Microsoft and IBM executives Wednesday admitted feeling heat from Google now that the Web search giant is trying to make inroads into the enterprise market with its hosted suite of communication and collaboration tools.

Google Apps, a hosted service, is gaining traction primarily in universities but is a welcome addition to enterprise software because of its simplicity and ease of use, said Rob Curry, director of Microsoft's Office business platform group, during a panel discussion today at the Enterprise 2.0 conference in Boston.

"We actually see [Google] as a great competitor in this space," Curry said. "And they bring a good spirit in terms of simplicity, ease of use and things we're trying to leverage as we go forward in our development cycle."

Google Apps was described as a "direct shot at Microsoft Office" by Forrester Analyst Erica Driver when Google released an enterprise version of the tool in February. For $50 per user per year, customers get e-mail, instant messaging, a calendar tool, a Web page creator, support for e-mail on BlackBerry mobile devices and integration with Google Docs & Spreadsheets. Analysts say Google Apps offers less functionality than Office but is less expensive.

IBM, which offers the Lotus Notes set of e-mail, calendaring and collaborative applications, and Lotus Sametime, an IM and Web conferencing tool, has partnered with Google but still sees the company as a potential competitor. Lotus Sametime allows IM customers to communicate with users of Google Talk.

"We're a key partner of Google's," said Ken Bisconti, vice president of messaging and collaboration software for IBM, during the panel discussion. "We partner with them, and continue to partner with them, hopefully for the good of our customers. I also fully expect them to become a competitor to us in the business space."

Google executives are busy trying to understand the requirements of enterprises, a learning process that will be crucial if the search company hopes to gain market traction for Google Apps outside of academia, Bisconti said.

"Most of our customers tell us they're talking to the Google enterprise team," he said. "Google is doing a good job of collecting information to understand enterprise requirements. ... I don't see them as a near-term competitor but as a long-term potential substitution."

No Google officials participated in the panel. The session, titled "Vendor Spotlight: Assessing IBM & Microsoft Platforms for Collaboration & Unified Communications," also gave the vendors a chance to discuss the broad trend in which employees expect the types of instant communication available to them in their personal lives.

This is placing increased important on IM, Web conferencing, video and audio conferencing, and mobile communications.

"The role of instant messaging has completely transformed and it has become a business expectation," said Akiba Saeedi, IBM's program director for unified communications and collaboration products.

Years ago, people questioned whether e-mail would become a necessary business function. No one would question e-mail's importance today, and IM seems to be heading in a similar direction, Saeedi said.

Bisconti cautioned against getting caught up in industry buzzwords such as "enterprise 2.0," but said the desire for collaborative technology in general is real and has created a huge business opportunity for software vendors. "I have never seen so much senior-level interest in companies in improving the way they communicate, collaborate and improve the speed and agility of their business," he said.