Over the past few years, Google has repeatedly denied that it ever intended to take on Microsoft in the lucrative market for office productivity software. But this week the online search giant delivered a shot across Microsoft's bow, delivering an Internet-based suite of productivity services that does just that.

Dubbed Google Apps, the new suite of services combined previously available email, instant messaging, calendaring, word processing, and spreadsheet solutions with an affordable corporate-oriented licensing scheme that vastly undercuts Microsoft's more expensive but dramatically more powerful offerings. Google's offering will likely be of most interest to cash-strapped smaller companies, but Google is clearly aiming for the high-end as well.

Google is offering two versions of Google Apps. A free version will be ad-supported and include 2 GB of email storage space, while Google Apps Premium, priced at $50 per user per year, will provide 10 GB of email storage space. Both versions of the suite include Gmail email, Google Calendar and Google Talk instant messaging capabilities that are tied to custom domains as well as access to the Google Docs (word processing) and Google Spreadsheets Web-based productivity services and Page Creator, a Web-based Web page creation tool.

Analysts say that Google Apps is the most potentially damaging competition to Microsoft Office since Lotus fielded its office productivity suite in the mid-1990s. But Google is taking a different approach than Microsoft's traditional competitors: Instead of providing a yet another desktop-based office productivity suite that mimics Microsoft Office, Google's services are only available via the Internet. This ties into Google's strengths and exposes a weakness in Microsoft's strategy: Though the software goliath offers both desktop software and Internet-based services, it has done nothing to move the core capabilities of Microsoft Office to the Web.

For Microsoft, the ramifications of Google's offerings are immense: While few of Microsoft's biggest customers will likely move to Google, many smaller companies are sure to test the waters, lured by Google's low pricing. But Microsoft still retains some important advantages: The Office applications work offline and are far richer and feature-packed than Google's offerings, and Google's ability to support corporations is a big question mark. But this first version of Google Apps is obviously just the first shot in what promises to be an interesting battle. We can expect Google to expand its services and Microsoft to begin offering more compelling Web-based Office solutions.

For more information about Google Apps, please visit the Google Web site.