Network World — Google Apps or Microsoft Office? That is the question on the minds of many CIOs today.

Microsoft (MSFT) has long dominated the e-mail, collaboration and office tools market, and its customer list dwarfs that of Google (GOOG) and all other competitors. But despite the presence of well-established alternatives such as OpenOffice and IBM's (IBM) Lotus Notes, some industry analysts believe Google may pose the strongest long-term threat to Microsoft's office dominance.

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"Google is still a wannabe, but they're Google so this is a very strong challenger," says Laura DiDio, lead analyst with Information Technology Intelligence Corp (ITIC).

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Why should a business choose Google over Microsoft? Google is inexpensive, at $50 per user per year. Employees are often familiar with Gmail, so user training shouldn't be too burdensome. Outsourcing IT functions to Google lets businesses reduce internal IT expenditures and wasted time maintaining servers and applications. With Google, businesses get the basic productivity tools of e-mail, calendaring, and document creation and editing, as well as a Web site builder, private video sharing and other functions. (See related article, "Google Apps basics".)

Yet even Google has a hard time arguing that its own office tools are just as good as Microsoft's. And customers and analysts agree that Google's support is not on the same level as Microsoft's, which has far more experience dealing with the needs of enterprise customers.

But Google's momentum, and the emergence of cloud computing as a viable alternative to in-house IT systems, has clearly caused Microsoft to change the way it approaches the office market. Microsoft is offering its own online services now, and is being forced to give better pricing to customers who bring up the name of Google as a negotiation tactic.

Rexel (RXL), an electrical distributor in France, recently chose to deploy Microsoft Exchange Online instead of Google Apps and was able to get pricing that was nearly identical to Google's $50 per user per year, says CIO Olivier Baldassari.

"We were fortunate in the process to have this competition playing in our favor," Baldassari says. "Microsoft has been pushed by Google. And Google keeps pushing Microsoft. I think it is forcing Microsoft to adjust its strategy, and I think Microsoft has been reacting great. It's a good process and I think everybody's benefiting."

Microsoft Office list prices from $150 to $680 for the various home, student, small business and professional editions. Like any IT product, negotiations with large businesses include heavy discounts, particularly when the customer appears to be considering other options.

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