Steve Lohr at the New York Times offers up a fairly accurate summary of the coming battle over cloud computing:

The growing confrontation between Google and Microsoft promises to be an epic business battle. It is likely to shape the prosperity and progress of both companies, and also inform how consumers and corporations work, shop, communicate and go about their digital lives. Google sees all of this happening on remote servers in faraway data centers, accessible over the Web by an array of wired and wireless devices — a setup known as cloud computing. Microsoft sees a Web future as well, but one whose center of gravity remains firmly tethered to its desktop PC software. Therein lies the conflict.

“For most people,” he says, “computers are complex and unreliable,” given to crashing and afflicted with viruses. If Google can deliver computing services over the Web, then “it will be a real improvement in people’s lives,” Google CEO Eric E. Schmidt says. So, in Google’s thinking, will 90 percent of computing eventually reside in the cloud? “In our view, yes,” Mr. Schmidt says. “It’s a 90-10 thing.” Inside the cloud resides “almost everything you do in a company, almost everything a knowledge worker does.”

At Microsoft, Mr. Schmidt’s remarks are fighting words. Traditional software installed on personal computers is where Microsoft makes its living, and its executives see the prospect of 90 percent of computing tasks migrating to the Web-based cloud as a fantasy.

“It’s, of course, totally inaccurate compared with where the market is today and where the market is headed,” says Jeff Raikes, president of Microsoft’s business division, which includes the Office products.“I mean, we have more than 500 million people who are using Microsoft Office tools,” he says.

But then the guy responsible for one-half of Microsoft's monopoly products would say that. It's a mistake to believe that the world won't change, however, and arguably it already is. After all, office productivity used to involve dedicated word processors and typewriters, slide projectors, and lots and lots of paper. The world moved on to today's productivity model because software was better. The world will move on in the future as well, assuming that what comes next is better again. It's not yet, but then the first version of Word wasn't all that impressive either. These things get better over time. And to be fair, some of what Google's doing is already better: The company doesn't charge for its Web solutions for the most part, a huge deal for the individuals and small businesses that will be leading the wider business world in the future.

Google is a different competitor from others Microsoft has dispatched in recent years: it is bigger, faster-growing, loaded with cash and a magnet for talent. And the technology of the Google cloud opens doors. Its vast data centers are designed by Google engineers for efficiency, speed and low cost, giving the company an edge in computing firepower and allowing it to add offerings inexpensively.

Conventional software is typically built, tested and shipped in two- or three-year product cycles. Inside Google, Mr. Schmidt says, there are no two-year plans. Its product road maps look ahead only four or five months at most. And, Mr. Schmidt says, the only plans “anybody believes in go through the end of this quarter.”

New features and improvements are made and tested on Google’s computers and constantly sprinkled into the services users tap into online. In the last two months alone, eight new features or improvements have been added to Google’s e-mail system, Gmail, including a tweak to improve the processing speed and code to simplify the handling of e-mail on mobile phones. A similar number of enhancements have been made in the last two months to Google’s online spreadsheet, word processing and presentation software.

Early this month, Google released new cellphone software, with the code-name Grand Prix. A project that took just six weeks to complete, Grand Prix allows for fast and easy access to Google services like search, Gmail and calendars through a stripped-down mobile phone browser. (For now, it is tailored for iPhone browsers, but the plan is to make it work on other mobile browsers as well.)

Fascinating anecdote here: This Grand Prix project was pushed through at Google by a former 15-year Microsoft vet, tired of how slowly the software giant moves. Needless to say, he had an immediate impact on Google and it's users: He joined the company in July.

Cloud computing won’t happen overnight. Big companies change habits slowly, as do older consumers. Clever software is needed — and under development, he says — to overcome other shortcomings like the “airplane issue,” or how users can keep working when they find themselves unable to get online.

Yet small and midsize companies, as well as universities and individuals — in other words, a majority of computer users — could shift toward Web-based cloud computing fairly quickly, Mr. Schmidt contends. Small businesses, he says, could greatly reduce their costs and technology headaches by adopting the Web offerings now available from Google and others.

Yep. Anyone who bets against cloud computing is taking a fool's bet. Things change. And they're changing right now.