Google’s new, web-based Spreadsheet is being viewed as a major challenge to Microsoft’s Excel and the dominance of its Office suite. From my perspective, it is also a significant endorsement and will be another catalyst in the movement toward Software-as-a-Service (SaaS).

Google’s move isn’t a big surprise to anyone who follows the software industry and the escalating tensions between Google and Microsoft. But, it is still a milestone in the evolution of SaaS.

While the number of web-based alternatives to Microsoft Word, Excel, Powerpoint and Project has grown–check out THINKstrategies’ SaaS Showplace for some examples–none had gained mass market attention and acceptance. Instead, they’ve been the playthings of Marc Benioff of Salesforce.com and techies who love to imagine a world without Microsoft.

Google’s Spreadsheet has made news in the popular and business press, elevating the stature of SaaS and giving it greater credibility across a larger cross-section of potential customers, including corporate executives.

This will accelerate Microsoft’s SaaS development and acquisition efforts. (See my previous blog.) It will also fuel a surge in venture funding of nascent SaaS developers, and intensify the efforts of eBay, Yahoo, AOL and other Internet companies seeking to position themselves as SaaS providers.