Most analysts, users and vendors generally agree that hosted suites and packaged software suites, each with its advantages, work best in tandem, complementing each other.

"We'll see more and more organizations that look to a tiered strategy for the way they deliver desktop applications. So rather than have a standard desktop, I may give Office to the folks in finance who really need Excel, while the folks in marketing may be fine within the Google environment," Wettemann says.

At SF Bay Pediatrics in San Francisco, employees use Microsoft Office in conjunction with the Google Apps word processor and spreadsheet applications, says CIO Andrew Johnson.

Meanwhile the Gmail Webmail component of Google Apps has proven a major improvement over the previous situation in which individual employees used a variety of personal accounts, Johnson says. The option of bringing in an Exchange server for e-mail would have been too expensive, he says.

Peter Gilbert, an independent IT consultant in New York whose one-man company is called PG Systems, swears by Zimbra's suite. Previously for e-mail he used a shared hosted Exchange server. But the hosted Zimbra suite gives him much more, like a hosted document repository and a centralized contacts manager.

"I see Zimbra's collaboration suite as a solid backbone for my business," he says.