Great post - talks about "Microsoft Application Virtualization (MAV)"
He's right - this will kill other HTML/XML based web app's. Office online with all the richness vs. the rest of them.
Here's a simple test - tabs... try tabbing in an online word processor. It doesn't work.
Ultimately it boils down to solving the customer need/want. At that point what's good enough? Free is one way, however it's not a sustainable business model. Therefore something that costs just a little more - yet delivers more is the way to go.
Virtualizing Office is the way to do it. What comes next is Virtualizing Windows which should have been done years ago.