My 2 cents on the Google Apps product.
It doesn’t challenge MS Office, it challenges hosting companies.
I currently using Interland for ketcheson.com and 1and1.com for ketcheson.net (long story). Management of my domains, MX records, ftp sites, forwarding, etc. is becoming a royal pain in the butt.
I’ve already become annoyed with the e-mail service provisioning of both, and launder all my mail through a gmail account for searching and archival reasons.
If Google Apps works as advertised, then I will pull my money from them and switch over to Google-hosted services for my domains.
I’ve already abandoned MS-Outlook because it is useless for those of us who switch PCs during our day and fear hard drive failure, loss or theft of our laptop.
Word and Excel are still far more powerful than the Writely suite, and they will remain dominant for the near future.
It’s the e-mail management, chat, start page, calendaring, etc. that I’m looking forward to.
I can’t wait until the day I say “bye bye” to the hosting providers.