Ed Sim, a venture capitalist, and big investor in SaaS software companies, says "G Office - What's the big deal?"  Phil Windley at ZDnet says "Google Apps doesn't compete".

Ed Sim is a big proponent of Software as a Service, but he is also a constant user of office productivity applications to get his work done. Ed recently sent his laptop in for service and had to live totally on the web for a few weeks. His experience convinced him that client based applications are absolutely vital, and that he lost about 40% of his productivity using just on-line apps. Listen to what Ed says;

While I am huge fan of web-based software and data in the cloud, there is one big problem - you always need to be connected.  For the last two weeks I have been living in a web-based world as I had to send my laptop back for service.  While I could do everything I needed to do, I must admit I was about 60% as productive as usual.  This lack of productivity partly came from clicking and waiting in my web-based Exchange offering and partly due to lots of travel which meant I could do absolutely nothing on the airplane.

In my web-based world, disconnected applications with an on-line component will rule.

At Microsoft we call this the Client /Server / Services continuum. It means having substantially the same experience on-line and offline, and the same features across all devices. Sounds easy, but its not. Keeping data synchronized is difficult, but Microsoft knows how to do it.

Microsoft Outlook Web Access did this about 10 years ago.It has steadily improved, and the same model will be extended to other Microsoft products.

Office Live is available now, but there is a lot more coming. Microsoft is building two $500 million data centers to host the on-line apps. Billions of dollars are already committed to realizing this vision.

How will Google respond? Can they solve the offline problem? Client based applications are far more powerful and responsive even when you do have on-line access. How will Google respond to that?

Google has all the press buzz now, and consumers love them. But business customers are much more demanding, and less susceptible to hype.

This will be a battle of the titans. I wouldn't bet against Microsoft. And yes, I work for Microsoft, so you know where my bet is.