When your chief business rival is giving its product away, you have two choices: either sit back and watch your customers migrate to the other team, or match what the other company is doing.

For three years, Google (GOOG) has offered Google Docs, which offers free browser-based document and spreadsheet software. Google Docs has chipped away at Microsoft Office's stranglehold on the category. Apparently weary of losing its customers to Google, the software giant is finally taking action and doing what some thought it would never do: give away its Office suite.
The free version of Office will have fewer features than the beefier versions that Microsoft will continue to sell, BusinessWeek reported last week -- but it will compete with Google's Office-like applications.
"More than 400 million consumers will have access to Office Web applications at no cost," Microsoft said yesterday in a press release. The Redmond, Washington–based company promised "innovative capabilities and provide new levels of flexibility." Sounds like it's upping its game. "New levels of flexibility" is an innovation Microsoft probably wouldn't have come up without feeling some pressure.

"Microsoft was forced to provide a free product" as an answer to Google Docs, Sheri McLeish, an analyst with Forrester Research, told the Los Angeles Times. "It's a very competitive market out there, and this was Microsoft's opportunity to one-up Google by offering a much better product."

Whether Microsoft has one-upped Google remains to be seen, but at least it matched its rival on the price point. "The Internet has thrown Microsoft back on its heels," Peter Burrows writes in BusinessWeek's July 6 cover story, "Microsoft Defends Its Empire."

So this is the Empire striking back. What's next from Google? We await the return of the Jedi.

Anthony Massucci is a senior writer for DailyFinance. You may follow him on Twitter at hianthony.

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