Microsoft has unleashed its latest weapon in its ongoing battle with Google.

The software giant has launched its flagship product Office 2010, aimed at businesses and home users.

The latest version of the software has a free online component - called Office Web Apps.

Analysts believe the web offering is a response to Google, which has been encroaching on Microsoft's core business with its free online tools.

Crucially, Microsoft will also offer its online office suite to all users of one of the world's most popular social networking sites, Facebook.

"There's no question - Microsoft is responding to Google's threat," said Whit Andrews, analyst at research firm Gartner.

'Microsoft world'
Google and Microsoft have increasingly begun to stray into each other's traditional markets.

Microsoft has thrown its full weight behind its search engine Bing, whilst Google is about to launch its own operating system, known as Chrome OS.

It is critical that Microsoft capture users who are not tethered to the same desktop PC every day

Whit Andrews
The battle for the Office software market started in 2006 when the search giant launched the first elements of its Google Docs.

"Until Google emerged with a credible suite of networked applications, Microsoft was not compelled to do anything."

Google Docs now offers word-processing, spreadsheet software and a presentation tool, amongst others. Businesses can pay for premium versions.

"Each release of Office has a new set of competitors and we take those very seriously," Jeff Teper, vice president of the Microsoft Business Division told BBC News.

"[Google] has introduced a product that they have tried to target businesses with - it hasn't done very well."

Google Docs currently has a small (4%) but growing share of the market.

Google Chrome OS will be released in the second half of 2010
By contrast, Microsoft dominates the office software space, with a market share of more than 94%, according to Gartner. The vast majority of sales are to businesses.

Business "is still overwhelmingly a Microsoft world", said Sheri McLeish, analyst at Forrester Research.

Microsoft retains its dominant position despite the free offerings from Google and other alternatives such as Zoho or the free office suite

Ahead of Microsoft's launch Google posted a blog urging businesses to switch to its software, claiming that it represents a real alternative".

"If you're considering upgrading Office with Office, we'd encourage you to consider an alternative: upgrading Office with Google Docs," it read.

Despite, Google's focus on businesses, Mr Andrews said its message and software were likely to appeal to younger people, who have not necessarily grown up using Microsoft products.

"If all your content is generated in the Google apps system and it lives there, you would need to have a really good reason to move," he told BBC News.