In the early years of the personal computing revolution, the pitched battle between Microsoft and Apple was at the top of the fight card. Microsoft and Apple still like to snipe at each other in cutesy TV ads. But the company that made Bill Gates the richest man on earth increasingly finds itself confronted by a big, powerful and well-funded competitor that wasn't even around when the Rolling Stones "started up" Windows 95 back in the late 20th century. Google, the search engine and web advertising giant, wasn't founded until 1996, but now has a market capitalisation of $US130 billion ($167 billion). And while Google made its name on the web, the company is making big moves into areas of the software market that have long been Microsoft's preserve. Last week Google announced plans for its biggest foray to date. The company unveiled plans for what it is calling Google Chrome OS - a lightweight, Linux-based open source operating system that will build on the Chrome web browser and Android mobile phone operating systems already in the market. Industry watchers had long suspected that Google may attempt its own operating system, but speculation has been consistently hosed down by Google executives, who have always stressed that the company's primary interest is online. While designed for mobile phones, Android is already being used as an operating system for netbooks - the cheap, lightweight laptops that are designed primarily for surfing the web. Netbooks have been one of the few parts of the computer hardware market to show any growth recently. Chrome OS will be free, and is scheduled to start appearing on computers in the second half of 2010. A Microsoft spokeswoman declined to comment on the announcement, citing a company policy of not commenting on products that had yet to see the light of day. Announcing the project on Google's official blog, executives Sundar Pinchai and Linus Upson said Chrome OS would be designed for web-centric computing. "The operating systems that browsers run on were designed in an era where there was no web," the two said. Pointedly, they also said that Chrome would initially be targeted at netbooks. It's a statement that left plenty of scope for expansion for Chrome OS and some are predicting that Google is planning a larger assault on the near monopoly that Microsoft's Windows has on the personal computer operating system market. Most estimates put Microsoft's total market share at approximately 90 per cent. But in the netbook market, its share has been under threat from low-cost machines running no-cost Linux operating systems. In Australia, notebook sales grew up 27 per cent during the March quarter to $515.2 million, according to market tracker GfK. Netbook sales grew to account for 9 per cent of notebook sales. The pressure means Microsoft has bolstered its presence in netbooks and remains watchful. Price cuts and its well-reviewed, forthcoming Windows 7 operating system could prove a hard combination to dislodge. The software giant has also for some time recognised the potential threat that Google represents to its desktop hegemony. In a February analyst briefing, chief executive Steve Ballmer correctly predicted that Android would probably morph into a Linux-based operating system for PCs. Microsoft was "very focused" on Linux as a competitor, he said at the time. "I think the dynamic with Linux is changing somewhat. "I assume we're going to see Android-based, Linux-based laptops, in addition to phones. We'll see Google more as a competitor in the desktop operating system business than we ever have before. The seams between what's a phone operating system and a PC operating system will change." According to Ovum open source software analyst Laurent Lachal, "the new Google OS will challenge Microsoft's ability to maintain profit margins". Google has promised that Chrome OS will be fast to start up and will need minimal upkeep in areas such as security and virus prevention. Lachal argues that as well as challenging Microsoft on price, Chrome also has the potential to take on Windows by providing a better user experience. Like others, Lachal sees Chrome OS as a move to boost Google's Microsoft Office-like Google Apps suite of applications, and its Gmail email platform. Google has increasingly been pushing its applications, hosted online in a so-called "cloud" architecture, at the large organisations that have traditionally used products such as Microsoft's. The education market is one area in which it has had some success. Last year the NSW Department of Education signed Google to provide its 1.3 million students with email accounts based on Gmail. Chrome OS "could also be the starting point for a more integrated experience across Google applications/services and we expect it, like Android, to be linked to an online store of web applications not just to make it easier to consume these applications but also to prove that they can meet most needs", Lachal says. The tightness of that integration could in itself cause Google problems as it takes the fight to Microsoft. Antitrust regulators in the US are already wary of Google's broadening array of interests, which include internet telephony products, office applications, operating systems, e-payment facilities and online libraries, not to mention its stranglehold on search. Google's chief executive, Eric Schmidt, on Friday indicated that the potential for trouble was also on his mind when he said that he would have to discuss his involvement on Apple's board. The US Federal Trade Commission is already eyeing Schmidt's Apple board membership under laws that prevent directors from serving on the boards of competing companies. However, Google has also so far failed to demonstrate that it can repeat the success it has enjoyed in search in other markets, such as applications where it has struggled to attract corporate users of its office software. IBRS analyst Joe Sweeney says that Chrome OS is an attempt by Google to bolster its presence in the enterprise market. "I think the main reason for it is that Google wants to be seen as a serious player in the enterprise market," he says. But in trying to tap this market, Google is also taking on one of Microsoft's key strengths - the legions of independent software vendors, or ISVs, that develop products for use on its systems. Sweeney says Google is trying to switch from being an advertising business to a technology provider. "But they have not been able to demonstrate that they understand what it takes to build an ISV ecosystem," he says. "Google may claim that it has hundreds of thousands of ISVs signed on. But signing them on is one thing. Getting them producing and backing your platforms is another thing altogether and they haven't done that." Nevertheless, a combination of the failure of Microsoft's Windows Vista operating system to gain traction in the market, its sometimes complex and expensive licensing arrangements, and the arrival of a global recession, has many companies looking anew at the possibilities of open source software, adds Sweeney. Many in Australia are also coming to the end of three-year software licensing agreements. "A lot of people have gone out and done software audits." Sweeney says he has in recent weeks spoken to organisations "that are seriously re-evaluating their desktop in terms of Open Office and, potentially, Linux".