While we debate whether Microsoft should port its Office productivity suite to the iPad and Android-based tablets, a third party has done just that, offering both to consumers for free. But thanks to complaints from its partners, Microsoft is crying foul, and threatening legal action against OnLive. Is this solution really too good to be true?

The story begins back in early January, when cloud-based game platform maker OnLive released a shocking new iPad app called OnLive Desktop. Before the release of this app, OnLive was focused on delivering video games to various devices using cloud computing technologies, a somewhat amazing proof of concept that removed the local hardware console from the equation. With the OnLive Game Service, consumers could play games from almost anywhere: a TV, a PC or Mac, an iPad or iPhone, or various Android-based devices.

Compared with the overhead of delivering modern, 3D video games over the cloud, delivering the Windows desktop and associated productivity tasks seems somewhat less adventurous. But the OnLive Desktop solution overcame a hurdle that was far more important than any technical considerations: It was free and offered iPad users the ability to access Windows and Microsoft Office for free.

Before OnLive Desktop, iPad users could connect to a remote Windows desktop using various paid and free apps. But they needed to install and configure these desktops themselves, and keep them up to date. More important, they had to figure out a way to connect them remotely to a service that would work with an available iPad app. It was a lot of work and of course required that you already own Windows, Office, and whatever other applications you wanted to use.

With OnLive Desktop, the Windows desktop and its associated applications are hosted in OnLive's data center, and OnLive keeps everything up to date for you. It was such a hit that the company moved to add paid versions of the service, including OnLive Desktop Plus, which costs just $5 per month and adds full Adobe Flash capabilities and a web acceleration feature, which promises that the connection between the remote PC you're using and the Internet is a full 1Gbps. OnLive also bolstered the free version with Adobe Reader functionality.

Impressed with this solution, I reviewed OnLive Desktop on the SuperSite for Windows in February. It seemed like an amazing product in both free and paid versions.

Maybe a bit too amazing. Spurred by complaints from virtualization expert Brian Madden, and the industry researchers at Gartner, Microsoft finally rumbled to life last week and contacted OnLive, informing them that OnLive Desktop was, in fact, illegal. That is, according to the terms of Microsoft's licensing programs, it's not possible for OnLive to offer this service as it currently stands, because the company isn't correctly licensing Windows and Office. Put even more simply, it really was too good to be true.

"We are actively engaged with OnLive with the hope of bringing them into a properly licensed scenario, and we are committed to seeing this issue resolved," Microsoft Corporate Vice President Joe Matz wrote in a post to Microsoft's Volume Licensing blog. "It's important to us and to our partners that we're serious about issues of compliance."

Matz continued: "The Services Provider License Agreement does not support delivery of Windows 7 as a hosted client or provide the ability to access Office as a service through Windows 7. Office may only be provided as a service if it is hosted on Windows Server and Remote Desktop Services."

It's unclear how expensive it will be for OnLive to come into compliance and offer its OnLive Desktop solutions, but one thing is clear. Assuming it's technically feasible to continue offering this solution, it's going to be a lot more expensive for end users. One might surmise that, at the least, the free version will be a thing of the past.

But OnLive's sudden move into what is essentially the cloud delivery of a desktop virtualization solution has almost certainly thrown a wrench into Microsoft's presumed plans to bring its Office productivity suite to the iPad and Android. Rumors have long swirled that the company will do so, and my own sources have essentially corroborated these plans, though one suggested that the actual delivery time could be tied to Office 15 and won't happen until as late as 2013.

Tech enthusiasts have been debating this potential change, regardless. On the one hand, we have a pro-Windows camp that believes Microsoft should protect Windows at all cost, and that bringing Office to other platforms only dilutes the value of Microsoft's client OS. But on the other hand, we have those who think Microsoft should push its popular platforms as broadly as possible, since the future of computing will be more heterogeneous regardless; and both Office and Windows being supplanted is a far worse fate than just a Windows decline. 

I'm with the latter camp, and I'd point out that it is Office, not Windows, that provides the most income and revenues to Microsoft each quarter, and thus should be the higher priority. The OnLive solutions were, and are, fairly impressive. But as with other Microsoft solutions that are provided as hosted services, such as Exchange and SharePoint in Office 365, device-based access to Windows and Office would be even more useful and relevant if delivered directly from Microsoft. And while it's wise for the software giant to take a partner-friendly approach to curtailing OnLive's questionable licensing practices, one has to think that Microsoft's future plans are somehow at the heart of all this.