For all of the buzz around the idea of web 2.0 and its potential impact on the enterprise, this move by Google, anticipated by many, will prove to be a watershed moment in the history of technology industry.  As I contemplate what this means for the industry two questions come to mind:

Will Eric Schmidt, on the losing end of some epic battles with Microsoft before (e.g. Sun and Novell), emerge as the winner here?

It feels like this time around, he has the wind at his back.  Google possesses everything that it needs to compete successfully against Microsoft:

• a mature infrastructure known as the web as their distribution channel;
• a huge, loyal user base, already familiar with Google as a brand;
• an unbelievably talented development organization that can rapidly iterate and improve its services;
• a core competence in building and managing massively scalable internet services; and, most important, in my view
• a business model that is fundamentally disruptive to Microsoft's largely 'packaged software' model and the ecosystem of ISVs, systems integrators, VARs and retail distribution channels that has been painstakingly built over decades to support it

How will Microsoft respond to Google as an emerging threat to its core businesses?

It's hard to say precisely how Microsoft will respond, but you can bet that it will be measured, thoughtful and relentless.  I for one would never count out Microsoft.  They have weathered many storms in their past and pretty consistently emerged triumphant.  Here is some food for thought on how I think they should respond:

• Deeply Integrate Web Based Services Into Core Microsoft Clients.  Microsoft Outlook and Office are great applications.  But they could be better, particularly if the web apps I use today could be seamlessly integrated with them.  For example, if Microsoft integrated MSN maps into Outlook, I would probably use MSN Maps more often than I do now (which is never).
• Microsoft Clients as Distribution Channels.  Distribution is the name of the game, certainly for consumer facing internet services.  How many desktops today have Office or Outlook on them?  Hundreds of millions?  It doesn't seem like too much of a stretch to embed a search box in the ribbon of Microsoft Word, Excel and Outlook. Even with a small adoption rate, that could translate to many many search queries, which, as we all know, can translate into some serious revenue
• Privacy.  I'd be focused on privacy as a reason to think twice before putting everything on the web.  I think many users will believe, rightly or wrongly, that having their information on their physical computer maintains a degree of personal privacy (not security, privacy).   I don't know about you, but all of this information that Google tracks about its users gives me the willies. 

I can't wait to see how this one plays out.  What do you think?

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