Well what Google actually declared is that it will declare war, next year. We have officially entered the pre fight period like before a fight in the playground when two bullies push and shove each other and beat their chest spruking what they are going to do to the other party.

Google has been nibbling away at Microsoft’s profit centers for the last two years by launching free programmes that do much the same as Microsoft’s paid product such as Google docs that potentially could eat away at Microsoft’s lucrative Office products range.

Microsoft has retaliated by beefing up its search engine offering and frustrating Google’s overtures to potential partners like Facebook.

But neither company has been successful in its move into the other company’s prime markets and they would do well to remember Bertrand Russell’s adage "War does not determine who is right - only who is left."

Google upped the stakes by announcing on Tuesday (7th July) it will launch its own operating system in the second half of next year, finally launching a direct assault on Microsoft's crown jewel.

The Google operating system will initially be targeted to netbooks, then broadened to all PCs.  It will be a combination of a Google Chrome browser and a Linux kernel.  It is a separate project to Android (a complete set of software for mobile devices including an operating system, middleware and key mobile applications). It will be designed to be simple and fast.  It will also, presumably, be free.

So why is Google telegraphing its strategy so far in advance?

A year is a long time in computer land but this announcement bears all the hallmarks of a similar successful strategy employed by IBM in the halcyon days when it was caught napping by the take off of personal computers in the mid 80’s. IBM became notorious for announcing new models that were often still on the drawing board but the threat that a cheap IBM PC was on the way deterred many buyers from purchasing a computer until the IBM model was released and thereby deprived many up and coming PC manufacturers of the oxygen they needed to survive (and threaten IBM) - sales.

Secondly, developing a new operating system is complex and this announcement shows how much Google needs help from partners in this endeavor to be successful. It is in effect a clarion call to companies that feel threatened by Microsoft to ally themselves to Google.

An operating system that is distributed only by downloads won't work, it needs to come loaded on the computer when it is purchased.  This has been the big problem with Chrome so far, and Google knows it needs to address it.

Assuming Google provide their full operating system free to both users and OEM PC makers as they have done with almost all of their non-search products to date, Microsoft will need to revise its plans for the free version of its own Windows 7 OS for netbooks. Up until now Microsoft has planned to provide a free lite version of 7(read free of bells and whistles) and try to get users to upgrade. 

If Google’s free full version gains traction Microsoft may be excused a little panic time (you can imagine the salesman, “would Sir like to have the full version of this OS for free with life time free updates or pay for this buggy one).

This is a classic IBM disruption strategy. 

First, Google puts the market on notice that there is an alternative to upgrading to Microsoft 7 a full year before it will be ready but if you are a small business or even a large company potentially up for hundreds of thousands of dollars in upgrade costs in the middle of a financial crisis, wouldn’t you welcome an excuse to put the buying decision off for 12 months? Starving you know who of early sales and first mover advantage.

Second, Google’s strategy is to gain market share at the low end where traditionally the market leader won’t fight too hard to retain it because it's low-margin.  But then... as the product gets better and more fully featured they begin to migrate up the ladder to the desk top.  Soon the market leader is retreating to defend the high-margin high-end but eventually, the upstart (free) product becomes mass market and the incumbent looks like a punch card operator that nobody needs anymore.

We have all seen industrial giants of the 20^th century crumble like cheese cake but I doubt anyone expected to see the digital giants of the computer age rise and fall so quickly but ask IBM or AOL if it can happen (although IBM has successfully reinvented itself and AOL is in the process of doing the same). 

However as slick as the plan may be Google has not impressed us with its successes outside its core business of search and search advertising. You Tube is reputed to be losing over $400 million a year and other purchases by Google have been closed down or converted to open source (e.g. Jaiku). Success is not guaranteed but Microsoft needs to start working out how to defend its crown jewels against this assault.  It won't be easy. 

But like all wars there will be collateral damage and companies such as Apple could become non combatant casualties. Apple sells integrated hardware and software devices and if free software begins to take over the world their computer and phone products will look even more expensive when compared to their competitors. Sooner or later this will cause its market share or its profit margins to come down and its share price with it.

To read Google’s full press release go to our press release section here

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