Google decided it wants to play in the big leagues and is now offering a premium version of its "office suite" instead of just subsidizing the applications with search revenue. They're trying to get a more complex customer that has higher needs than their free service provides. But in the process, they're going to show that not even the almighty Google can allay fears of security and privacy. I think Mary Jo hits it pretty well, do businesses want their data offsite?
Google has been at the forefront in the move from the desktop to the web, and now that they've taken a big step, I can't wait to watch as the shortcomings of the web translate into poor adoption of Google's premium service. The great thing about the desktop is that users have total control over things like privacy and security. The data is residing on servers they control behind networks they manage. Even small businesses are going to be loath to turn their most sensitive data over to Google.
This is only compounded by the fact that a lot of very robust desktop solutions are coming. Web applications aren't the only way any more, and with Rich Internet Application technologies that bridge the web and the desktop, businesses and users can have it both ways. They can store some data in the cloud while accessing it via the web, and they can keep sensitive data on their own servers accessing it with an RIA desktop application. I think this move is only going to show how much people rely on their desktop. Using a free product is one thing, but paying money to turn over the keys to the castle is a very different beast.