NetDocs- Story of a Missed Opportunity

The WallStreet Journal has published a fabulous article on the dynamics between Bill Gates and Ballmer. It reveals how a clash between Bill Gates and Steve Ballmer laid the foundation for the current transition of power. But for me the most interesting aspect of the article was the revelation that Microsoft had come up with the idea of a web based alternative to Microsoft Word as far back as 2001. Here’s the relevant excerpt from the article:

In one case, two vice presidents clashed over the future of NetDocs, a promising effort to offer software programs such as word processing over the Internet. The issue: Because NetDocs risked cannibalizing sales of Microsoft’s cash-cow Office programs, some executives wanted NetDocs killed.

Messrs. Gates and Ballmer were unable to settle on a plan. First, NetDocs ballooned to a 400-person staff, then it got folded into the Office group in early 2001, where it died.

NetDocs was being developed in 2001 – that’s four years before the launch of Writely. Google later took over Writely (in 2006) and relaunched it as Google Docs. So, if Microsoft had gone through with its plans then it would have had a major head start on its competition. Microsoft could have even gone on to dominate the cloud. Of course, it’s also possible that the project was too ahead of its time. NetDocs might have struggled to find takers back in 2001, when web applications as we know today didn’t even exist.

What do you think? Is this incident another example of Microsoft’s lack of vision and lack of understanding of the dynamics of the web? Is this perhaps why Microsoft’s online division has been struggling to make moolah? Or did Microsoft make the right decision by dumping a project that required resources not available at that time to succeed?