To that end, the company designs its applications with collaboration as the guiding post instead of as a "bolt-on" that is affixed as an afterthought. Kraus compared the superiority of that approach as similar to the superiority of ( CRM), a company that offers software as a service over the Internet, over Oracle's ( ORCL) Siebel Systems unit, an incumbent in the field that has been struggling to catch up with its own tweaked service offering.

And while Google's free service may seem like an act of charity, the move is a shrewdly calculated one to deflate the value of Microsoft's biggest properties. It also comes at a time when Microsoft is aggressively ramping up its bid to cut into Google's bread-and-butter advertising revenue.

While the Redmond, Wash., giant has long plotted to march onto Google's turf, it should now expect a push on its own home front as well.

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