It has been obvious for some time that my theory of a year ago--that Google and Microsoft weren't really going to go to war with each other (because Microsoft had already lost the web game and because Google wasn't going to be stupid enough to take aim at Microsoft's crown jewels)--was wrong. I was right about the first part--Microsoft is still nowhere on the web--but wrong about the second: Google clearly has its sights set on that pot of Office gold.
So, what is the current status of the office productivity battle? And what are the long-term implications? The current status is that Google's offerings are fine for low-end use but won't start meaningfully cannibalizing Microsoft's sales for years. No self-respecting IT manager at a Fortune 500 company is suddenly going to throw out the global standard and bet his or her job on the sideline business of an Internet media company. Over the years, a parade of web and technology titans--AOL, Oracle, Sun, Yahoo--have tried to upend parts of the Redmond monopoly, and all have found the crossover from their core business to PC software far harder than it looked. And if Google is serious about stealing some of Microsoft's sales and support customers, it will undoubtedly find this transition hard, too.
On the other hand, Google's current offerings--Gmail, Docs & Spreadsheets, etc.--bear all the markings of a classic disruptive technology. As Harvard professor Clayton Christensen observed, disruption begins when a dominant market leader has built so so much functionality into its core products that it has begun to over-serve its core customers. Some of these customers, realizing that a simpler, cheaper product will do, abandon the old technology. At first, this does not concern the incumbent, as it maintains a chokehold on the highest margin business--the high-end customers who need most of that complicated functionality and support. But, gradually, as the lower end product gets better, and the incumbent is forced to migrate to even more complex and expensive solutions, more of the overall customer base defects. And, then, voila, one day the incumbent wakes up and discovers that it is DEC, Sears, or AOL...and by then it's far too late to do anything about it.
From a long-term perspective, Google's initial offerings look mighty disruptive. And although Microsoft will no doubt assert until it's blue in the face that it has long since gotten Google religion and is already adapting all of its products for web-based delivery, it will likely find this easier to say than do--if only because each new free or low-priced subscription seat of a web-based Office won't immediately drop a couple of hundred dollars to the bottom line.
At the same time, by targeting Microsoft's crown jewels, Google is risking not only failure but its own monopolistic dominance of its core business--search. Selling and servicing technology solutions is a fundamentally different business than selling and providing advertising solutions, and will eventually require the creation of an entirely new sales and service organization. No company in history has dominated the hearts and minds of both marketers and IT buyers, although several have tried. Even with Google's awesome talents and power, therefore, success is far from guaranteed. Especially because the opponent in question, a sleeping giant that has so thoroughly dominated its industry that not one but two governments were forced to try to stop it, won't likely give up without a fight.