Microsoft introduced its Office 365, a cloud-based service that offers Microsoft Office and Microsoft Server products.  CEO Ballmer called it Microsoft Office meets the cloud.

Microsoft Office 365 is compatible with traditionally-installed Office software on the PC.  It also offers access to web-based Office software and mobile-based Office software.

It allows for real-time collaboration among multiple users and a conference feature integrated into Microsoft Office products. 

A major target of Office 365 is small businesses.  Microsoft CEO Steve Ballmer emphasized that for companies that aren't big enough to justify the existence of a dedicated IT staff, Office 365 is a great solution.  For larger companies, it can save time and money, he said.

Office 365 offers a web editing tool that promises to making building websites as easy as editing Microsoft Office documents, which is a potentially attractive feature for small businesses.

The cloud-based Office 365 is seen as a direct response to Google Apps.

Microsoft has long dominated the enterprise software market.  However, with Google's entry and the advent of cloud computing, Google Apps has captured almost 20 percent of the market, according to a recent White Stratus survey.

A day before the launch of Office 365, Google product manager Shan Sinha criticized the very existence of it in a blog post.

You can't just take legacy, desktop software, move some of it to a data center and call it 'cloud,' he said.

He also claimed Google Apps was more collaborative, universal, and transparently priced.