It is already 10 years ago, when Open Office (before StarOffice) became open source (Sun Micr.) and was released.
A serious competitor of Microsoft’s Office suite, yet giving away its source and software.
The new version of Open Office is not so much better or does have better functionallity, at the other hand, I think it is the best free alternative for MS Office products.
Often while explaining that there is a free Office product besides MS, I have been asked why is it free and how do they earn money.
First of all, Oracle is the new owner of OpenOffice, because of the aquisition of Sun Microsystems. So you do not have to worry about their financial position. The initial thought of these kinds of products are related to independant developement and the availability of free software for everyone.
The way they make their money is by commercial support. And that is quit logical. Large enterprises (but also small and mid sized businesses) must serve their internal customers in a proper way and are required to make customized solutions for those same customers.
Looking at the cloud and SaaS trend, and the price models behind that, I think that OpenOffice (but also other Open Source and Free desktop software) must be aware of the fact that people using e.g. Google Apps or Zoho is are fact a real competitors.