May 12, 2010 | The Wall Street Journal

In the technology world, the battle to win the small-business workplace is about to heat up.

On Wednesday, Microsoft Corp. is set to launch Office Web Apps, the long-awaited “cloud” version of its Office suite of software, which includes business mainstays Word and Excel. The move is a nod to growing interest in Web-based applications among companies— and GoogleInc.’s success in wooing an increasing number of people, especially small-business users, with its Docs online suite.

Office Web Apps will allow users to store files in Microsoft’s datacenters—or its “cloud”—rather than on their own computers. The approach, popularized by Google and others, allows users to access their files anywhere from any device via an Internet connection.

The cloud service will be included free with the new 2010 versions of Office and SharePoint, Microsoft’s Web-based collaboration software, also due out on Wednesday. A free consumer version, expected out in June, will compete with Google Docs’ free, advertising-supported basic version. Docs also has a paid version with additional business features that costs $50 per user per year.

The energized competition between the two giants will benefit small companies by spurring product innovation, while keeping prices low, says Melissa Webster, content and digital media technologies analyst at research firm IDC. With Google providing free-to-cheap software, Microsoft will be especially motivated “to show the value of its advanced functionality,” she says.

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