Not long ago we talked about Microsoft the monopoly using its vast power to squash would-be competitors. Now it seems almost like poor Gulliver being tied down and lashed by the tiny knives of its Lilliputian enemies.  It just can’t get no respect.

Until Bing?  The NY Times has written that Bing delivers credibility to Microsoft’s search efforts, finally, pointing to its gains in query volume since its launch in May.  Yet most of those gains seem to be coming from weaker challengers like AOL and Ask (another perennial search pretender), and the industry’s talking heads don’t think people will switch to Bing for good.  Why bother, when Google delivers the goods?

To rub salt in the wounds, Google recently announced its own frontal assault on Microsoft with its plan to develop the Chrome OS for netbooks.  Google’s language in the announcement almost seems like it’s taunting Microsoft: So today, we’re announcing a new project that’s a natural extension of Google Chrome — the Google Chrome Operating System. It’s our attempt to re-think what operating systems should be…Google Chrome OS is an open source, lightweight operating system…

Google describes this as the operating system for people who spend most of their time online and invites developers to begin making applications for it.  I am betting that they will.

Sometimes I wonder at Google’s need to take it to Microsoft, but I think I get why they do.  From the user’s point of view, you want to have a framework of programs and applications that work together – interoperability is essential.  Once you begin to use a set of products that are integrated like this, you tend to keep using all of them.  There is a price to pay to use applications outside the network because it can’t have access to all your information and preferences.  Once you are inside one of these families of software, you will see the ads running there, and not somewhere else.  So both Google and Microsoft are extending their offerings and necessarily moving into the other’s space.

There’s almost no one alive who hasn’t got the message that cloud computing is the future, which seems to give a natural advantage to Google in the long run.  But no one knows for sure.  And sure enough, Microsoft continues to try to reinvent itself by moving into the web services with its Azure platform.

Then, just yesterday, Microsoft announced it would be offering light versions of its flagship applications Word and Excel as Internet-based programs to compete with Google’s successful Apps.  Here’s the leader from Marketwatch on Microsoft’s announcement:

Microsoft Corp. on Monday made the latest edition of its Office software suite available for testing and plans to make key applications such as Word and Excel available over the Web – acknowledging burgeoning competition from Internet giant Google Inc. and others.

I’m glad to see this. Letting Google define our total existence online is not a good idea, even if it were true the G didn’t “do evil.”  We need this competition — they will make each other better.