The US Department of the Interior has picked Google Apps to provide cloud-based email and collaboration applications to about 90,000 staffers, choosing Google's services over Microsoft's Office 365.
Google had sued the US agency in 2010, claiming its requirements for the contract tilted the scales unfairly toward Microsoft. Google eventually dropped its lawsuit last September.
On Tuesday, the Interior Department announced that it had chosen Google Apps for Government to consolidate a variety of email systems it currently uses.
The agency will also use the online suite's audio and video chat tools, Docs productivity applications, Calendar and the Sites website design tool. Employees will also be able to tap into the Google services from their mobile devices.
Save up to $500 mil by 2020
The contract is worth about US$35 million over seven years, the Interior Department said. It estimated that by replacing its current systems with Google Apps for Government, it will save up to $500 million by 2020. It didn't say what those current systems are, only that there are several of them.
Asked to comment, Microsoft said it was working on a number of enterprisewide initiatives with the Interior Department, with which it has a "positive, longstanding relationship."
"Although we are disappointed by this award, we will engage with our partners and DOI to review and understand the reasons for this decision," the company said in a statement.
Microsoft and Google are engaged in an all-out war in the market for online productivity applications. They are chasing customers of all sizes while sniping at each other and touting their customer wins, especially when tens of thousands of users are involved.
The broadening appeal of Google Apps
The stakes are particularly high for Microsoft, whose email and collaboration software, like Office, Exchange and SharePoint, represents a big part of its revenue. The situation is different for Google, whose main revenue source is online advertising. Google has been building up its enterprise software unit as a complementary business for years. In the past 18 months or so, it has managed to broaden Google Apps' appeal beyond small companies, attracting some large government, education and private-sector clients.
The Interior Department's contract was actually awarded to Google partner Onix Networking, which will have 60 days to prove it can meet the agency's various technology and security requirements. It then expects to roll out the apps across the agency by December.
Google didn't immediately make its own announcement about the customer win, nor did it immediately respond to a request for comment.