Microsoft is updating and repackaging its web-based email and Office programmes in an ongoing effort to keep Google from encroaching on its home turf.
The software industry is in the midst of a major shift from the desktop and server-based programmess on which Microsoft built its business to ones that are accessed over the internet.
Companies are starting to embrace the idea of "cloud" computing - trusting Google, Microsoft and others to manage their information and technology out of vast data centres that serve many other customers.
Google was faster to bring word processing, presentation editing and other office-work applications to the cloud. Microsoft closed the gap with Office 2010, which launched in May with free web apps.
Today, Microsoft says it has 40 million people paying to access its cloud-based services.
Google says its own line of cloud software, Google Apps, has 30 million users; the company will only say that "millions" of people pay instead of using the free version.
"Office 365" brings together web-based versions of Word, Excel and other Office applications; the Exchange e-mail system and SharePoint online collaboration technology; and Microsoft's unified communications system, which includes instant messaging, internet phone and video conferencing.
The new package is an upgrade to technology that was available in the past under other Microsoft brands, including the Business Productivity Online Suite (known colloquially as B-Pos) and the Live@edu package for schools.
For small businesses with 25 or fewer employees, the package will be sold on a subscription basis for $US72 ($NZ96) a person each year.
For the first time, Microsoft is also selling access to its standard desktop Office programs on a subscription basis, as an option for Office 365 for enterprises.
Large companies can give employees access to different levels of software for $US24 ($NZ32) to $US324 ($NZ435) a person each year. The software is still in beta test phase, and will be widely available next year, Microsoft says.
Microsoft is betting its familiar programs and long history of providing technology and support to businesses will justify the premium over Google's $US50 ($NZ67) a person each year Apps product.
Google Apps "was really the primary competitive target for this," said Gartner analyst Jeffry Mann in an interview.
Office 365 arrives as companies are becoming more comfortable with the idea of cloud computing.
"What it comes down to is, do you trust Microsoft (or Google) to run your crucial systems for you?" said Mann. "Every month, every quarter, there are more companies that are willing to do that."
