Microsoft and Google are revving up their battle for the budgets of Chief Information Officers, with new versions of Microsoft Office and SharePoint coming in June.

One analyst, Rob Helm of Directions on Microsoft, describes SharePoint 2010, which can be hosted either inside or outside a company’s walls so employees can collaborate on documents with whatever level of privacy they choose, as Microsoft’s “secret weapon against Google Apps” — Google’s hosted Office suite.

Microsoft has also been testing a free, ad-supported version of SharePoint — similar to what Google offers with its basic version of Google Apps — with Windows Live SkyDrive, which is Microsoft’s online storage service, Helm said.

“Microsoft is really already executing against Google,” he said. “It just has to get to market what it said it has planned.”

Still, offering Web-based software does put Microsoft in a bind. Helm said the company has been careful to limit the capabilities of SharePoint and the Web-based Microsoft Office applications that work with it so that the combination is not a replacement for the full-blown version of Microsoft Office — Microsoft’s biggest business. Bloomberg estimated recently that Microsoft Office brought in $19 billion a year, about a third of Microsoft’s sales.

Judging from its recent behavior, Google will be a tough competitor to Microsoft. Lately, the company has been revving up Google Apps, which it licenses to businesses in a premium version for $50 per user per year.

New features revealed this month include a Web clipboard that lets users cut and paste content between documents, spreadsheets and presentations without reformatting; new buttons that make it clearer when content has been saved so that changes aren’t lost; and enhancements to Google’s scripting language, Google Apps Script, that let users automatically feed data from Google Apps into their Web sites. For example, users can automatically populate sites with data from their Google calendars or contact lists.

Google also announced a new customer – Lincoln Property Company, a property management firm with 3,500 employees that upgraded to Google Apps from Novell Groupwise at an estimated savings of $200,000 per year. In addition, Google said in a blog post this month, every employee at Lincoln Property would now be able to have their own e-mail, instant messaging and calendars — not just the 950 people who work in the office at desks. The lower cost of using Google Apps compared to Microsoft software is an advantage for Google, according to one integrator, Ed Laczynski of LTech, who sells and installs Google Apps for businesses. He estimates that businesses can use Google for 1/6 to 1/8 of what it would cost them to use Microsoft.

Google Apps doesn’t have as many features as Microsoft, but it doesn’t have to support as much legacy software or be retrofitted to work over the Web either, since it was designed to be collaborative and Web-based from the beginning.

“Microsoft makes great products, but they’re not in a position to be the provider of this kind of software for the worker of the future,” Laczynski says. “College students use Google, and they’re not going to want to use Microsoft when they get into the workforce.”

Still, he adds, “I want to see the competition (between Microsoft and Google) — it’s good for business.”