Google Sites was just launched and its target is clear: Microsoft SharePoint. While it has an uphill battle--security and a lack of the complex features that SharePoint has, for example--its biggest problem is that it doesn't connect with the content production tools that most people spend their (enterprise) content-producing lives in:
Microsoft Outlook and Microsoft Office.
Of course, Google Sites is free, which will cover a multitude of other problems, especially since Microsoft SharePoint turns out to be amazingly overpriced for a Microsoft product. Microsoft has, according to CMS Wire's analysis, completely priced the SME market out of SharePoint.
...[W]hen comparing licensing models and Web CMS features, we're not sure what would drive a company to go with SharePoint, when there are a number of viable and more cost effective solutions just waiting in the wings.
Like Google Sites, though not for the Web content management that CMS Wire discusses. For internal collaboration, Google Sites is likely to be a viable option.
However, I still think that Google's attempt to manage all collaboration through a wiki--which is really all Google Sites is--is a mistake. Wikis are great, but they are just one facet of collaboration. MindTouch, an open-source collaboration company with wikis at its heart, arguably does a better job of making wikis much more than wikis, while Google Sites seems content to run with a relatively vanilla wiki implementation.
Google has yet to prove itself as a viable enterprise competitor. But then again, it doesn't need to win overnight. Just as Microsoft has always done with its cash-cow businesses, Google can use the immense fruits of its search business to patiently chip away at the enterprise market. Google does exceptionally well at making software easy to use and, well, free.
Those are going to be hard to beat.
One thing I'd like to see: a pledge from Google to keep all of its customers' content open. The users, not Google, must own the right to easily move data out of Google Sites. I assume Google will do this--it's getting better and better at such things--but I would like to see it in writing.
Disclosure: I am an employee of Alfresco, an open-source content collaboration company, which theoretically will compete with Google Sites and which does compete with Microsoft SharePoint. I am also an adviser to MindTouch.