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I can create and edit word documents from Office Live. So what does Office365 offer??

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Office 365 is Microsoft's cloud offering for the Enterprise. It offers small business, large business, education and federal suites of tools - amongst them versions of office. You can read Mary-Jo Foley's articles:
Ten more tidbits on Microsoft's new Office 365 cloud play
and
Office 365: Sorry, folks. This is not Office in the cloud

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