With Steve Jobs’ prediction of a post-PC world becoming a reality, the late Apple leader might want to offer a posthumous hat tip to three-year-old mobile productivity company CloudOn. It’s software tools are squarely aimed at helping people ditch laptops for tablets. After all, it’s the Palo Alto-based startup– not Microsoft or Adobe– that brought Microsoft Office and Adobe Reader to iPads and Android tablets.

The approach is clearly resonating. The company has reached 1 million active users in just six months. The company points out that it took Dropbox 12 months to get to that number, Evernote 15 months, and Yammer more than two years to hit that mark.

CloudOn’s app reached this milestone while crossing the 2 million download mark, earning it the distinction of the No. 1 productivity app in 75 countries worldwide, according to the company.

The stats are good, but the competition is likely to get more stiff soon, if Microsoft and others have anything to say about it. The good news is that CloudOn has an enormous head start, in both installed users and in optimization for mobile. The bad news is that it’s proven the market opportunity and done much of the early user testing on behalf of Microsoft, who could quickly duplicate many of its most popular features.

That’s why today’s product release is so important. CloudOn is looking to stay ahead of that competition with the new version available in more global app marketplaces, with more languages supported than ever before.

CloudOn 2.5 is moving beyond simply document editing via tablet to become a comprehensive mobile workspace. By popular demand, the company now offers users the ability to utilize notes, annotations, and collaboration tools to more effectively work with shared documents.

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The new product offers a real-time activity stream called CloudOn FileSpace, that provides context around changes made by multiple users. Via a new Annotations feature, users can add graphical notes to MS Office documents. These notes appear as customizable, colored circles or rectangles that can be used to highlight a particular area of a document and that offer a text field for including comments or questions. Annotations are saved and displayed in the document when opened by another users, either in CloudOn or on a traditional PC.

The company has further optimized the MS Office “ribbon,” aka. the primary toolbar where users find fonts, paragraph formatting, spell check, and track changes features, to make it more touch-friendly. Finally, with this latest version of CloudOn being released in every iTunes App Store and Google Play marketplace worldwide, the company also added universal language support, including keyboards for character languages like Chinese, Japanese, Korean and Hebrew.

(Both FileSpace and Annotations are currently available for iOS initially, and will be coming soon to Android, while the improved ribbon and universal language support will roll out simultaneously for iPad and Android tablets.)

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CloudOn is the clear leader in this space and has gone largely unchallenged since first launching for iOS in January 2012. There have been other paid apps, including OnLive and QuickOffice Pro, but with no real feature differentiation based on my own experience, these look pretty undesirable next to CloudOn’s price of free.

This is a luxury that the company shouldn’t expect to last forever, as rumors have been intensifying around Microsoft’s release of fully-native Office apps for non-Windows tablets. Redmond may be waiting for the release of Windows 8 tablets, including its own Surface, before rolling out on competing platforms, but it appears to be more a question of when than if at this point.

When Microsoft does finally release Office apps, expect them to be paid apps – priced either at $9.99 to $19.99 per program, with paid version updates (which would be a first among tablet apps), or perhaps more radically on a SaaS subscription.

Again, CloudOn has the advantage of free, but Microsoft holds the trump card here. The software giant could potentially alter, restrict, or even terminate the license that it currently extends to CloudOn. Regardless of the path it takes, expect Microsoft to take measures to make its Office apps the most full-featured and productive on the marketplace – anything else would be suicide.

CloudOn has raised $33.5 million, including a $16 million in Series B round in June, from investors including The Social+Capital Partnership, TransLink Capital, Foundation Capital, and Rembrandt Venture Partners, Charles Moldow, and Chamath Palihapitiya.

The big vision for CloudOn is to move far beyond simply offering Microsoft Office, but to instead use the virtualization platform it’s built to allow users to access any application from any device. The company envisions a future where a user’s working environment is fully portable.

“Dropbox and Box already mobilized files from any device,” says co-founder and CEO Milind Gadekar. “Instead we’re tackling the mobilization of applications.”

CloudOn has yet to monetize, instead focusing on building its user base and becoming a ubiquitous productivity platform. The next step will be to eventually offer a freemium model that charges for premium features or extended usage.

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