Google, the online advertising giant, and Salesforce.com, a pioneer in offering online software services to businesses, are reportedly set to join forces to take on Microsoft in the next generation of software applications.

An alliance could see Google package its online tools – such as e-mail and word processing – with Salesforce's systems, which include web-based software that allows companies to keep track of customer accounts. Talks are continuing between the two groups, according to The Wall Street Journal, and an announcement is expected in the coming weeks.

The mooted union would be a heavy blow to Microsoft, which competes with both companies.

In particular, Microsoft Office, the software package that along with Windows accounts for the lion’s share of the group’s revenues, is seen as highly vulnerable to rival software tools that are offered as services accessible through a web browser.

While Office is licensed and installed on a user's PC, these “on demand” services are paid for through subscriptions and store information in outsourced datacentres, in which Google has invested billions of dollars.

Recently, Google began offering paid-for online word-processing, spreadsheet and calendar services over the web.

These tools duplicate functions carried out by Office, a product whose continued success is seen as key if Microsoft is to continue to lock in customers to its products – including the Windows operating system.

“Without Office, Microsoft is a video games company,” one rival technology chief executive told The Times last week.

Meanwhile, Salesforce, which has so far concentrated on customer relationship management software, is looking to move into more complex and expensive services.

The shift will see it compete with much larger business software groups such as SAP and Oracle. Investment in growth has already hit margins, a factor analysts suggest could lead it to search for a partner.

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