In 2007, Google threw down the gauntlet to Microsoft. After years of denying that it was after the Microsoft Office space, the gloves came off, and following a spate of acquisitions incorporating word processing, spreadsheet, and other applications, the free bundle was revealed to the world as “Google Apps”.

After successfully seeing off the desktop competition in various guises most notably WordPerfect, and remoulding itself (with Ribbons) pushing off the cost-effective appeal of OpenOffice, Office is facing the Online contender. Specifically, it faces the ideological challenge of Software as a Service (SaaS). Will we abandon in droves the traditional client-server software model and turn to the Web for applications? How will Microsoft react?

Microsoft’s response? Take a look at Redmond’s latest Dynamic’s offering. Microsoft Dynamics NAV 2009 (Version 6 due out during Q3 2008) contains the strategy. Microsoft calls it a 3-tier approach: Client-server-web services, or Software plus services. This means that alongside the traditional client-side installation it is also possible to obtain dynamic feeds from online services such as maps, exchange rate information, and post codes, that become integrated into the end-user experience.

Microsoft is marketing it as a range of options to choose from; “The combination of software plus services gives customers advanced choice and flexibility in how they access and manage software,” Bill Gates said on March 2nd 2008.

When you think about it this approach is eminently sensible. It does not abandon Microsoft’s core strengths, but accommodates the flavour of the moment by selectively utilising web technology - technology that should not be re-invented by each and every business. Why put a process in place to manually check post code changes when a generic one can be created, available for all?

At the same time, Microsoft avoids the difficulties of trying to place sophisticated business process online. Google have got around this problem by trying to convince us that we do not need or use much of the functionality of Word or Excel. This may be true for Office, but try doing this to Enterprise Resource Planning (ERP) software, and listen to the outcry!

I’m sure we’ve yet to hear Google’s response, but for now Microsoft, although preparing Web offerings such as Office Online, do not seem to want to move permanently away from the tried-and-tested path.