We've used Google Docs to collaborate on our Internet Campus project. The ease of creating a document and having multiple, simultaneous users editing is quite impressive. However, maybe it's just me, but I have found it difficult to precisely control the formatting (this isn't unique to Google Docs, it's true of every HTML editor I've used including Outlook).
So now Microsoft has announced Office Live Workspace. If it has the same ease of use as Google Docs but allows precise formatting using Word, it could be the best of both worlds.
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