FILE PHOTO: The Google logo is seen on the Google house at CES 2024, an annual consumer electronics trade show, in Las Vegas, Nevada, U.S. January 10, 2024. REUTERS/Steve Marcus/File Photo
(Reuters) - Google will offer steep discounts to U.S. federal agencies for its business apps package as the company looks to capitalize on the Trump administration's cost-cutting push and chip away at Microsoft's longstanding grip on the government software market.
The move comes amid U.S. President Donald Trump's drive to minimize federal spending through billionaire ally Elon Musk's DOGE government reform team, which is working to cancel contracts and shrink agencies.
The 71% discount as part of an agreement with the U.S. General Services Administration (GSA) could generate up to $2 billion in cost savings for federal agencies if there is government-wide adoption, Google said on Thursday.
The GSA, which manages federal property and services, was among the first agencies targeted by Department of Government Efficiency (DOGE) layoffs.
"The Workspace agreement marks a step forward in GSA's work with Google and other companies to create cost savings for the federal government," the GSA said on Thursday.
Pricing will be based on the "volume of the entire government", rather than the lower discounts previously available through separate agreements on an agency-by-agency basis, the GSA added.
The discounts, effective till September 30, could help Google entrench itself deeper into government spending contracts, which are otherwise dominated by Microsoft.
Microsoft's share of the U.S. government software market was estimated to be about 85% in 2021, according to research firm Omdia.
Google has been attempting to beef up its offerings with the addition of a slew of AI features powered by its large language model Gemini to its Workspace suite, as it competes against Microsoft for a bigger piece of consumer, enterprise and government budgets.
Workspace has already been in use by some government bodies. The Air Force Research Laboratory, which supports the U.S. Air Force and the U.S. Space Force, has been using its products since 2021, Google said.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shounak Dasgupta)
