Google has pushed further into Microsoft's turf with a major upgrade of its Google Apps hosted suite.

Like the free Standard and Education Edition versions, the new Premier offering has Gmail webmail (with BlackBerry support), Calendar shared scheduling, IM and integrated Docs & Spreadsheets apps. But for $50 (£25)per user per year, Premier customers will get 10GB of email storage per user, instead of 2GB. A Premier subscription also buys a 99.9 percent uptime guarantee, IT management tools and phone support, and tools for integration with other business data.

What's winning over the first Google converts? Money. Consider US property firm Prudential Preferred Properties in Chicago, which is feeling a sting of between $350 and $400 per Microsoft Office licence. "We have instances in which the Office licence was more expensive than the PC it's on," says Camden Daily, Prudential's director of IT.

While 450-employee Prudential still uses Office, it doesn't want to use MS Exchange any longer. Google Apps has found its way in as the salvation for an outsourced email service that constantly malfunctioned. Prudential has been using the free Standard version - but Daily said the Gmail service alone is worth the price of the Premier edition, which he will adopt. "Everything on top of that is just a bonus," he said. He'll evaluate Docs & Spreadsheets.

What's missing? Google Apps needs a presentation application like PowerPoint, and better support for offline work beyond its ability to import and export files from Docs & Spreadsheets, analysts say. Google indicated that it was developing a PowerPoint competitor earlier this week.

Dave Girouard, vice president and general manager of Google's enterprise unit, says Premier can be a good complement to Office, and Google sees a big opportunity in organizations that haven't been able to justify the cost of offering e-mail to some employees.