Microsoft is poised to cast off a decades-old model of installing programs such as Word and Excel on computers prior to shipping and instead charge consumers to access them on a monthly basis.

The software giant has said it will begin trials of a product that would deliver some of its most iconic programs, including the Office suite, to consumers via the internet, meaning that programs like Word would no longer sit on a user's PC.

Consumers would instead access Microsoft's Office Suite - including Word, Excel, and PowerPoint, and other programs, including the security suite Windows Live OneCare, via the web as part of a monthly fee. Their documents would also sit on Microsoft's servers.

Microsoft has not said how much the subscription will cost, or when the product is likely to be released, though it suggested it could be introduced by the end of the year.

The release of a subscription-based version of Office would likely significantly reduce the cost of PCs, because vendors will no longer be forced to incorporate a software license fee into the cost of the machine. For every $1,000 spent on a PC laptop, an estimated 9-12 per cent goes directly to Microsoft, according to Gartner, the analyst firm.

There is no suggestion that consumers would begin paying a subscription to use Windows, Microsoft's ubiquitous operating system, which would likely continue to be built into the cost of a PC.

Details of the new product, code-named 'Albany', were released in a statement on Microsoft's website. The company said that consumers would not be obliged to embrace the new subcription model, and that there would always be "a significant number for whom purchasing a license is still the best choice." But, it said, those who chose the new offering would have "more choice".

The release of a subscription-based version of Office marks the latest foray by Microsoft into a new model for distributing software known as 'software as a service', where businesses and consumers access programs via the web.

For businesses, the main benefit of the model, which is also known as 'cloud computing', is that they can cut down on the cost of buying and running expensive IT equipment in their own offices. Consumers, meanwhile, are able to access - and share - their content from any computer, because documents are held centrally on servers owned by companies such as Google, the search firm, among others.

Microsoft is already enormously threatened by Google, which has released a series a free, web-based software akin to Office - though with reduced functionality - that allows users to access their documents from any computer while on the move.

Last month, Microsoft introduced a web-based element to its Office by allowing users who already have Word on their machines to post documents to the internet so others could read them. The 'Albany' announcement suggests it plans to go one step further and make Office a wholly web-based product.

Analysts said such moving Office online would almost certainly mean that computers would come down in price, because customers would be able to choose which software they wanted pre-installed on their machine.

But they voiced concerns over whether customers would be willing to pay a subscription for such software, given that alternatives - at least when it came to Word - were available for free, and that in the long run the overall cost of the software might be greater.

"I think there'll be some customers who won't be happy because the overall amount they would pay to Microsoft might go up - but we'll have to wait and see how the pricing works," Annette Jump, a Gartner analyst, said.

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