Though Google Docs has more functionality that Office Live its UI is very confusing and even though it has been my Document editing platform for years I still have a hard time making use of most of the functionality. Office Live offers a better best fit to most users and a better UI, BUT, I started a paper in graduate school. I have 2 Linux computers and in the current form Office Live can't handle them. So I am continuing to do my graduate paper in Google Doc.
Is this a problem?
Traditionally Microsoft could count on total client ownership in most businesses. The occasional Mac was handled via a Microsoft Mac team. But with the rise of the micro-lap top more and more of your information workers are going to demand support to their very small machines that run better on Linux. As you so smaller and smaller Linux with Open Office becomes a better and better option.
As long as you have a few important people on Linux you can't really join them up to Office Live but you can to Google Docs. AND the two don't connect yet.
Maybe my love of Linux is blinding me to the fact that Microsoft own the desktop space and will continue to do so. Well for my own professional sake and for Microsoft future in the Cloud, they better either embrace Linux or hope that change does not come.