A worker fix a spotlight at the Microsoft exhibit of the upcoming CeBIT fair in Hanover March 3, 2008. REUTERS/Hannibal Hanschke

SAN FRANCISCO (Reuters) - Microsoft Corp MSFT.O started testing a new way of selling its Office software suite on a subscription basis, packaging it with security software and free online services.

Microsoft on Friday launched a new test program code-named “Albany” that will allow consumers to download and install Office 2007, which includes Word processing and Excel spreadsheet, and then receive updates for a subscription instead of a more traditional one-time license fee.

Consumers will also receive Windows Live OneCare, a Web-based security software, and online applications including Windows Live Mail and Office Live Workspace.

Microsoft did not disclose how it plans to set the pricing for “Albany” or when it would be widely available.

The company faces competition from Google Inc GOOG.O and a slew of start-ups including privately-held Zoho, which are offering applications comparable to Office but delivered through a Web browser for free or a monthly subscription.

Microsoft said this is not a complete overhaul of how it sells software.

“We are definitely not straying from our traditional software sales model,” said Bryson Gordon, product manager for the project.

“There will always be a significant number of users for whom purchasing a perpetual license to the latest version of Office is still the best choice. “Albany” just gives customers more choice.”