Google has slowly been phasing out support for its free Google Apps for businesses over the last couple of years, but the company announced its most significant changes yet this week. After scaling back the Google Apps user limit in April 2011, Google is now killing off its free Google Apps offering to new small businesses.

Existing users will be unaffected, but new small businesses who want to use a custom domain with Google's services will now need to pay $50 per user, per year. Google used to offer Apps for Business for free for up to 200 users, but the company has changed this limit a number of times, most recently reducing it down to just 10 for new users. The changes could mean that small businesses will look elsewhere to avoid the charges on new accounts.

Microsoft offers its own Office 365 Small Business service, which includes web-based Office apps and cloud-based email for $72 per user, per year or an upcoming Office 365 Small Business Premium subscription that also includes access to traditional Mac or PC versions of Office and mobile clients at $149.99 per user, per year. Windows Live Domains is also a free alternative with a maximum of 500 users on a custom domain, providing access to mail, 7GB of SkyDrive storage, and Office Web apps for each user at no cost. It lacks the team and public websites that Office 365 offers, but for basic use it's a reasonable free option. There are also alternatives from providers such as Zoho and Salesforce, both of which cater to small businesses.

A large number of small businesses have moved to Google Apps to take advantage of the low-cost benefits of cloud-based collaboration via shared calendars and Google Drive. Microsoft and Google have been battling to entice small and big business over to their web-based services and Google's latest announcements show it's starting to cut its free offerings to generate revenue. Microsoft is slowly moving closer to Google with pricing that's increasingly competitive, but the company has a number of areas it needs to improve on feature wise before things are truly even. Google's announcement has just made it easier for other services to capture the small business market with low-cost services, so expect 2013 to be a big cloud battle amongst the big and small players.

Update: The Wall Street Journal has posted a story on the move, and it appears Google may have some real financial motives behind the change. According to the WSJ's sources, Google Apps generated $1 billion in revenue this past year.