24/7 Wall St.

The theory goes something like this: Microsoft (MSFT) has a model for selling software which is installed in a PC or server and uses that device’s computing power and memory to run the applications. That seems to work fine because most machines have plenty of processing power.

Google (GOOG) decided to challenge the Microsoft approach by offering its Apps product which includes word processing, spreadsheet, and presentation software. These products work on remote servers and do not tie up the computing power of the user’s machine.

Google does not do well with Apps, at least according to most industry reports. People still download Microsoft Windows without many complaints, but some IT department would probably like to move the load of processing much of the Windows software to Google’s server farms. The customer is always right.

So, Microsoft will greatly expand the number of products it markets for buyers who want to use the online versions of its software. According to Reuters, "Microsoft Corp will soon launch a full range of online versions of its software products, including the Office suite, and expects the weak economy to accelerate growth of the nascent Web-based software market." That will help companies which want to move to very cheap PCs to save money the opportunity to run Windows and Office without needing to upgrade to hardware with the newest and fastest Intel (INTC) and AMD (AMD) chips.

If Microsoft has learned any lesson from Google, it is about to hit the search company over the head with it.

Douglas A. McIntyre