It's not an either-or world. Back in 1999, "bricks and mortar businesses" were going the way of the schooner, the steam powered "pure play Dot Com" businesses were going to motor right by all of the floundering store fronts as they sat waiting for a favorable breeze. Yea, right.
I just read a Wall Street Journal article titled "Is It Time to Dump Your Desktop: Web-based software claims to do everything". Have we not learned anything in the ensuing years. Granted, the article itself is much more rational than the headline, but I find myself wandering into conversations all the time where one person in the conversation is arguing that "every" app of the future will be browser based.
Outlook and Outlook Web Access (OWA) get along very nicely together. Outlook power users would be lost without the full blown version of Outlook on their laptop, and they would be equally lost without the ability to quickly check their mail from some other machine using OWA. I currently use beta versions of Outlook 2007 and OWA 2007, the user experience of each are both huge steps forward and they continue to complement each other.
I know nothing about the future plans of Office Live, but I can easily guess at a picture of the future that includes a Word Web Access and an Excel Web Access, and that doesn't mean the desktop is dead. It means just the opposite: the desktop will be connected and "live". If anything, it was dead before - when desktop apps were not connected, collaborative experiences.
WPF is breathing new life into the user experience capable of being provided by Windows smart client applications and at the same time AJAX developers are reaching new levels of cool with what they are doing in browser apps - both are taking huge steps forward, both will continue to complement each other.
Microsoft has it's line of Office client applications that need to continue to evolve into a more powerful line of live clients that combine the best of the desktop with the best of the web - but, um, I think you're nuts if you count out Microsoft's ability to make this happen. The desktop is not dead just because Google is working on a browser based spreadsheet product.
It's not either-or. Bricks get along very nicely with Clicks - or is it the mortar that gets along with the clicks? hmm...
quick update: Funny thing happened as I was walking out to my car here at Microsoft's Mountain View campus after posting this entry - a Google employee stopped me in the parking lot and asked where he could find the HR office because he was interested in "transferring" from Google to Microsoft. Nice guy, kind of stumbled on the word he was looking for, I don't think he really meant "transfer" - but kind of goes to the point of this post - maybe Microsoft and Google are the "bricks and clicks" and are getting along even better than I thought.