I doubt that the web based Microsoft office will be as good as Zoho's offerings which have been optimized for years.
I can even imagine another effect: More people finding out about office webware and then searching for other office suites than MS. Also bloggers pointing out MS office webware alternatives etc.
I certainly wouldn't bet on that. Did you read the UI research the Office team published with the release of the 2007 version?
The amount of work they put in determining what their clients needed and how they used the software and what would make them more productive is staggering. It's the best UI research I've ever read. Here's a presentation about how they went about their work: http://blogs.msdn.com/jensenh/archive/2008/03/12/the-story-o...
Certainly MS does put a lot of work (and money) into trying to improve their UIs. Unfortunately, whether it's due to the huge feature set of the Office applications or legacy support required by certain clients, the result of their work is not something most would hold up as a shining beacon of UI design.
While Office 2007 is a step up from 2003 in a number of ways, I'd have to agree with onreact that I wouldn't expect much from the eventual web app version of Office. At least not in the initial release.
I can even imagine another effect: More people finding out about office webware and then searching for other office suites than MS. Also bloggers pointing out MS office webware alternatives etc.