From early in their company’s history, Google’s founders, Larry Page and Sergey Brin, wanted to develop a computer operating system and browser.

Illustration by Brian Stauffer

They believed it would help make personal computing less expensive, because Google would give away the software free of charge. They wanted to shrug off 20 years of accumulated software history (what the information technology industry calls the “legacy”) by building an OS and browser from scratch. Finally, they hoped the combined technology would be an alternative to Microsoft Windows and Internet Explorer, providing a new platform for developers to write Web applications and unleashing the creativity of programmers for the benefit of the masses.

But despite the sublimity of their aspirations, Eric Schmidt, Google’s chief executive, said no for six years. Google’s main source of revenue, which reached $5.5 billion in its most recent quarter, is advertising. How would the project they envisioned support the company’s advertising business? The question wasn’t whether Google could afford it. The company is wonderfully profitable and is on track to net more than $5 billion in its current fiscal year. But Schmidt, a 20-year veteran of the IT industry, wasn’t keen on shouldering the considerable costs of creating and maintaining an OS and browser for no obvious return.

Finally, two years ago, Schmidt said yes to the browser. The rationale was that quicker and more frequent Web access would mean more searches, which would translate into more revenue from ads. Then, in July of this year, Schmidt announced Google’s intention to launch an operating system as well. The idea is that an OS developed with the Internet in mind will also increase the volume of Web activity, and support the browser.

Google’s browser and OS both bear the name Chrome. At a year old, the browser holds a mere 2 to 3 percent share of a contested global market, in which Microsoft’s Internet Explorer has a majority share and Firefox comes in second. The Chrome operating system will be released next year. Today, Windows enjoys around 90 percent of the global market for operating systems, followed by Apple’s Mac OS and the freeware Linux. Does Google know what it’s doing?

RITUALIZED SUICIDE

Going after Microsoft’s operating system used to be hopeless. When I covered the company for the Wall Street Journal in the 1990s, I chronicled one failed attempt after another by software innovators to wrest control of the field from Bill Gates. IBM failed. Sun failed. Borland. Everybody. By the end of the 1990s, the quest had become a kind of ritualized suicide for software companies. Irresistible forces seemed to compel Gates’s rivals, driving them toward self-destruction.

The networking company Novell, which Schmidt once ran, could have been one of these casualties. Perhaps Schmidt’s managerial experience and intellectual engagement with computer code immunized him against the OS bug. In any case, he knew that the task of dislodging Microsoft was bigger than creating a better OS. While others misguidedly focused on the many engineering shortcomings of Windows, Schmidt knew that Microsoft was the leader not for technical reasons but for business ones, such as pricing practices and synergies between its popular office applications and Windows.

So for Schmidt to finally agree to develop an OS suggests less a technological shift than a business revolution. Google’s new ventures “are game changers,” he now says.

What has changed? Google has challenged the Microsoft franchise, further diminishing a declining force. The latest quarter gave Microsoft the worst year in its history. Revenue from its various Windows PC programs, including operating systems, fell 29 percent in the fiscal quarter that ended in June. Some of the decline stems from the global economic slowdown. But broad shifts in information technology are also reducing the importance of the personal computer and its central piece of software, the OS. In many parts of the world, including the two most populous countries, China and India, mobile phones are increasingly the most common means of reaching the Web. And in the rich world, netbooks, which are ideal for Web surfing, e-mailing, and Twittering, account for one in every 10 computers sold.

Another powerful trend that undercuts Microsoft is toward programs that look and function the same way in any operating system. “Over the past five years there’s been a steady move away from Windows-specific to applications being OS-neutral,” says Michael Silver, a software analyst at the research firm Gartner.

One example would be Adobe Flash. Such popular social applications as Facebook and Twitter are also indifferent to operating systems, offering users much the same experience no matter what personal computer or handheld device they use. Since so many people live in their social-media sites, the look and feel of these sites has become at least as important as the user interface of the OS. The effect is to shrink the role of the OS, from conductor of the orchestra to merely one of its soloists. “The traditional operating system is becoming less and less important,” says Paul Maritz, chief executive of VMware, who was once the Microsoft executive in charge of the operating system. By and large, he has noted, “people are no longer writing traditional Windows applications.”

Microsoft’s troubles make the company’s OS doubly vulnerable. Vista, its current version, has been roundly criticized, and it has never caught on as widely as the company anticipated; many Microsoft customers continue to use the previous version of Windows, XP. A new version being released this fall, Windows 7, promises to remedy the worst problems of Vista. But even 7 may not address a set of technical issues that both galvanize Microsoft’s critics and stoke the appetites of Brin and Page to create a more pleasing alternative. In their view, the Microsoft OS takes too long to boot up, and it slows down even the newest hardware. It is too prone to viral attacks and too complicated.

Exactly how Google plans to solve these problems is still something of a mystery. Technical details aren’t available. Google has said so little about the innards of its forthcoming OS that it qualifies as “a textbook example of vaporware,” wrote John Gruber on his blog Daring Fireball. Information is scarce about even such basic things as whether it will have a new user interface or rely on an existing open-source one, and whether it will support the driver that make printers and other peripherals routinely work with Windows PCs.

The mere announcement of Chrome already threatens Microsoft, however. The imminence of Google’s entry into the market—following the delivery of its Android OS for mobile phones—gives Microsoft’s corporate customers a reason to ask for lower prices. After all, Google’s OS will be free, and the buyers of Windows are chiefly PC makers, whose profit margins are already ultra-slim.

“It’s all upside for Google and no downside,” says Mitchell Kapor, a software investor and the founder of Lotus, a pioneer supplier of PC applications that was bloodied by Microsoft in the 1990s.