Most people are familiar with Google Docs, the free cloud-based office suite offered by Google within its Google Drive service.

Google Docs is complemented by Google Drive, a storage service, and allows users to create and edit documents online while collaborating in real-time with other users.

Google Docs has been a work in process for many years, but with the advent of cloud based services and new mobile devices, it now poses a threat to the Office hegemony and indirectly to Windows 8.

One of the major drivers to user adoption of Windows 8 on tablets is the much-vaunted Office set of applications – Word, Excel, Powerpoint – that enable smooth transitions between working on office PCs and tablets.

Take that advantage away and the benefits of using windows tablets become less clear to many potential adopters.

The New York Times reports that worryingly (for Redmond), large organizations are beginning to adopt Google Docs, stating;

…the notion is catching on with larger enterprises. In the last year Google has scored an impressive string of wins, including at the Swiss drug maker Hoffmann-La Roche, where over 80,000 employees use the package, and at the Interior Department, where 90,000 use it.

For business users, cost is a big issue. Windows on desktops cost roughly $200 per user using volume discounts, Google Docs is $50/year.

While full compatibility with Office documents was an issue, Google has responded by launching free Quickoffice for iPad Google Docs customers, allowing almost 100% perfect imports and exports of Office documents for use with spreadsheet, presentation and word processing apps.

Take Genentech – a biotech leader – for example. After studying alternatives, they chose to use Google Docs for their productivity apps. They cite cost avoidance (by using the cloud), no need for updates, and ease of use. Ditto the City of Los Angeles, who are now users of Google Docs.

Microsoft has responded by introducing the lower-cost, cloud-based Office 365, but its cost ranges from $72 to $240 a year vs. $50/year for Google apps.

The issue for Microsoft then is what moderate success for Google Docs will mean for Windows 8. If dependency on Office can be broken, then why not the OS?

What then is the strong justification for moving to Windows 8 or Windows 8 Pro on mobile devices, especially since the app store offerings are so lean?

Again, my solution to this for a company with $70 billion in cash, is to match or undercut Google Apps in price, until desired market share in mobile is achieved.

Micrsoft has to see failure in mobile as not being an option but an existential problem and be ready to do everything necessary to make it succeed.

Do you agree on the threat level? What do you think Microsoft should do? Let me know in the discussion below.

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