Overall, comparing Office 365 to Google Apps is like comparing the QE II to a sailboat. Both of them will get you over the water, but they do it in completely different ways -- especially on the server side. (To dig deep into the online versions of Exchange 2010, SharePoint 2010, and Lync 2010, see InfoWorld's Office 365 preview; little has changed since then.)
If you revel in the intricacies of Exchange Server 2010, you'll be happy to know that all of that power and complexity carries through to the Microsoft-hosted version, although there's a simplified interface sitting on top. There's also a peace-of-mind factor: Microsoft takes on the care and feeding of Exchange, SharePoint, and Lync -- including maintenance, security, backup, and uptime. For those of you in large organizations, Microsoft will let you split server duties on-premises and in the Microsoft cloud, an inviting prospect if your company has a handful of big centers, with small satellites spread out geographically.
Finally, a word about file compatibility -- which remains a sticking point for both Office Web Apps and Google Docs. Opening an existing Office document in either of these companies' online apps works reasonably well, but it's not unusual for Google Docs to garble heavily formatted Word documents. In general, Microsoft Web Apps do a better job displaying complex Word documents than Google Docs does.
Setup: The quick and the bloatedThe first setup hurdle to clear involves email. On the Google side, you have to migrate your current mail server over to Gmail. On the Office 365 side, you need to get Exchange hooked up and get the mail flowing through it, but there's much more on offer.
If you're looking at moving some of your company's functions into the cloud, and you aren't wedded to Exchange Server, spend some time with Google Apps. Taking Google Apps for a test drive is very easy. Start with the setup wizard. After you verify ownership of your domain name (generally by putting a specific file on your website), it only takes a few clicks to follow the wizard (see Figure 1), set up users, and get going.Figure 1: The setup wizard, integrated into the administrator’s control panel, makes it very easy to get started with Google Apps for Business.