Google = Microsoft 2.0

Back in the 1980s, when Microsoft was building its empire, the company built separate applications (such as Word, Excel and so on). Then the company did something powerful – combining the applications into a suite. Of course, now Office Suite is a huge cash cow for the company.

No doubt, Google would like to do the same thing with its growing number of applications. And we got more evidence of this today; that is, the company is bundling email, IM and scheduling into a combined offering. It's called Google Apps. Expect the suite to get bigger, with the inclusion of a spreadsheet and word processor.

In fact, Google is targeting the business and educational markets – which is a further encroachment on the Microsoft Office franchise.

The really cool thing about Google Apps is that you can use your company's domain name. In fact, Google is planning to develop a fee-based version for larger companies.

I talked to Reid Conrad, who is the CEO of Near-Time, which develops online applications for small and midsize companies. According to him: "On demand application services are becoming increasingly mainstream in the business software industry. Google will accelerate the transition. Hosted applications increasingly make sense for organizations of all types and sizes. Client applications are far too static for the fluid needs of businesses today. While most of the focus has been on the ease of use, the real win is the integration of application services and content. Business software vendors who don't have a hosted story had better find one soon. Google's move is just the beginning. Also, as this sector matures, business models will clearly be moving from advertising to fee based services. Most businesses could do without the commercials."

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.