Microsoft is mulling putting Microsoft Works online in an attempt to compete with Google, says Reuters, but that's actually old news. According to Microsoft's annual 10-K filing, Microsoft is not only worried about Google, but also:
Should Microsoft be worried that an online version of Works would cannibalize sales of desktop apps? I don't understand how that could happen. There's just no way I would use an online word processor without some kind of backup on my hard drive (for when I'm in a Wi-Fi dead zone). And there are always documents you don't want to put on the Web. Besides, it's my understanding that Microsoft derives most of its Office revenue from enterprise sales. I don't see that wellspring drying up any time soon.
Bottom line: If Microsoft doesn't put Office online, then it'll miss out on serving users who will have no other choice than to use the companies named above.