Zoho CEO Sridhar wrote this excellent post about why Zoho plays in the office productivity space, but why Google only will do up to a point.

The gist of his post is that for Google, docs is a low margin offering compared to their traditional business. Therefore docs moves Google down the margin food chain and there need to be reasons for doing it other than pure profit generation. Clearly there are some strategic reasons for Google to do docs – anything that lets them eat some of Microsoft’s lunch is a good thing, and they also want to give the SaaS office productivity pace a leg-up to damage MS further.

For AdventNet however (AdventNet is the parent company of Zoho), office productivity docs are a move up the margin food ladder – as such it an especially attractive direction for a business that is purely self-funded.

I’d not be surprised (but have zero way of knowing) if there haven’t been high-level discussions between Zoho and Google – they both have distinct markets and would both benefit from tipping MS off it’s own throne.