Chrome May Take Shine Off Schmidt's Apple

(MoneyWatch)  Google CEO Eric Schmidt admits that he might have to recuse himself from Apple's board, now that Google is introducing the Chrome operating system. Schmidt told reporters at Sun Valley, Idaho, where he's attending a technology conference, that he intends to discuss his board position "with the Apple people. At the moment, there's no change," he added.

The move may be inevitable in any case, since the government is investigating close ties between the two companies (which share not just Schmidt but another common board member, former Genentech CEO Arthur Levinson). Google and Apple may have been able to argue that there wasn't enough overlap between their products and services to warrant severing their ties, but that changed this week with the introduction of the Chrome operating system, which is a direct competitor to not just Microsoft's Windows OS but Apple's OS X as well. The direction Google is taking does more than create certain areas where the companies compete -- it threatens to disrupt the very premise underlying Apple's business, which is software.

Indeed, Schmidt referred to the Chrome browser, introduced last year, and the forthcoming OS of the same name, as "game-changers [because] they change the way you think about your computer." Google's co-founder, Larry Page, explained that netbooks running Chrome will boot up almost instantaneously and store data on the Internet instead of a hard drive, making the operating system inside the machine virtually indistinguishable from the Web browser. "I wanted the operating system to kind of be out of the way," Mr. Page said.

Schmidt added that Google is introducing Chrome to encourage people to spend more time on line -- not just for browsing and searching, but as a basis for everything they do with computers, from writing letters to keeping their accounts to doctoring photographs. "We benefit when people spend more of their life online," he said.

Even if you trust Google to create a great OS, the move is still a gamble. While most consumers already use Web-based programs for some tasks, like email and chat, they're not really aware that they're using "software-as-a-service" (or SaaS). Google is betting that consumers won't worry about whether the software they use runs on their local drives or in the cloud, an irony that shouldn't be lost on Marc Benioff, CEO of Salesforce.com.

Benioff has used Google as an example of SaaS in the consumer world to explain why business users should adopt the same principles of software delivery. There's no reason, Benioff has argued, for businesses to concern themselves with running data centers, deal with software upgrades, and otherwise divert resources from their true purpose, when they can rent all that stuff from companies that specialize in providing those services. It took almost ten years for enterprise customers to embrace Benioff's vision, and even now that confidence can be easily shaken.

But most businesses have come to the conclusion that SaaS is appropriate for at least some -- if not all -- of their needs. The question now is whether consumers will reach the same conclusion. It's one thing to blithely use Yahoo, Hotmail or Gmail because it's easy and everyone's doing it, or to use Facebook or Flickr -- Web based programs all -- but quite another for them to decide they're willing to swap Word or Photoshop for some Web-based alternative, and that they're comfortable storing their documents in the cloud.

Google executives clearly expect that consumers will be just as persuaded as business users that they shouldn't have to deal with all the issues that come with installing and updating software and backing up their data in case their hard disk crashes. If Google wins that bet, both Microsoft and Apple stand to lose a lot of chips, which is reason enough for Schmidt to step down from Apple's board.

[Image source: dFarber via Flickr]