UPDATE 1-Google says shut out of USDA cloud computing deal
* Claims did not get chance to bid for large USDA job
* Comes after lawsuit against gov't over Interior Dept
* USDA says talked with Google, deal will save money
* Microsoft says contract was competed (Adds USDA, Microsoft comments, paragraphs 8-14)
By Bill Rigby
SEATTLE, Dec 8 (Reuters) - Google Inc (GOOG.O) didn't get the chance to formally compete for the largest federal government "cloud computing" deal yet struck, according to the Web firm, adding to its concerns that government agencies are unfairly favoring rival Microsoft Corp (MSFT.O).
Early on Wednesday, the United States Department of Agriculture (USDA) announced it was moving 120,000 of its employees onto email, Web conferencing and messaging systems provided over the Internet by Microsoft, generally referred to as "cloud computing."
The move is the largest of its kind by a federal agency and the first by a cabinet-level department in a growing area that is hotly contested by Microsoft -- which has long provided technology to local and national governments -- and emerging competitor Google, which offers cheaper but less well-known online alternatives. [ID:nN07280126]
The issue of technology procurement by U.S. government agencies has heated up recently. Last month, Google sued the U.S. government for excluding its products from being considered for a 5-year contract worth about $59 million to upgrade the Interior Department's email system. [ID:nN01169155]
Government agencies, like many companies, are attracted by cloud computing as it generally saves them money on maintaining a computer network as data is stored remotely, and it means users can access systems from more or less anywhere.
Microsoft, as the incumbent provider, tends to win most government technology contracts in this area, but Google has recently won high-profile jobs to provide a version of its online Google Apps service to the U.S. General Services Administration, the state of Wyoming and the city of Los Angeles.
The USDA said in a statement on Wednesday its move to the cloud was part of a deal signed in May with computer-maker Dell Inc (DELL.O) to provide online services from Microsoft.
The government agency, which oversees the U.S. farming, agriculture and food industries, said it had been working with Microsoft and Dell for the past six months on the project. The contract, worth $27 million over three years, is expected to save the USDA about $6 million per year once the switch to the cloud is complete.
Google, which claims its services save more money than Microsoft, and that its presence in a bidding situation usually means lower prices regardless of who wins, said it had no opportunity to formally bid on the contract at any point.
"We were not given the opportunity to bid for USDA's business," said a Google spokesman. "When there has been a full and open competition, customers have chosen Google Apps, and taxpayers are saving millions of dollars."
The USDA says it did look at Google's offerings informally two years ago, when it decided to overhaul and consolidate its disparate email systems.
"We did extensive market research to include face-to-face meetings with Microsoft and Google and pricing was publicly available," said Chris Smith, the USDA's chief information officer." Ultimately, he said the agency went with Microsoft as it already had large investments in Microsoft's e-mail systems and its SharePoint Web-collaboration tool.
Microsoft said the USDA did consider alternatives.
"This was a competed contract under the General Services Administration Schedule (the framework for federal procurement) that was ultimately awarded to Dell, who bid the Microsoft solution," said Curt Kolcun, Microsoft's executive for providing services to the U.S public sector. "The USDA looked at Google at one point, but wanted to explore a more mature cloud service offering." (Reporting by Bill Rigby; Editing by Richard Chang, Bernard Orr)
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