MS Office isn't "banned" from employees' computers at Google. If you need it (and some do) you must request it specifically, because it costs Google a nontrivial amount of money for every user. Same thing with any piece of commercial software: for example, I have Adobe Photoshop on my Google laptop, and I had to request it because it costs Google a few hundred bucks, and most people don't need it at all.

Before Google Docs existed, many employees used MS Office, and when Docs was being rolled out Googlers were incentivized to switch to Docs by being offered kudos, swag, etc (ie, the carrot, not the stick).