Amazon really wants your business. They want to make a fortune in the compute supply business. This seems like another Google offering that they don't take particularly seriously - that they can offer for free at some level of service because of the enormous river of advertising cash - but you know its not much of blip on their business radar. Mostly these services aid recruitment and keep up Google's profile but I don't expect them to be actively chasing down customers and getting better at what they do like Amazon does.
There is only one business sector in which I'd be scared to compete with Google and that's search.
This seems like another Google offering that they don't take particularly seriously
I don't think so, Google's hosting is going to bite into MS's market of IIS and Windows Servers just like GMail/Calendar is competing with Outlook/Exchange.
Microsoft is countering with hosted Exchange service and hosted SQL Server services. I think hosted Exchange will be a lot more profitable than (ad-free) GMail hosting can ever be.
There is only one business sector in which I'd be scared to compete with Google and that's search.