Some insight into Microsoft's strategy around file formats being used as a "competitive moat"

In fact, several areas that demonstrate real cross-cutting complexity challenges is where Google’s slower pace is especially relevant. Google Apps have been announcing some variant of offline editing for almost 8 years now and it is still semi-functional. The other “real soon now” promise is “better compatibility with Office”. This has the flavor of the laundry detergent claims of “now with blue crystals”! The claim of “better” is hard to argue with but history would seem to indicate they are not getting any closer to actually being compatible, especially as Office continues to evolve.

The final decision to build the “Word Web App” rather than “a new web-based word processor from Microsoft that is not fully compatible with Word” (and similarly for Excel, PowerPoint and OneNote) was strongly driven by the belief that the file formats continued to serve as a critical competitive moat with immensely strong network effects. In fact, an argument can be made that the Office file formats represent one of the most significant network-based moats in business history (with Win32 and the iOS APIs as two others). Even applications like OpenOffice that were specifically designed to be clones have struggled with compatibility for decades. By embracing that complexity, and the costs, we would deliver something that we knew was fundamentally hard to match, especially if there was any confusion or hesitancy about the commitment required to compete.