New From Microsoft: Google Apps

In a May 1995 memo entitled “The Internet Tidal Wave,” Microsoft (MSFT) founder Bill Gates declared that the Internet was the “most important single development” since the IBM PC, one that was fast becoming a global communications and computing medium. “I have gone through several stages of increasing my views of its importance,” he wrote. “Now, I assign the Internet the highest level.”

Ten years later, he penned another memo–titled simply “Internet Software Services“–in which he warned of a “services wave of applications and experiences available instantly over the internet” that would reshape the traditional software business. “This coming ‘services wave’ will be very disruptive,” Gates wrote.

And lucrative for those who were quick enough catch it. Salesforce.com (CRM), for example. Google (GOOG) and Amazon (AMZN), as well. Not Microsoft, though. Fearful of undercutting its fantastically lucrative packaged-software business, the company has been slow to enter the “software-as-a-service,” or cloud computing, market. Methodical, but still slow.

Now, with Google’s business-level hosted applications (Google Apps) gaining traction, Microsoft is moving a bit more quickly. The company dropped the 5,000 worker minimum on its Microsoft Online Services offering today, expanding the availability of Exchange Online, SharePoint Online, and Office Communications Server Online to businesses of all sizes. Especially, the smaller ones for whom Google Apps had previously been the only option …