The game is on. Microsoft officially took its ubiquitous Office suite to the cloud this week with Office 365. And that, say industry watchers, is not good news for rival Google, which has been trying to capture the enterprise with its own offerings of cloud-based office apps.

"This is not a great day for Google," said Dan Olds, an analyst with The Gabriel Consulting Group. " Microsoft, when it comes to office productivity applications, isn't only an 800-pound gorilla, it's a zoo worth of 800-pound gorillas. They are the standard."

Last year, Google began a concerted effort to push its cloud-based Google Apps into the lucrative enterprise market, taking on Microsoft and its popular desktop applications. With Microsoft slower to get to the cloud, Google had a head start. Dave Girouard, president of Google's enterprise division, said earlier this year that Microsoft was simply too far behind Google to catch up.

However, now that Microsoft is officially in the game, that advantage might not be so clear.

"Yes, Google's office apps have been out there longer," Olds said. "They definitely have users and a fairly decent number of users, but not a lot of noticeable revenue from it... And there's no such thing as an insurmountable lead in the Net."

"I think the other thing is that Microsoft will bring a full load of features and a more mature and integrated set of offerings that people already know and understand," Olds said. "That will be big in their favour."

This week's announcement isn't Microsoft's first cloud-based app offerings. It's more of a bundling move. Microsoft took the wraps off its Office 365 suite of applications on Tuesday, adding long-awaited, web-based versions of its ubiquitous Office applications to what had been a rather little noticed collection of hosted business software.

And analysts say with Microsoft throwing its full weight into the cloud arena, it just might prove to be an interesting battle between two companies that already duke it out over search engines, operating systems and browsers.

After all, while Google may have been first to the market, the company still makes most of its money from search. Google Apps hasn't yet proven to be a money-maker. Microsoft, on the other hand, may be late to the dance, but its Office applications are known around the globe and account for much of Microsoft's revenue.

"If history is any indicator, Microsoft is well positioned to succeed within what has become a very cloud-centric collaboration and productivity marketplace," said Brad Shimmin, an analyst with Current Analysis.

"In the '90s, Microsoft ignored the importance of the web, for example, allowing rivals such as Netscape to dominate the browser market. But Microsoft was able to quickly turn the tables, creating what has become the de facto standard for web browsers, Internet Explorer," Shimmin said. "Given the central role Microsoft's desktop-based collaboration software will play in Office 365, I think it is likely that Microsoft will give Google a run for its money."

Rob Enderle, an analyst with the Enderle Group, however, said Microsoft might have a harder time making headway into the enterprise cloud market. "[Microsoft's] user base is tied tightly to their client-based offering and Microsoft doesn't want to move them," Enderle said. "This limits how much they will want to promote the [web-based] offering."

Analysts said that if Google really wants to compete in the productivity application market, it better focus its sights.

"They need to decide which fights they want to really fight," Enderle said. "They do most things outside of search half-assed and, at some point, they will need to bring up their game and focus more if they want to be more than just a search vendor living off advertising revenue."

Olds agreed that Google needs to lift its game. "They're going to have to improve the quality of their apps, the integration of their applications and do whatever they can to match what Microsoft is bringing to the table," Olds said.

"It's not like this move is suddenly going to make people drop Google Apps. It's more that this will be a real impediment to its growth," he said. "A large number of people using Google Apps are using it because they either hate Microsoft or they're people who really just need that web interface. Those latter folks will be the ones in play now. They're the ones that Google could lose if they're not careful,"