Incentives?
"With Google offering free products there'll need to be some hefty incentive from Microsoft "
Beyond the usual vendor lock-in tactics?
The next version of Microsoft's Office is due to be released for testing today, but you won't be able to get your hands on the web-based edition of Office 2010 just yet. Office Web applications won't be released for testing even though they have reached the same technical preview engineering milestone as Office 2010 and …
MS have certainly launched some less than stellar initiatives over the years, but with tens of billions of cash in the bank and a market capitalization of some $206,740,495,600 (NASDAQ), "FAIL" hardly applies to their overall business record. Amoral? certainly. Loathsome? no doubt. Evil? arguably, yes. But FAIL? no.
P.S. Love the icon mouse-over comments :)