As rumored yesterday, Google made a major announcement: a subscription package of premium, hosted business applications. (Man, Arrington's sources are scary good). The service combines GMail, Google Calendar, Google Talk and Google Docs & Spreadsheets for $50 per user annually.
I still insist that Microsoft is well positioned to compete with a hosted version that integrates with existing Office apps. There are elements about a hosted Office that are appealing, but there are just as many that are not - particularly in publicly traded enterprises. Aside from potential downtime issues, you're placing a lot of trust in Google and its security (which may not be the best idea). No word on any plans for a self-hosted server like their search appliance - to me, that would be key for broader adoption and erase a lot of these security and compliance concerns.
Getting back to Microsoft, I'm still puzzled that they haven't done more with Foldershare. By integrating this technology with a Office frontend and a Sharepoint backend, they could effectively bridge the gap between hosted services and what we have today. Such a system would allow allay fears of downtime because all files are available locally, and would provide a web-based interface. As I've said before, the web UI for these office products is the easiest element in the equation - all the hard pieces are already in place.