With Office 365, the software giant is targeting small businesses with the promise they can be up and running with Office, Exchange Online, SharePoint Online and Lync Online in just 15 minutes. A worldwide launch is expected later this year.

To add value to its cloud productivity product, Microsoft also announced the Office 365 Marketplace. The marketplace offers apps and services that work to extend and customize Office 365. At launch, the store offers more than 100 apps and 400 professional services.

"We've been in the cloud for years supporting large enterprises such as Shell and DuPont, but Office 365 takes that same technology power and delivers it to small businesses," said Kirk Koenigsbauer, corporate vice president of the Microsoft Office Division. "More than 70 percent of the people who signed up for the limited beta were small businesses, so it clearly strikes a chord."

Warding Off Google

It needs to strike a chord. Office 365 is the software giant's response to Google Apps. Microsoft needed to so something. A recent study from White Stratus showed Google is making inroads into the enterprise software market.

The education sector has been the leading adopter of Google Apps, with more than 58 percent of organizations tapping into the online software for free. But Google is also finding a place in other industries. According to White Stratus, about 25 percent of utilities, real estate, and professional services firms are switching to Google Apps. That seems to be driven by mobility. But Microsoft doesn't appear to have to worry about a mass exodus. Only 14.9 percent of manufacturing firms and 11.6 percent of healthcare industries are using Google Apps.

At the end of the day, about 20 percent of companies have deployed some form of Google Apps and more than 80 percent are either piloting or actively using it. Larger organizations are leading the way. White Stratus concluded that Google has a toehold in a large share of the enterprise market in the U.S., the pump is primed for expansion at Microsoft's expense.

Microsoft Can't Blow It

"We've got a couples of negative stories circulating around Google right now, which seem very similar to what happened with Netscape when they were trying to move into the enterprise," said Rob Enderle, principal analyst at the Enderle Group. "Between the blowup in LA County and the scuffle on the security solution for government, that might be enough to stem the tide."

As Enderle sees it, the enterprise environment doesn't like to make changes to begin with and is risk-averse. Since Microsoft is the entrenched vendor and there is a buying structure in place in the enterprise, the momentum rests with Microsoft. A refreshed product can only help, unless Microsoft drops the ball.

"Microsoft is clearly addressing the shortcomings with regard to prior offerings. The introduction of an app store makes it seem much more current and is going to help them appear like they are not out of date," Enderle said. "We live with impression and perceptions regarding a product like this. Since Microsoft is the entrenched vendor, they only have to be good enough. This, at least right now, appears to be good enough."