Google CEO Eric Schmidt says that the integration between GoogleApps and Salesforce.com's on-demand software is just the first step toward what he expects to be a bigger partnership between the two companies.

"I think we'll be doing a lot more" with Salesforce.com, Schmidt said of the two firms, which are each working hard to chip away at Microsoft's domination of the market for office applications.

In this exclusive Vator.tv interview, Google CEO Eric Schmidt lays out his vision for the future of business computing over the Internet that could one day present a nightmare scenario for Microsoft.

"Once their data (meaning Salesforce's) and our data are linked together, a whole generation of apps will be built on top of it," Schmidt said.

Both Salesforce and Google have a vision of Internet-based "cloud" computing that sees the end of shrink-wrapped software, and their latest moves are meant to give developers a platform outside of Microsoft. 

We caught up to Schmidt at the Four Seasons Hotel in San Francisco, where he and Salesforce.com CEO Marc Benioff provided details of the partnership to analysts and media plied with a four-course lunch in a room filled with lava lamps.

Salesforce.com users will now be able to integrate Gmail, GTalk instant messenger and other Google functions into their sales tracking records. Google, meanwhile, will get a channel into Salesforce.com's tens of thousands of enterprise customers.

That could help boost the number of users of Google's online applications. While those are free, a premiere edition that comes with better security options costs a nominal monthly fee.

Given that most large companies around the globe still run their businesses on Microsoft programs, Schmidt's vision is a ways off. Large companies have shown relatively little interest in running their most important applications over the Web.

But smaller firms have, and Microsoft's own actions suggest the tipping point for cloud computing may come sooner than we think. CEO Steve Ballmer is spending most of his energy these days on the company's hostile bid for Yahoo so it can improve its share of the Internet advertising market.

At the same time, Ballmer has said in the past that the giant is not going to spend a half-decade on an upgrade to its flagship programs, and Microsoft is dipping its toes into the on-demand market with a rival offering to Salesforce.

NetSuite, which offers on-demand sales and back office applications, entered the public markets last year. With Google and Salesforce pushing hard in the same direction of cloud computing at the same time CIOs are looking to cut costs, more businesses are likely to experiment with it.