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November 29, 2007

Microsoft and Google faceoff for hosted email at the State of California

Posted by David Hunter at 4:54 AM ET.

Paul McDougall reports at InformationWeek that the government of the State of California is examining a move to hosted email and calendaring for state employees and it’s a Google vs Microsoft faceoff for the business:

California is looking at moving its e-mail, messaging, and calendaring systems to a hosted service … and the contract could land in the lap of either Google (NSDQ: GOOG) or Microsoft (NSDQ: MSFT), InformationWeek has learned.

It’s a choice that could affect a quarter of a million state workers and create a multimillion dollar revenue windfall for one of two major technology vendors. The state already has formed a working group to weigh the possibility of shifting to an online software service and how that would be handled either by Google or Microsoft.

Documents generated by the working group show that California would expect to pay Google about $4.17 per user, per month, for basic e-mail hosting, messaging, and calendaring services with no setup fees. Exchange Online, by contrast, would cost the state a one-time setup fee of $17.65 per user, and an ongoing, per-user fee of $8.59 per month.

Ellison called the figures “ballpark” numbers. “We haven’t done any serious negotiating yet” with Google or Microsoft, he said, noting that about 250,000 California state workers are regular e-mail users. “We’d expect very competitive prices if we go forward,” said Ellison.

John Ellison, technology officer for the California Resources Agency and chairman of the working group also indicated that the current in-house Microsoft Exchange systems are comparable in cost to the hosted Microsoft Exchange offering, but inferior is some ways.

There will inevitably be jousting over features, but I think it is clear that Microsoft will not be able to maintain a price differential like that described as more and more of these head to head competitions with Google crop up. That means that Microsoft’s server software revenues just sprang a slow leak. And, of course, once Google gets its nose in the tent can Google Docs and a Microsoft Office revenue hit be far behind?

Filed under Coopetition, Exchange, Google, Hosted Services, Microsoft, Servers

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One Response to “Microsoft and Google faceoff for hosted email at the State of California”

  1. Microsoft anticipates a tidal wave of Exchange outsourcing | Microsoft News Tracker Says:

    [...] Spoken like a good outsourcer, but the question remains why Microsoft felt the need to get into this low margin business and squeeze out their partners who were already providing an equivalent service. The answer has to be fear of the Web apps vendors like Google with whom they are already in competition and Microsoft’s inclination to do things themselves that they consider important instead of leaving them to partners. The canonical example of this is the tossing of the PlaysForSure partners under the Zune train. [...]

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