If Google’s announcement of its forthcoming Chrome OS has done nothing else, it has provided the fodder for considerable opining around the Internet. (Not to be left out, I have written about the Chrome OS several times before.) Technology Review (published by MIT) has a new article, by G. Pascal Zachary, that looks at some of the background to the Chrome announcement, both within Google and in the industry at large.
One of his important points is that the idea of creating a new operating system, as well as a new browser, has been around at Google for a long time. (I can say from personal experience that it has been rumored on the Internet for several years.) According to Zachary, Larry Page and Sergey Brin, Google’s founders, have always been favorable to the idea, but it was put off by Eric Schmidt, Google’s CEO, who questioned whether such a development would ever pay off for Google. Many firms have tried, and failed, to challenge Microsoft’s hegemony in the personal computer OS market. Since Schmidt previously ran Novell, the maker of the Netware network OS, he certainly is aware of this history.
While others misguidedly focused on the many engineering shortcomings of Windows, Schmidt knew that Microsoft was the leader not for technical reasons but for business ones, such as pricing practices and synergies between its popular office applications and Windows.
So for Schmidt to finally agree to develop an OS suggests less a technological shift than a business revolution. Google’s new ventures “are game changers,” he now says.
As Zachary goes on to point out, the shape of the personal computer market has changed. Microsoft is no longer the undisputed trend-setter of the industry; that can be a dangerous development (just ask IBM). In the US and other parts of the rich world, the new netbooks, which are perfectly suitable for E-mail and surfing the Web, are selling well – and Microsoft has had to extend the life of Windows XP and drastically cut its price to stay in the game. In more rapidly developing markets, such as India and China, “smart” cell phones are becoming more popular as Internet access devices. Google has already introduced a competitor to Microsoft’s offering for mobile devices, in the form of its Android OS. If Google can put together the Chrome OS so that applications can be developed to run on both Android and Chrome, it will potentially have quite an attractive proposition for software developers. And, of course, Web-centric “cloud” applications, like Facebook, Twitter, or Google’s own Docs, are more or less OS-neutral.
Now, at the moment, the Chrome OS is basically vaporware; but even the threat of a competitive OS is something Microsoft has to take seriously. The Chrome OS will be open source (based on a Linux kernel) and free, so undercutting Google’s price will not work. (And, unlike Netscape, Google has very deep pockets.) It seems clear that the growing popularity of Linux in the server OS market is already exerting pressure on Microsoft’s pricing. The threat in the client sector is more serious because, as I’ve noted before, Microsoft’s Office, its other cash cow, depends importantly on Windows’ market share for its success. Generally speaking, if Microsoft loses a Windows customer, there is a very good chance it simultaneously loses an Office customer.
It seems clear that Microsoft understands this: witness their push to promote their new Bing search engine, and their deal with Yahoo!. Now Google has introduced its next-generation search engine, code-named Caffeine, which is getting mostly positive early reactions.
As I’ve said before, I think all of this will be good for consumers, so let’s sit back and enjoy the show.
Posted by Rich 
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