Is the Web Office Microsoft's game to win or lose?

In the wake of all the noise generated by the release of Google Calendar last week, I added a comment to a post by fellow ZDNet blogger Richard MacManus about Google Calendar suggesting that Google wasn't about to "kill" anything. Richard's reply got me thinking: who really has the best shot at winning the Web Office game?

Here's the comment I posted in response to Richard's reply:

"The migration to a web office will be slow and possibly never complete for many. So Microsoft, with their entrenched base, is actually in the best position to leverage that base as they migrate key functionality from the fat clients we use today to the lightweight web tools that are today in the chipped flint state of technical evolution.

Google will be a viable alternative for the ABM crowd and Mac and *NIX folk and will hopefully be to the web office space what Firefox is to the browser space - a serious competitor that keeps Microsoft from getting lazy and complacent (again).

Nothing in Microsoft's long history of market dominance suggest they will sit idly by and allow one of their major revenue streams to be diverted. And from the long view, their response to web-based software and services has been much faster and more concerted than their previous epiphanies that the world had changed while they counted their treasure. Call it the Ray Ozzie/Gary Flake effect."

Doesn't that make sense? If you accept it as a given that Microsoft currently owns the market for productivity suites on the Windows platform (and I hope you brought enough mind-altering substance to share with everyone if you don't), then aren't they in the best position to extend that advantage onto the web by transitioning Office into a service without relinquishing the advantages of a PC-based client?

One of the biggest complaints I hear about Office is that it is too expensive. Suppose Microsoft were to create a new "light" version of Office that provided a core set of features in both an online and a PC-based incarnation. Further suppose that part of this dualism was the ability to instantly publish any document to a shared, collaborative online space with synchronization back to your desktop. This web-enhanced Office Light could be sold at a nominal price or given away with a subscription to the online service. Given their existing assets in collaboration in the form of SharePoint and Groove (not to mention Exchange Server), how difficult would this really be?

Another complaint about Office is that it's bloated - that the average user only touches a fraction of the total functionality. A light, but fully file-compatible version that was differentiated not only by a reduced price, feature set, and desktop footprint, but also by its ability to connect to a web-based counterpart integrated with a collaboration environment would be a killer app for many people.

The current Office Live initiative was criticized by a lot of people for not being a web-based version of the current suite. I'm the first to admit Microsoft makes some awfully curious decisions when it comes to naming products. The whole Internet Explorer/Windows Explorer and Outlook Express/Outlook confusion are classic cases in point. But what if Office Live, in its current form, is just the first stage in establishing the infrastructure for an application play like the one I'm describing?

I think it would work. And I think it would be an incredibly tough act to compete with. For Google, or anyone else. What do you think?