* Google wins contract to provide email to federal agency
* Google poses threat to rival Microsoft's pricing-analyst
By Jasmin Melvin
WASHINGTON (Reuters) - Google Inc won a
federal government contract last week that the company hopes
will give it a boost over rival Microsoft Corp as they
race to convert government agencies to cloud computing.
The U.S. General Services Administration (GSA) awarded a
five-year, $6.7 million contract to Google and Unisys Corp
-- a relatively small dollar amount but an important
As part of the contract, Google and Unisys will transition
the GSA, which basically serves as the back office for federal
agencies, to a secure cloud-based platform that includes
Google's Gmail, Calendar, Docs and Sites applications.
GSA is the first U.S. federal agency to make a agencywide
"move to the cloud."
Cloud computing is computing over the Internet, in which
applications are delivered through a web browser, allowing any
time and anywhere access to information.
Consumers typically use cloud computing when online banking
or shopping on sites like Amazon.com.
The GSA is a big win for Web search engine leader Google
because the agency touches so many aspects of the federal
government, potentially setting the company up for other
federal agency contracts.
"It's a real duel," said Melissa Webster, program vice
president for content and digital media technologies at market
"Microsoft is clearly in Google's gun sights and... Google
is a huge threat to Microsoft in lots of areas," she said.
She added that the biggest challenge Google poses to
Microsoft is on pricing.
Software giant Microsoft expressed disappointment in the
GSA's decision. However, Microsoft U.S. Public Sector Vice
President Curt Kolcun said in a statement the company remained
"gratified that so many federal, state and local governments
have chosen Microsoft to meet their business needs."
But Google hopes the GSA win will begin to change that.
"This opens up the flood gates to a lot of agencies who
really have wanted to move to the cloud and have wanted to see
a green light to do so," Dave Girouard, Google's president of
enterprise, told Reuters.
Girouard said Google's advantage over Microsoft in cloud
computing hinges on the elimination of software installation as
Google's cloud is entirely web-based, keeping prices low.
"We're built from the bottom up for the cloud. That gives
us a significant head start over Microsoft," he said.
Microsoft said competition was good for the industry, and
it was confident customers would not stray.
Microsoft offers a "private cloud" option that hosts its
products on the customer's own servers. Google's servers must
host their suite of cloud services.
Moving all of its 17,000 employees and contractors to
cloud-based email and collaboration tools will lower costs by
50 percent, saving the agency $15 million over five years, GSA
said in a statement.
"I think other agencies will look closely at that savings
as budgetary pressures become more and more significant in the
federal government," David Mihalchik, Google strategy and
business development executive, said in a phone interview.
With Google Apps integrated into government operations in
more than 30 states, in addition to use by more than 3 million
businesses, Mihalchik, who oversaw the GSA contract process,
said he expects to see the same kind of strong adoption in the
"We're offering a more powerful technology at a lower cost
with better security," he said.
Global IT spending on cloud services are expected to triple
by 2013, topping $44 billion, IDC said.
IDC's Webster said that although a cloud vendor offering
robust functionality could displace the incumbent, she did not
think Google would be able to displace Microsoft in the private
"There is still a huge gap in what Microsoft provides in
its online suite and what Google provides," she told Reuters.
"The real threat to Microsoft is to maintain its price and
maintain its value in the face of this cheaper, innovative
challenger," Webster said, adding that the heated competition
with keep prices down for consumers.
But Google may make inroads in the government sector, she
said, as these deals are driven primarily by email services.
(Reporting by Jasmin Melvin; Editing by Tim Dobbyn)
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