There's no doubt about it, the Dublin offices of the world's biggest software company have been Googled. The on-site leisure facilities, recently installed in the reception area of its Sandyford office building, are more reminiscent of a certain upstart search company than its more established competitor.

Google's offices are, famously, characterised by the creature comforts afforded to employees, including bean bags, games rooms, and fridges stocked with soft drinks and snacks for staff.

The company's primary goal, elucidated in its preflotation documents, is "don't do evil". Even its recruitment advertisements take a refreshingly light touch, showing pictures of Google employees when they were toddlers and inviting prospective applicants to submit their CVs accompanied by a baby photo of their own.

These little things make a difference. The competition for talent between the top dogs in the technology world is fierce. It's the IT version of the arms race.

Google's Dublin offices are plastered with posters explaining 'project plasma'.

Project plasma involves rewarding Google employees for referring friends, colleagues or . . . as the poster puts it . . . 'the pub genius from the local', to the company. Anyone who refers a candidate who is hired by Google gets an iPod. Refer another applicant and get another prize. Refer enough new Googlers and you can earn a moped or a even a plasma screen with a home entertainment system.

"We're a talent play. Our goal is to find all the best people in the world, " said Douglas Merrill, Google's vice president in charge of engineering.

Merrill, in Dublin last week to promote a Google 'code jam' competition aimed at finding new programming talent, said it helps to have a nice working environment.

Hence the free food, bean bags and games rooms.

"What matters isn't the food, per se, or the games.

What matters is what you do over them. Our engineers play against each other and they argue over code, or whatever, " he said.

The image of Google as a laid-back haven nurturing the creativity of hyperintelligent engineers has struck a chord. Some of Google's top brains have even been lured from Microsoft as a result, including Mark Lucovsky, one of the main developers behind Windows. His former employers have always had a more austere and hard-working image.

Fussball tables and Xboxes in the lobby are something of a departure.

Fiona Mullen, human resources manager with Microsoft Ireland, said the company had always been conscious that fun should be a part of the working day. "It's part of developing a community, " she said.

There is no suggestion that the innovation was part of any design to emulate its rival.

"Innovation can only be led in an environment that is open and comfortable, " she said, adding that Microsoft had always strived to create such an environment for its employees.

Mullen also pointed out that Microsoft has little difficulty attracting talent, despite the presence of many of its rivals in Ireland.

Microsoft Ireland received 20,000 job applications last year, she said, and recruited 250 new staff from among those applicants. Last year was "one of our most successful recruitment years yet", she said.

"There's no doubt there's competition in the marketplace. . . We haven't felt any pressure from those companies at all, so far, " said Mullen.

Microsoft would never admit to taking a more Googlesque approach of late. Why should it? Google is a $12bn company, Microsoft is a $236bn behemoth with enough cash on its balance sheet to buy the search firm three times over.

In 29 years it has developed a fearsome reputation for putting paid to would-be rivals, no matter how brightly their stars shine. Google might have a better search engine than Microsoft, but Apple had a better operating system, Netscape had a better internet browser, Lotus had a better spreadsheet application and WordPerfect was a better word processor.

But as Bill Gates nears the end of his tenure, the Microsoft founder and former chief executive having announced his intention to step down as chairman in 2008, the Google question remains unanswered.

Google has spread its reach beyond the search engine which made it a household name. The "talent" at its Mountain View head quarters are churning out new products at a rate of knots: email, online auctions, internet telephony and, most recently, a spreadsheet.

At a briefing in Dublin last week, Microsoft provided Irish journalists with a sneak peek at Vista, the latest version of its dominant Windows operating system. The company will release Vista in January 2007 alongside the latest version of Microsoft Office, the suite containing the new releases of Word, Powerpoint, Outlook and other ubiquitous Microsoft products.

The new Windows plays heavily on its enhanced ability to search files and folders and organise documents for easy retrieval. The latest version of its Outlook email program, meanwhile, boasts a search feature not a million miles away from the one behind Google's Gmail.

Vista has taken longer to put together than any of the previous releases of Windows. The gap between the last version, Windows XP, and Vista stretches back to 2003. The intervening years have been characterised by a number of previously unforeseen threats to Microsoft's dominance.

Google gained a stranglehold in search, achieving a 50% share of all search traffic in the US and a 72% share of traffic outside the States, while Microsoft languishes in third place with 12% and 7% in those markets, respectively. Elsewhere, not-for-profit foundation Mozilla introduced an internet browser which began to eat in to the dominant position held by Internet Explorer.

Microsoft has also had to keep a careful eye on Apple.

Its extraordinary success with the iPod music player and its online music site, iTunes, has reinvigorated the company. The success of iTunes and Apple's media player, Quicktime, has relegated the Windows media player, and the music download services which use it, to the status of alsorans.

In isolation, none of the above is a clear and present danger to Microsoft, but in the aggregate they are all causing concern.

It's no coincidence that the new version of Internet Explorer includes a range of features culled from Mozilla's Firefox browser, including 'tabbed browsing' . . . the ability to open a number of web pages in one window and flick quickly between them. Vista also mimics some of the features introduced by Apple's OSX Tiger operating system last year.

Vista aims to take some of the initiative from Microsoft's legion rivals.

The legacy of Gates' stewardship of the company over the last three decades is that Windows is used by nine out of every ten computer users on the planet.

That's a commanding platform to build on. As those users begin to upgrade to Vista, Microsoft is betting that the bells and whistles included in the package will encourage them to turn back from Google, Apple, Mozilla et al and return to the Microsoft fold.