By Eric Auchard

SAN FRANCISCO: Google Inc. is making a concerted move beyond search and advertising into the business software market, starting with a set of Web programs for e-mail, scheduling and communications, it said on Sunday.

The online search leader said it has created a software platform to run basic business activities -- based on programs it already offers separately. The move marks a stepped up challenge to rival Microsoft Corp. as the software giant prepares to upgrade its Windows and Office franchises.

The free set of Web-based programs for small businesses, universities and nonprofit businesses goes by the mouthful "Google Apps for Your Domain".

Later this year, Google said it will offer a "paid, premium" version with the option of being ad-free and more administrative control and compliance features to meet the demands of bigger corporations and government agencies. Pricing for this more advanced version is not yet available, it said.

Google will host the applications relieving companies of the need to maintain or install software on individual PCs -- support tasks often more costly than software itself.

"If we do it right, we get the best of both worlds -- very consumer-friendly software, but also low-cost business applications," said Dave Girouard, general manager of Google's enterprise division, which sells search software to companies.

Individual office workers can sign on to Google Apps -- short for applications -- through their Web browsers.

Initial apps are Gmail Web e-mail, the Google Talk instant message and Web phone-calling service, group scheduling on Google Calendar, and Google Page Creator for Web page design.

"It really is intended to be a platform," Girouard said.

"One of the fundamental benefits of the software as service approach is that you can just turn on new features over time." The Writely word processor and Google Spreadsheet are candidates for future inclusion in Google Apps, Girouard said.

SOFTWARE CHALLENGE

Google's main appeal is to consumers of its popular Web search and advertising systems. By packaging a set of software for businesses, Google is responding to demands by corporate network administrators who prefer to manage a standard set of software inside organizations. Many are cracking down on the spread of individual consumer programs within their networks.

Sue Feldman, an analyst with market research firm IDC, said Google Apps moves the company into open competition with Microsoft in the business software market.

Anticipating Google's moves, the world's biggest software maker has responded with Windows "Live" -- Web-based software for small business and consumers. But Microsoft's unwillingness to deliver its software until it is "fully baked" gives Google an opening to win adherents to its approach, the analyst said.

"There is simplicity and there is s-i-m-p-l-i-c-i-t-y," Feldman said. "If you are used to using Microsoft Outlook, you may need many more features and you will want to use them whether you are connected to the Internet or offline."

Martin Pyykkonen, an analyst with Global Crown Capital of San Francisco, says Google's bid to host business software may give pause to companies mulling when to upgrade to new versions of Microsoft Windows, Office and Outlook due in the next year.

"For all the complexity of Microsoft software and how long Vista has taken, a lot of corporate executives are going to be wary: Do you update to the complexity of Vista or would you be better off just using something simple like Google Apps?" he said.

Vista, the first major upgrade of Windows in five years, is due out later this year or early next.

IBM, Oracle Corp. and SAP AG also are racing to offer their software as Web-based services in order to make it easier to use and to cut costs, following the lead of pioneer Salesforce.com. Google's latest move makes them both competitors and potential partners.

Girouard underscored that the Google Apps platform is not designed to replace Microsoft's core software. Many businesses are likely to run Windows and Office programs alongside Google Apps on office workers' computers, he said.

"This platform isn't by any means an alternative to Windows," Girouard said. "We are not really out there to eliminate any applications. We are looking to introduce new ways to solve problems people have been having for years."

"There is a lot of open territory," he said.