By John Letzing
The Los Angeles City Council voted Tuesday to start using email
service from Google Inc. (GOOG), a widely anticipated move that may
augur well for the Internet search giant's efforts in competition
with Microsoft Corp. (MSFT) to sell technology to businesses and
government agencies.
A spokeswoman for Councilman Tony Cardenas said that Google beat
out Microsoft in bidding for the $7.25 million email contract,
which covers the city's roughly 30,000 employees. She added that
the council voted 12-0 to approve the deal.
Google, which still makes the majority of its revenue from
search advertising, began to offer Google Apps--which includes
email, word processing and spreadsheet tools--roughly two years
ago. The technology is positioned as a rival to Microsoft's
dominant Office suite of software.
Google's software is hosted online and accessed on a
subscription basis. This so-called cloud computing model, where
data and applications are stored online rather than locally on
computers, is becoming increasingly popular among businesses and
agencies.
Microsoft's Office suite remains a powerful source of profits
for the Redmond, Wash.-based company, however. In the quarter ended
in September, the business division that includes Office
contributed roughly $2.9 billion to Microsoft's bottom line.
Microsoft is also making its own foray into cloud computing. The
company has begun previewing versions of some of its Office
applications--including Word and PowerPoint--that are hosted and
accessible online. Those Internet-hosted Office applications should
become available next year.
A Google spokesman said in a statement that, "We're thrilled the
L.A. City Council unanimously voted to go Google, and we look
forward to working with the city to bring the many benefits of
Google Apps to their employees."
Microsoft released a statement emphasizing that Google is
replacing technology from Novell Inc. (NOVL) for the Los Angeles
contract, and noting that a number of companies and public sector
customers have begun using Microsoft's cloud computing
services.
The contract between Los Angeles and Google was approved pending
an amendment that would require the company to compensate the city
if its email service is breached and data is stolen.
Recent glitches in Google's popular, free email service for the
public have raised awareness that cloud-computing models come with
inherent risks.
In a statement, Cardenas said that, "By utilizing cloud
computing technology provided by an outside vendor like Google,
that vendor will be fully responsible to protect that data and will
have to pay for data recovery costs."
-John Letzing; 415-439-6400; AskNewswires@dowjones.com