Take That, Gmail: San Francisco Goes With Microsoft For Cloud-Based Email Upgrade

Microsoft has scored a bit of a coup in rival Google’s backyard: The Redmond, WA-based software giant has landed a contract to provide cloud-based email for San Francisco’s city and county government, winning out against options from Google (NASDAQ: GOOG) and Lotus. San Francisco will pay Microsoft (NASDAQ: MSFT) about $1.2 million per year for the service, which will cover email for about 23,000 government employees, San Francisco’s chief information officer, Jon Walton, said at a news conference today.

Google (NASDAQ: GOOG), based just down the Peninsula in Mountain View, CA, has made inroads with other government agencies that want cloud-based email. One noteworthy customer came in 2009, when the city of Los Angeles picked Gmail for its e-mail services, despite a hard-fought effort by Microsoft.

Walton said San Francisco officials looked at Google and Lotus Notes before settling on Microsoft, in large part because it allows the city to more easily adopt additional Microsoft cloud services in the future, such as instant messaging, video conferencing, and web-based file sharing. “This creates for us the foundation, the core of the system that we could expand in the future,” Walton said.

San Francisco already has moved a pilot group of about 300 people over to Microsoft Exchange Online already, and plans to transition the rest of the workforce over the next year. That means last week’s Microsoft online email outage gave San Francisco officials their first taste of what a big cloud crash could do to their system.

Walton put a happy face on the situation, saying the outage actually allowed San Francisco’s IT department to see how Microsoft would react under fire—and he said the city was pleased, getting good communication as the company worked to resolve the problem. “It only impacted us for about four hours,” Walton said. “Because nothing was lost, it was perceived as a delay by our users.” He also noted that having its own physical email servers—San Francisco government currently has seven separate email systems—didn’t preclude outages either.

Obviously, the numbers on this contract aren’t huge for Microsoft—the real value is the PR. As governments deal with a new era of austerity following the Great Recession, the opportunity to remake their old IT departments will start to look much more attractive. Having a tech-savvy city like San Francisco on its client roster just makes additional sales for the company that much easier.

And, hey, it never hurts to score on the other side’s home turf, either.

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