In a bid to challenge Google's collection of online office productivity and communications programs called 'Google Apps', Microsoft starts selling Office 365, a cloud-based version of its Microsoft Office suite of desktop applications. It also includes hosted versions of Microsoft's Server products like Exchange Server, SharePoint Server, and Lync Server that are delivered and accessed over the Internet.

Various other companies are also providing cloud-based business e-mail, productivity and collaboration tools - Zoho, Zimbra from VMware, Lotus Live from IBM to name a few. However, according to analysts, Google is the one that Microsoft considers as its close rival.

There's no doubt that the increasing popularity of Google Apps has forced Microsoft's hand, said Melissa Webster, an analyst at IDC. But Microsoft is really embracing the cloud now.

Microsoft's Office 365 is a $20 billion-a-year business with profit margins of 60 percent before taxing. The business is considered to be even larger than Microsoft's other big sources of profit like the Windows PC operating system, The New York Times reported.

The prices of Office 365 start from $2 per user a month to $27 per user a month. While the $2-a-month service just offers e-mail, the $27-a-month service includes Web conferencing and digital whiteboards for team projects, and also a license to the most powerful version of the Office PC software.

There is another $6-a-month service that offers Microsoft's e-mail server services and collaboration tools, like SharePoint, to small businesses. However, at $50-a-year, the pricing of Google Apps looks more attractive than the Office 365 that costs $72-a-year.

If Microsoft stumbles, it really opens the door to Google, said Matt Cain, an analyst for Gartner. It's a tremendous long-term threat to Microsoft and its Office franchise.

Google is enjoying large converts

Google claimed that it has got over 30 million active users of Google Apps. The company has also announced a series of large converts. As per the details, the National Oceanic and Atmospheric Administration, the federal agency that conducts climate and ocean studies, with 25,000 employees, is adopting Google Apps. Other companies opting for Google Apps include the State of Wyoming, with 10,000 workers, and the McClatchy Group, a publishing chain, with 8,500 workers, The New York Times reported. 

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