Google and Salesforce.com will announce a partnership on Tuesday, a source close to the company in Europe said.

Salesforce.com has scheduled an online news conference on Tuesday at 11 am GMT at which Lindsey Armstrong, co-president of the company's operations in the Europe, Middle East, Africa (EMEA) region, will make a "strategic announcement". The source said it is safe enough to assume that the announcement concerns Google.

A Salesforce.com US spokesman declined to comment on the identity of the internet company in the deal.

The Wall Street Journal reported on 21 May that Google and Salesforce.com were holding talks over a possible alliance that could see the two companies bundle web-based applications. Both vendors declined to comment on the report.

Google and Salesforce.com have each been rapidly expanding the online services they offer.

Google has dramatically widened its scope from being a leading internet search engine to encompass an ever-increasing range of other online services including desktop applications. Eight-year-old Salesforce.com has its roots as a hosted provider of customer relationship management (CRM), but has its sights set on becoming a software-as-a-service (SaaS) platform vendor using its AppExchange website, which it is in the process of fully commercialising as an online software marketplace.

"We're a catalyst for change," Marc Benioff, Salesforce.com chief executive, told financial analysts earlier this month. "Google, Amazon.com, eBay and Yahoo inspire us. We want to duplicate what they do in the consumer world." He added that to his mind Salesforce.com was effectively "building an on-demand operating system." Benioff positioned Salesforce.com as still very much focused on growth. "We're just trying to get to a billion dollars in on-demand [software] before anyone else does," he said. "We're willing to do anything."

At the same time, Microsoft, a prime competitor of Google in the search and internet advertising arenas, is marshalling its own set of Windows Live online services, including a hosted version of its Dynamics CRM software.

The Journal report suggested that Google and Salesforce.com need to buddy up to take on Microsoft and avoid competing with each other.

Teaming up could involve integrating Google's Apps suite with Salesforce.com's hosted CRM. The two companies have previously worked together around Google's Search Appliance and AdWords. There's also the possibility that the relationship might become much closer with Google potentially looking to acquire Salesforce.com at some point.

Read more about the evolution and growth of the SaaS market in CIO's special report.