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I thought when I first connected I could go to a document library, select new and create a document within the browser but perhaps that was wishful thinking. Now it only creates documents by opening my desktop application. Is this by design? Will it change?
There was some outdated information involved in answering your question earlier. Office Web Apps in Sharepoint Online is what you were referring about and is enabled for small business based on your licence for viewing, editing and sharing documents but creating documents within the browser is a feature that is only for Kiosk Worker licences and will only create in the browser if you do not have the Office client installed on the PC. Currently, there is not a setting to adust this default behavior. The Beta product offering is developing with certain features and Office Web Apps is one of them. You can keep tabs on developments and changes using the link below:
But I can edit a document with the browser, what is that called? Sorry, just trying to understand.