David Prosser: Google's next move flies in the Windows

Outlook Don't be counting too many chickens just yet, but a credible threat to the near-total dominance of Microsoft may have emerged yesterday. Google knows a thing or two about dominance, of course, and now it plans to take on Microsoft in its core market, providing the operating systems that make computers work.

Globally, nine in 10 of all computers shipped come with a Microsoft operating system installed – either Windows Vista, or Windows XP for smaller notebook computers. Later this year, when Microsoft launches its Windows 7 system, it will replace both packages. Geeks say Google may just be in with a chance of taking on its rival because Microsoft has chosen to limit the way Windows 7 will work on notebook PCs, unless their owners pay extra. Google, on the other hand, promises that its Chrome system, which will be launched next year, works equally well on all computers big and small.

Google should find itself pushing at an open door. Computer makers are dying to see some competition for Microsoft because they have little bargaining power on the licence fees they pay for its systems. Nor will Microsoft be able to squash the cash-rich Google in the way it has previously dealt with upstarts.

If Google gets this right – both on technology and price (Chrome might even be free) – it could be a fun battle. The notebook market is Google's first target, but its ambitions do not stop there. As for Microsoft, it may now have to rethink its strategy for Windows 7, due for launch this autumn. It may also regret the direct challenge it made to its rival's core market in the spring, when it relaunched its search engine, betting heavily that a new version, Bing, was good enough to take on Google.