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Hi
Is it possible to run a windows application/software installed in a remote windows machine through my local windows machine in the same network. For example if MS Office is installed in that remote m/c and not on my local m/c, then is it possible to run MS office?

Sometimes. It depends on the application. Some simple applications will allow this but probably not Office. If the application requires file installed into the system folder, or has a lot of registry entries then it probably won't run across the network. If it all just runs out of one folder then it very well might run.
You'd have to test it but I think you'll find Office won't work that way. You could however install it on a Terminal Server and run it that way.

I'm not sure of your circumstances but you may want to look into remote desktop connection options.
A. Windows XP Pro allows you to connect remotely to another workstation. Its called Remote Desktop. Only one person will be able to use the workstation. If you connect remotely then then users will be locked out of sitting physically at the workstation.
B. Windows 2000 Adv Server allows up to two remote users plus the workstation if you are the machine Administrators with Terminal Service. Terminal Server also has an Application mode that allows multiple users to connect to one machine but it requires additional licensing.
C. VNC is a free utility that allows remote desktop connection on any platform (98 - XP / Linux ). Similar to the previous two options you view the desktop of the remote workstation, however, with this application you are actually using the desktop. Any mouse movements or typing that is done is visible on the machines desktop and the remote display.

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