Google is pushing further into the communication and collaboration applications market with a major upgrade of Google Apps, a hosted suite for organizations of all sizes that analysts say could soon become a real competitor to Microsoft Office.

On Thursday, Google will introduce a Google Apps version that, for a fee, offers guaranteed uptime, IT management tools, technical support, increased e-mail storage, and integration with the Docs & Spreadsheets word-processing and spreadsheet applications, as well as BlackBerry support for Gmail.

With a cost of US$50 per user per year, Google Apps Premier Edition becomes the third and most sophisticated version of the suite, which was launched in August with the free Standard Edition and Education Edition versions. Like the original editions, Premier will have services like Gmail Web mail, Calendar shared scheduling and Talk instant messaging.

Google Screenshot

Until today the suite was called Google Apps for Your Domain, because organizations offer these Google hosted services using their own Internet domain and branding. The Standard edition is used by more than 100,000 small businesses, and the Education edition by hundreds of universities.

SF Bay Pediatrics, which has two medical offices in the San Francisco area, implemented the Premier edition in January for most of its 25 employees, which until then had used individual e-mail accounts from providers like AOL. "We had no control over e-mail, and supporting it was a nightmare," said Andrew Johnson, the company’s chief information officer. With Gmail, the performance and management e-mail problems disappeared, he said.

While SF Bay Pediatrics employees use Microsoft’s Office suite, they also use Docs & Spreadsheets to store their files on a central server and collaborate on them, Johnson said. "I don’t see us going fully software as a service yet, but maybe in the future," he said.

Indeed, Google Apps represents a new, hosted approach for productivity suites, a market ruled by Office, which is mostly desktop software. Despite security and privacy concerns over storing applications and data on a third-party data center, organizations are increasingly adopting hosted models, because the vendor stores applications on its own data center and thus frees IT departments from spending time and money on hardware and software maintenance.

Forrester Research isn’t telling enterprises to drop Office, but it is recommending that CIOs give Google Apps a serious look, in large measure because Office’s price is high, said analyst Erica Driver. Today, Google Apps is a cheaper alternative to the core Office applications, but eventually it could be a replacement option, as Google grows its capabilities and CIOs get more comfortable with software as a service, she said. "Microsoft has a chance to respond, but this changes the game," Driver said.