Google has expanded its hosted applications push with a new collaboration and productivity tools package designed specifically for enterprise users, although experts have argued it still lacks the functionality to appeal to mid and large-sized firms. 

Google Apps Premier Edition is available for $50 per account per year and features all the applications available in the free Google Apps for your Domain package launched last summer, including Google Talk, Calendar and Gmail, as well as new additions Docs & Spreadsheets and Gmail support for BlackBerry devices.

Google has also exposed APIs designed to enable integration with firms' single sign-on systems, user provisioning and mail gateways.

With a relatively low price point, 10GB of storage per user, 24x7 support for critical issues, and service-level agreements promising 99.9 percent Gmail uptime, the firm hopes it will be yet another disruptive move in the space, according to UK sales manager Robert Whiteside.

"This is bringing online services to the masses," he argued. "You won't need IT working in the background [to support this] – they can focus on their core competencies."

Whiteside added that Docs & Spreadsheets provides more useful functionality than traditional software-based applications because they enable online collaboration and sharing as well as document creation.

"This can reduce the time from instigating a document to the final publishing [and] the ability to collaborate shortens the timescale for doing typical business processes," he said.

Sarah Burnett of analyst Butler Group said the launch should be welcomed as it will improve competition and encourage rivals to improve their offerings, but added that more functionality, such as analytics capabilities, is needed to tempt firms.

"Price is one thing but people won't pay for it if it is too basic," she argued. "I'd also have liked to see how third-party vendors integrate their apps with it."

David Bradshaw of analyst Ovum argued that the package would have a greater impact at the lower end of the market to start with. "It's not flexible enough at the moment and the internet tends to go down from time to time," he said. " They'll have to produce a downloadable version that allows users to work offline to get serious traction."

However, the software-as-a-service model will enable Google to be very responsive with its upgrades in the future, he added.

A Forrester research note by analysts Erica Driver, Matt Brown and Kyle McNabb argued that "Google presents a very clear and present danger to Microsoft in the messaging and collaboration and office productivity tools market, even though Google is currently positioning Google Apps Premier Edition as more complementary than competitive to Microsoft Office."

Meanwhile, Microsoft also signaled its commitment to the software as a service model by announcing a new partner initiative – Partnering for the Future – which will see the software giant encouraging new and existing partners to deliver their solutions over the internet.

At a roundtable event to launch the initiative, IDC analyst Robert Redgate argued that the SaaS market is growing far faster than the traditional licensing route. "There's a good market based on solid drivers with great longevity," he said. "Enterprises are looking for a closer relationship between the value they derive from software and the costs associated with that software."