This is really going to be fun to watch.
The odds are against any significant level of success. Remember, net computing was one of the basic goals of the dot com era, and failed miserably. Many of the heavier-duty business applications can't run from a local server, much less from a cloud. And even when presented with superior technology, inertia and migration expenses will keep most organizations from making any serious changes.
Still, Google's plan has the greatest potential of anything I've seen in a long time. It's free (though not for much longer) and it addresses many of the long-standing hassles associated with PC's. It is particularly inviting since it works well with netbook devices, and even more so when you see that ISP's in some areas are beginning to give away netbooks as part of a long-term broadband subscription package.
Is it really competition? I'm not sure. Maybe. Or it might just be an illusion. The two markets might actually be mutually exclusive. We'll see.
But it's really, really going to be fun to watch. And with any luck, we might even benefit in some way.
-ENO