Microsoft announced their new Office 365 cloud service yesterday which combines Microsoft Office 2010, Office Web Apps, SharePoint Online, Exchange Online, and Lync Online into a single bundle for small businesses, enterprises, and educational institutions. Digging deeper into the FAQs we’ll notice that two “Live” service that we were familiar with – Office Live Small Business and Live@edu – will be discontinued and transitioned into Office 365 in 2011.

Office Live Small Business will become part of Office 365 for small businesses. Back in early 2009 we’ve heard that the “Office Live” brand is going away, and we saw Office Live Workspaces being migrated to Windows Live SkyDrive with Office Web Apps as part of Wave 4 this year. The other component – Office Live Small Business, which offered free website hosting, design and management tools, email accounts, and a suite of professional online business applications – seemed to be left hanging there. The announcement today had determined the future of Office Live Small Business, and as mentioned in the Office Live Small Business FAQ page, Office Live Small Business will likely to begin transition to Office 365 during the second half of 2011. However, the Office Live Small Business service will continue to run through at least October 2011, and all existing Office Live Small Business customers will be offered 3 months free of the Office 365 service.

Similar to Office Live Small Business, Office 365 for small business will offer a set of easy-to-use website design tools.

Live@edu will become Office 365 for education. Live@edu, which currently offers educational institutions around the world a free set of online services for their students including Outlook Web App (or Outlook Live), Windows Live SkyDrive with Office Web Apps, and Windows Live Messenger, will be transitioned into Office 365 for education. According to the Live@edu FAQ page, Office 365 for education will include everything that Office 365 for enterprises has (meaning it will include Office Web Apps on SharePoint Online, but with optional Windows Live SkyDrive access for students), plus additional tools specifically designed for educational institutions. Availability and costs have not yet been announced.

Just like Live@edu, Office 365 for education will also offer Outlook Web App – but takes advantage of Exchange Online and Lync Online instead of Windows Live Messenger.

With the transition of Office Live Small Business to Office 365, it means that the originally free service will now come at a price for small businesses, although with a greatly expanded set of integrated services offered in the new Office 365 suite. Microsoft is actually recommending small business who does not wish to pay and transition to Office 365 to consider Windows Live Essentials and its set of online services like Hotmail, Office Web Apps on SkyDrive, and more. Do you think Windows Live, as it is right now, is sufficient for small business needs? Leave us a comment below!

Edit: Clarified that only Office 365 for small business will come at a price, pricing for Office 365 for education has not yet been announced. According to Microsoft spokesperson:

Availability and pricing for Office 365 for education will be announced at a future date. Microsoft expects to continue to offer a free service for education. Pricing for additional services will be completed as soon as possible and long before office 365 for education will be available. Details for the free services and paid options will be announced at the same time.

In addition, on the official Office 365 blog, Microsoft clarified more on what will be free and what additional services will incur a charge at a discounted rate for eligible educational institutions:

Will Office 365 for education be provided to current Live@edu customers at no cost? Will migration from Live@EDU be transparent?

Current Live@edu customers get the same pricing they have today for their existing services, such as email. Office 365 for education includes new services that are not in Live@edu, such as advanced Exchange features, Lync Online, SharePoint Online, voicemail, and Blackberry support. Customers can get those with academic discounts.

We will have transition details for Live@edu customers early next year to help them prepare for Office 365 for education later next year.