Google has grown to the point where it's become a threat to Microsoft, which has had a long and storied history of high-tech industry dominance. There was a time not so long ago when few believed that any company could rattle Microsoft, let alone a Web company like Google.
But Google's vice-like grip on the lucrative search market forced Microsoft to spend massive amounts of money to overhaul its old and unexciting Live Search engine to create Bing, which was unveiled this summer. Microsoft went a step further by signing an agreement that calls for Internet pioneer Yahoo to use Bing as the primary search engine on its various sites.
At the same time, Google was developing its Chrome browser to take on IE, and was looking to develop an operating system to compete with Windows.
Google in July announced plans to take on Windows with an open source operating system, also called Chrome, that could run Internet-centric computers like netbooks as early as the second half of next year. Many other companies have tried and failed to take on Microsoft in the operating systems business, but analysts say that Google has the financial muscle, the engineering might, and the industry clout to actually put up a realistic fight for market share.
Google also moved this summer to make its hosted applications suite more attractive to large government users by announcing plans to tailor its cloud computing services for various federal agencies.
"In Microsoft's mind, Google is probably the biggest threat to their bread-and-butter operating system and desktop application businesses," said Dan Olds, an analyst with The Gabriel Consulting Group. "Google's dominance of the search business is also Microsoft's biggest opportunity in terms of new revenue and revenue growth. So to a large extent, the two companies are going to do battle on several fronts, which is good for consumers as it keeps innovation high and prices low, and it's also fun to observe."
Google, with a focus on its core business along with an ingrained innovative track, is also influencing a whole lot of up-and-coming Web 2.0 businesses, according to Olds.
"The Google model of developing a killer application, optimizing it to provide high user value and gain user loyalty, and then monetizing it has been the model of choice for social networking companies. Take a look at Twitter," he said. "Google has gone from zero to industry giant in a record amount of time, starting with just a bunch of guys with a search engine to a company with a $156 billion capitalization in just over a decade. It's a company worth emulating."