Google is making a concerted move beyond search and advertising into the business software market, starting with a set of Web programs for e-mail, scheduling and communications, it said on Sunday.

The online search leader said it has created a software platform to run basic business activities -- based on programs it already offers separately. The move marks a stepped up challenge to rival Microsoft as the software giant prepares to upgrade its Windows and Office franchises.

The free set of Web-based programs for small businesses, universities and nonprofit businesses goes by the mouthful "Google Apps for Your Domain" (http://www.google.com/a).

Later this year, Google said it will offer a "paid, premium" version with the option of being ad-free and more administrative control and compliance features to meet the demands of bigger corporations and government agencies. Pricing for this more advanced version is not yet available, it said.

Google will host the applications relieving companies of the need to maintain or install software on individual PCs -- support tasks often more costly than software itself.

Individual office workers can sign on to Google Apps -- short for applications -- through their Web browsers.

Initial apps are Gmail Web e-mail, the Google Talk instant message and Web phone-calling service, group scheduling on Google Calendar, and Google Page Creator for Web page design.

"One of the fundamental benefits of the software as service approach is that you can just turn on new features over time." The Writely word processor and Google Spreadsheet are candidates for future inclusion in Google Apps, a Google spokeperson said.

Anticipating Google's moves, Microsoft has responded with Windows "Live" -- Web-based software for small business and consumers. But Microsoft's unwillingness to deliver its software until it is "fully baked" gives Google an opening to win adherents to its approach, the analyst said.

IBM , Oracle and SAP AG also are racing to offer their software as Web-based services in order to make it easier to use and to cut costs, following the lead of pioneer Salesforce.com . Google's latest move makes them both competitors and potential partners.