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Google’s plan to offer a bundle of hosted office applications sparks a lot of talk about the search giant’s chances of upending Microsoft’s Office juggernaut, but leaves one question unanswered: Will enterprise customers give Google a chance?

On Monday, Google announced Google Apps for Your Domain, a set of ad-supported communications tools such as Google Talk, Calendar and Gmail, to target small businesses that don’t want to install and maintain software.

This initial volley, which analysts say is targeted more at upending Microsoft’s Windows Live plans, is expected to become part of an escalating battle between Google and Microsoft.

But if Google is really going to make a dent in Microsoft’s Office, it will need to win the medium to large-sized enterprises.

How the company plans to do that remains to be seen. In a statement, Google says its target market was everything from family Web sites and community groups to nonprofits and small businesses to universities and large enterprises.

As for the latter, Google says it will create a premium ad-free version “for organizations with more advanced needs” with details on features and functionality “coming soon.”

Technology executives say Google may be onto something, but they note it will take a lot to get them to move away from Office. Among the questions that need to be resolved:

  • Will large companies trust Google with their data? Answer: Some technology executives raised privacy concerns, but most, like Mike Doan, Webmaster at Red Octane, a game developer, say worries are overblown.

  • What are the costs to migrate users, say 5,000 of them, to a new platform? Answer: Unknown, but executives worry about migration, integration and training costs involved with ditching Microsoft’s Office.

  • How reliable will Google’s service be in terms of uptime? Some executives said offline access is a concern as it is with many software as a service models.

    “I just don’t see a major move away from Office to save a few bucks,” says John Webster, Chief Strategy Officer for Certus Managed Hosting Solutions.

    Part of the challenge for Google is that Microsoft’s Office suite works well as it is, said Webster.

    “To make a switch, you’d need a business case and you’d have to consider retraining, migrating to a hosted environment and stability levels,” says Webster.

    According to Webster, Google faces the same inertia challenge as Sun Microsystems’ StarOffice effort—or any other rival—when it comes to upending Microsoft Office, a standard that technology managers are generally comfortable with.

    “Ask Sun Micro how it is to take on Windows Office. Office is the default standard,” says Webster.

    That take wasn’t hard to find. “We wouldn’t be interested in Google’s plan for the same reason we don’t buy in to Microsoft’s Web app plan,” says Marc Cote, a network manager for Terracon, a engineering firm based in Lenexa, Kan. “Productivity software needs to work even when you don’t have connectivity.”

    Next Page: Mobility.

    Mobility of Google’s applications would also need to be addressed to woo enterprises. “Part of the question of portability is the ability to sync with handheld devices either using Exchange Activesync, BlackBerry services or Good software,” says Kevin Benson, Chief Technology Officer, South Carolina Parks, Recreation & Tourism.

    “No solution Google is currently providing or has announced would meet the needs of small or midsize businesses, which rely on mobility as a key component. Being tethered to a Web-based app is becoming a prisoner to access and bandwidth.”

    Indeed, analysts have little expectations that Google can be an enterprise player with its latest application bundle.

    In a research note, Merrill Lynch analyst Justin Post says he doesn’t expect Google to garner “material revenue from software over the next year, or material penetration with large enterprises for Google’s hosted products.”

    So what’s the real endgame? Analysts say Google’s latest application effort telegraphs where the company is aiming in the future.

    “We think this highlights the idea of the network as the computer, an idea a long time coming,” says Benjamin Schachter, an analyst at UBS.

    Webster argues that Google’s effort is really about usurping Windows Live, Microsoft’s efforts to bridge its core operating system with a future of software as a service.

    However, even this will be a challenge for Google since Microsoft is embedding Windows Live links into Vista.

    And given that captive audience Microsoft users are likely to migrate to Office Live from Office instead of a new set of applications.

    Nonetheless, Google could find a niche market by targeting what Webster calls “mom and pop shops” and smaller companies that could become larger ones.

    Doan is one of those smaller companies currently using Google’s apps and hoping to grow with them.

    “I do see Google eventually becoming a competitor to Microsoft Office; however, I believe they will affect small business in the near feature,” says Doan.

    “RedOctane is a growing company and at some point in size, it would have definitely been too risky for us to move our e-mail system to Google apps.”

    Mary Jo Foley and Scott Ferguson contributed to this report.

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