I earlier argued that Google and Microsoft are not natural enemies; it is Google, not Microsoft, that has effectively drawn first blood. I think it would be interesting to see what Google was trying to accomplish, based on the assumption that it is working on a plan that requires Microsoft to focus on what Google seems to be doing, but not be able to block Google from reaching its actual goals.
Few companies are capable of this kind of complex strategy; however, Google demonstrated this capability in the latest spectrum auction, where it was able to get what it wanted (some disagree) from the auction by spending nearly nothing and playing one carrier off against the other.
I'm going to start with the assumption that Google doesn't want to take Microsoft out. It just wants to significantly weaken it so it can't remain a real threat. That might be a false assumption and, long term, this could change. But it is based on its lack of focus on platforms (excepting Android), and its core strength, which is monetizing page views. However, Android might indicate the war is real.
Let's start by revisiting Microsoft's strengths and weaknesses.
The Good, the Bad and ...
In products, Microsoft's strength is Windows Server and related infrastructure products. Its weaknesses are Windows XP/Vista, Office 2007, and the related IE browser. These three products are interconnected. With Windows being the critical link, control of this product is at risk due to Microsoft's prematurely signaling that Windows XP is obsolete. It is premature because although XP is old, the market isn't ready to adopt Vista in sufficient numbers to ensure Microsoft will continue to control the desktop once the company appears to abandon XP.
With Google's acquisition of DoubleClick, it has the capability to vertically integrate, but likely has hit its limit on expansion in this direction without serious antitrust problems. However, the acquisition has focused Microsoft like a laser on Google's dominant power and the very real risk that Microsoft could actually end up working for Google at some point, for at least a major part of its Web business. However, Google has no real play in the enterprise yet. Microsoft's enterprise agreements assure this is protected revenue, similar to the protection that IBM had and gave up when it sold its mainframe leases in the '80s.
So Google has focused Microsoft on the area where Google is strongest, monetizing ad revenue, and pushed it into a strategy of trying to match strength to strength. Still Microsoft, even with the Yahoo acquisition, will be significantly weaker than Google in this key area. Acquisitions, particularly big ones, can be a massive distraction and should keep Microsoft busy and looking elsewhere while Google executes different aspects of its strategy.
Google's Likely Strategy
To keep Microsoft off balance and to add value to Windows XP, Google is using its Apps application set and the Google Desktop. Apps should allow Google to apply increasing value on Windows XP, keeping people from justifying an upgrade to Vista and gradually transferring control of the platform to Google, which will be providing more of the current value. Successfully targeting education initially, but with indications of home and small business penetration, the product bypasses traditional retail-based market-share reports. Google is motivated to under-report its success to minimize the threat to Microsoft and avoid too much focus from Microsoft. Microsoft has seen other companies try similar things before and, if the strategy works, will not respond to the risk until it's too late.
Android, which has a much higher profile -- and needs to, because it is a platform play -- is positioned as just a cell phone offering. But much like Apple went from a full operating system down to the iPhone, nothing says that once it's established as a platform and has developers, it can't move up. Android's potential, once it establishes a beachhead, is much greater than just a phone. Developers for it could easily support the next likely move into broader thin-client computing, though I bet we don't call it that.
That requires a fat data pipe back to Google services and Google has been building some impressively big data centers and acquiring a lot of black fiber for something. I can see, potentially, a company positioned to not only surprise Microsoft but surprise others such as AT&T, HP, Comcast and Apple.
Wrapping Up: Why War?
With war comes control. By attacking Microsoft, Google forces Microsoft into a defensive posture. When defending, you are reacting to the other player. Done properly, the attacker can choose the field of battle and the weapons used. Microsoft, partially because it tends to focus on an attack and partially because of its antitrust constraints, is forced down a path of Google's choosing. While it eventually will figure out where Google is going, by the time it does -- assuming Google is successful -- Google will already be there.
While it might be in Microsoft's best interest to be partners with Google, Google would lose its control over Microsoft in such a situation, which would limit its ability to bring about the revolution it wants.
At some point, we might need to ask whether this revolution is in our best interest. As the saying goes, power corrupts and absolute power corrupts absolutely, despite promises to "do no evil."