Google Apps for Your Domain does not compete with Microsoft Office. Microsoft's Office market may be $12 billion, but the lion's share of those billions comes from a relatively small number of large companies. Writely can't compete with Word, Spreadsheets can't compete with Excel. They cater to the soccer mom, not the corporate worker. Right now, you need both to do your job. What Google gains from these apps is knowledge about how you use office software and what kind of information you're sending back and forth. This data goes into its advertising efforts so it can target you better. Everything is in the service of advertising. Google is also firing a shot across the bow of Microsoft Live, which targets the same functionality. Steve Bryant, of eWeek's Google Watch, offers a roundup of reasons why businesses will and won't use Google Apps for Your Domain.