Google Just Scored A Government Deal Based On 'The Volume Of The Entire Government' – And That's Bad News For Microsoft
Google has secured a significant deal with the U.S. General Services Administration, potentially saving the federal government up to $2 billion through a 71% discount. This agreement could challenge Microsoft's dominance, which has held an 85% market share in government software. The deal aims to streamline contracts across agencies, enhancing cost efficiency. Google's efforts to expand its market presence include integrating AI features into its services. The deal is effective through September and may lead to further government contracts for Google.
- For years, Microsoft has been the leading software provider for U.S. government agencies, holding an 85% share of the market
- But a new deal between Google and the U.S. General Services Administration may change that up
- The deal, Google says, has the potential to save the federal government up to $2 billion
Microsoft has long been the primary software provider for federal government agencies, but Reuters reports that Google just secured a deal that could put an end to that reign.
According to the report, Google has offered a 71% discount as part of an agreement with the General Services Administration. If adopted, Google says the deal could save government agencies up to $2 billion.
The deal comes at a time when President Donald Trump has been working to minimize federal spending. His administration installed Elon Musk as the de facto leader of the Department of Government Efficiency, tasking them with identifying and canceling unnecessary contracts and shrinking agencies.
The GSA, which is responsible for managing federal properties and services, was one of the first agencies targeted by DOGE. A spokesman for GSA told Reuters that, "The Workspace agreement marks a step forward in GSA’s work with Google and other companies to create cost savings for the federal government.”
Importantly, the deal will be based on the entire volume of the government, which could lead to more savings for it, Reuters reports. Previous deals, according to the report, have seen separate agencies get separate contracts with different discounts attached to each, making for a more chaotic and less structured system.
Reuters reports that Google is hopeful that the deal, which will be effective through September, will open the door for more extensive government contracts in the future. In 2021, it was estimated by Reuters that Microsoft's share of the U.S. government's software market was 85%, making it the largest player in the space by far.
For some time now, Google has been working on taking a larger share of the consumer, enterprise, and government markets. Its addition of a host of AI features powered by its large language model, Gemini, to its workspace is a perfect example of these efforts.
But it seems Google is looking to change things up at Gemini. On April 2, it said that Sissie Hsiao, who led the development of Gemini, would be stepping down. It's been widely reported that she's set to be replaced by Josh Woodward, who currently leads Google Labs and oversaw the launch of NotebookLM. Demis Hassabis, the CEO of Google DeepMind, reportedly said in a memo to staff that the move will help the company focus on the future of Gemini and that Hsiao is not leaving the company, just stepping into a new role.