Microsoft Office remains the default option for 'office productivity' software. The most recent version being Office 2013, the suite of programs is better known by its key components: Microsoft Word for producing documents, Excel for spreadsheets and PowerPoint for presentations.

But it comes at a cost, and for some businesses, cloud computing and open source software offer better options, sometimes for free.

Small businesses tend to buy Microsoft Office along with a computer, not least because this is usually been the cheapest option. The basic version of Office 2013 for small business – which also includes Microsoft Outlook, the email and calendar package – adds £159 (exclusive of VAT, as with all prices mentioned here) to the price of a Dell PC or laptop, although discounts are sometimes available.

Cloud computing – which simply means using the internet, rather than your own computers, to store files and software – offers an alternative. It can provide access from any device with an internet connection, including tablet computers and smartphones, although screen size may make access tricky with the latter. And you can get everything offered by Microsoft Office, along with some interesting extras, from Google for free at a basic level.

Gmail option

Google's Gmail is well known as a free webmail service, but through Google Drive (formerly known as Google Docs) the firm also offers equivalents of Word, Excel and PowerPoint in a web browser.

These have pros: files are available anywhere and can be used by several people in several locations simultaneously, with users able to see what their colleagues are doing.

There is also the option of linking in other Google services such as Fusion Tables, which generates maps with clickable pointers from spreadsheets; Analytics, which analyses web traffic; and its paid-for advertising service AdWords. These can all use the same log-in, although some have little integration with other Google services.

However, there are significant drawbacks. The components of Microsoft Office tend to have more features, so advanced users of spreadsheets are likely to need to stick with Excel. Also, many users have been trained or become accustomed to Microsoft, and there is a cost, at least in time, in retraining them to use an alternative.

But if you have far-flung staff who need only basic office software functionality, Google's products may well be sufficient, particularly as most people have a Google account that can be set to give them access.

Business choice

The firm packages them together in a higher spec version called Google Apps for Business, which provides 25GB of space rather than 10GB in the free version. It allows you to use your own domain name rather than gmail.com and a guarantee on availability – costing £3.30 a month per user with a month's free trial.

For those who want to stick with Microsoft, the firm has hit back with Office 365 , a cloud computing version of its software suite that includes Outlook as well as Word, Excel and PowerPoint. Documents can be saved online in Microsoft's SkyDrive service, which can also be used by normal versions of Office 2013, and the files are compatible with desktop versions of Microsoft Office 2007, 2010 and 2013.

The basic small business service costs £3.90 a month a user, or £39.60 a year – working out at the same monthly £3.30 charged by Google. It has similar specifications, too, with 25GB of storage space, the ability to use your own domain name, support and an availability guarantee, and a free month's trial.

There is also a £100 per user per year option which provides the software on your own computers, as well as other features.

A further option, either as an alternative or in addition to cloud computing, is open source software.

Apache OpenOffice is an office productivity package that can be used for any purpose free of download and licence fees. Its components, which include Writer for word processing, the Calc spreadsheet and Impress for presentations (as well as drawing and database software), have a level of functionality much closer to Microsoft Office than Google Apps, and they function as a single piece of software rather than a suite of connected ones.

Support

In terms of support, you get what you pay for with free software – there is a lot of advice online, but no guarantees. But OpenOffice has been around for 20 years and is used widely: since its latest version, 3.4, was released in May 2012, it has been downloaded more than 44 million times. Also, as with Microsoft Office's 'normal' version, it will work offline, whereas cloud computing is only as good and fast as your internet connection.

A smart business, even one with a very limited budget, should consider mixing and matching. Microsoft, Google and OpenOffice can all use open file formats that work in different types of software – for example, Google and OpenOffice can open Microsoft Word's .doc and .docx formats – although don't assume the results will always look exactly the same when viewed or printed.

If you fancy sticking your head in the cloud for office software, by using Google Apps or Office 365, you can always provide staff with a free version of OpenOffice as well to allow them to work offline.