When Microsoft invested $51 million in peer-to-peer collaborative software start-up Groove Networks, it raised more than a few eyebrows. It was not just the size of the investment, but the fact that the software giant took such a substantial stake in the company. What was the appeal of Groove to Microsoft chiefs Bill Gates and Steve Ballmer?

Groove's P2P software enables users to interactively collaborate on documents and data over an Internet protocol-based network. This is hardly surprising: Groove founder Ray Ozzie previously created the Lotus Notes collaborative software platform. However, unlike existing groupware platforms such as Lotus Notes which replicate documents to each user's PC, Groove uses a downloadable software client and enables users to work on the same document, interactively, in real-time.

Yet so far, although it is running 20 pilot projects and has recieved venture funding totalling $117 million, Groove does not as yet have a single paying customer to show for its four-and-a-half years of research and development.

Groove 2.0 has therefore been built more along the lines of an enterprise-class application and less like ICQ or Instant Messenger on steroids. The key component of Groove 2.0 – and what no doubt interests Microsoft most – is its Enterprise Integration

Server component, which improves Groove's integration with web-based enterprise applications from SAP, PeopleSoft, JD Edwards and others.

Until now, Groove's integration with such software has been weak. For example, SAP users need to export the documents they wish to work on collaboratively from SAP systems to Groove and return them back again when they are finished.

Closer integration will make Groove less like a standalone application and may lend credence to Ray Ozzie's dmission to license the software on an OEM [original equipment manufacturer] basis to enterprise application software suppliers.

As yet, collaborative design software supplier PTC is the only vendor that has fully embedded the underlying Groove technology into its software. Others only link with the P2P functions using middleware connectors.

It is with investor Microsoft that Groove has formed its most significant alliance. Groove 2.0 includes better integration with Microsoft Office to allow users to dynamically share documents between the Microsoft Office productivity suite, the Outlook email client and the Visual Studio.Net application development environment.

Forrester Research analyst Bruce Temkin believes that the integration could go further. He argues that Groove might be made the backbone of Office XP and could therefore become the de facto standard for "distributed productivity applications".

Indeed, Microsoft is rumoured to be building some form of P2P capability into its next version of Windows and it is almost inconceivable that it would do so without the help of Groove, given the size of its investment in the company.

Which may be just as well for Groove, in view of the difficulty it has so far had in persuading organisations of its vision.