I simply can't see the value in hosted "desktop" applications. Re: Microsoft, IBM feel heat from Google Apps. Response time and accessibility are all bandwidth throttled, and we've seen what happens to customers when Google's servers aren't accessible. Give me native windows apps over web apps every time, and add Web services functionality - but don't make the app completely reliant on their being available. Imaging being the bonehead on the airplane that can't read e-mail or update a proposal until he/she lands and gets connected to the internet...
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A Matter of Trust
I personally would not trust an application that operates through Google. The application could give them copies of all my work - much as they brazenly keep and parse the email of who foolishly submit to their webmail.
As the web browser becomes the ubitquitous interface of choice (perhaps merely by default), the O/S becomes irrelevant. Linux distributions need only have a browser to be totally user friendly - and the free wordprocessors, spreadsheets, and everything else that the open-source philosphy has already produce are first quality items at the best possible price: free.
And your business remains your business.
Trust, performance, and ubiquity
Right on - Google is less trustworthy of my data than Microsoft or IBM as far as I'm concerned.
I wouldn't call the web browser an interface "of choice." It's just that's what we're stuck with using the current web based technologies. "Browser" and "totally user friendly" are oxymoronic. OWA, Google Maps, are okay, but you can't compare OWA to Outlook.
The other comment about off-line access is spot on. The internet, and high speed internet, is not as ubiquitous as Google might have you believe.
I've also heard that the open-source philosophy isn't about "first quality", but is around "good enough". That was what was bounced around when OpenOffice first appeared. It wasn't as good as Office, but it was "good enough" for most users.