Codenamed Magellan, this edition of Microsoft Office for small and medium businesses (SMBs) is being jointly developed with the company’s Enterprise Resource Planning (ERP)-focused Microsoft Business Solutions (MBS) group, instead of the Office team alone.

The suite will feature Microsoft Office Small Business Accounting, financial management, and updated versions of Office Outlook 2003 with Contact Manager and Office 200, Microsoft said.

Reports added the suite would see new payroll functionality and web services added, with delivery in late 2005, according to Microsoft.

Together with Microsoft Office Small Business Edition 2003… this new edition will expand the range of Office-based solutions specifically designed for small business, Microsoft said in a statement.

Depending on how and when this edition is actually delivered, given Microsoft’s penchant for ripping features out of planned products whilst simultaneously pushing back delivery, the suite potentially poses a fresh challenge to Intuit.

Intuit is largely identified with personal finance and tax, but widely used by SMBs. Last month, the company updated its QuickBooks suite, with the addition of payroll processing. Ironically, Microsoft attempted to buy Intuit in the mid 1990s, but saw that proposed purchase headed off by the US Department of Justice (DoJ).

SMBs have become a huge focus for all ISVs during the last two years, after enterprise customers reduced their IT spending a fact that forced vendors to seek-out alternative markets. Microsoft said this version of Office would deliver a package that is meaningful to SMBs and the way they work.