Both Google's word processing and spreadsheet program are hosted online, meaning that groups of people can easily collaborate on projects without having to continuously send out the latest version of a file. Google's spreadsheet program also lets cells automatically grab updated data from the Internet, ranging from a company's stock price to the population of New York, based on what a user indicates. And of course, Google gives away these tools for free. Microsoft, meanwhile, has to keep packing its products with new bells and whistles in order to justify the cost of new upgrades. While some of these features may be valuable to the most discriminating, they tend to overshoot what a growing number of users are looking for. Over time, simpler, cheaper technology tends to displace its bulkier, expensive counterpart. That is what happened when personal computers overtook mainframes and, more recently, when the comparatively less powerful servers by companies such as Dell ( DELL) became popular at the expense of the high-end machines offered by the likes of Sun Microsystems ( SUNW). In a recent interview with TheStreet.com, Joe Kraus, who heads up Google's community and collaboration initiatives, delved into the company's thinking behind the moves. Google sees the biggest gains in productivity coming from allowing groups to work together more effectively rather than from enabling individuals to become even more productive.
To that end, the company designs its applications with collaboration as the guiding post instead of as a "bolt-on" that is affixed as an afterthought. Kraus compared the superiority of that approach as similar to the superiority of Salesforce.com ( CRM), a company that offers software as a service over the Internet, over Oracle's ( ORCL) Siebel Systems unit, an incumbent in the field that has been struggling to catch up with its own tweaked service offering. And while Google's free service may seem like an act of charity, the move is a shrewdly calculated one to deflate the value of Microsoft's biggest properties. It also comes at a time when Microsoft is aggressively ramping up its bid to cut into Google's bread-and-butter advertising revenue. While the Redmond, Wash., giant has long plotted to march onto Google's turf, it should now expect a push on its own home front as well.