One of the biggest tech hubs on the planet, San Francisco, is adopting Microsoft's cloud based email service for approximately 23,000 city and county employees.  

The email service will cost the city $78 per user per year, or $1.2 million for the first year. This is significantly cheaper for the city than having to pay for its own servers. When the system is fully deployed, in about a year, it will cost $1.7 million per year.

Microsoft, which beat out Google and IBM for the email contract, provides San Francisco with easy interoperability between its other products such as Word, Excel, SharePoint, and Azure. This made it a more attractive option than Google, which charges users $50 per year and provides them with its own suite of apps.

The Microsoft contract is the first part of a five year plan for the city of San Francisco, which will lay out its own technology roadmap over the coming week. Sixty different departments and agencies are scheduled to use the Microsoft Exchange Online, cloud-based email service.

It is our responsibility to make decisions that are fiscally responsible, forward-looking, and improve the services that city and county employees provide to our constituents, San Francisco mayor Edwin Lee said in a statement.

Along with price, the competing cloud-based email systems were judged on security, functionality, flexibility, SLA-backed service, proven record for support, and integration with existing infrastructure and tools. The cloud-based email can be automatically updated through one server, rather than administrators having to go send it to every computer. San Francisco also said the system would be available in case of a disaster, something that cannot be said for an email system stored on a physical server.

By moving to the Microsoft platform, we not only get immediate improvements to our system, but we gain a disaster-resilient system that provides the most modern information tools, with solid support provisions that can scale with the needs of our constituents, San Francisco chief information officer Jon Walton said in a statement.

The deal is a huge coup for the Redmond, Wash. based Microsoft, which lands a huge contract right in Google's back yard. The Mountain View, Calif. based Google is a mere 40 miles to the south of San Francisco.

This is not the first time Google and Microsoft have rivaled with each other over cloud-based email services to major cities. Google won a Los Angeles email contract back in 2009, and Microsoft has gotten a tryout in New York City and won a contract for the State of California. When Microsoft won the high-profile California contract, Google said there was a bias in the government against it competing for a contract.

We're disappointed we didn't have an opportunity to compete for San Francisco's business. Through a competitive bid process, the majority of customers choose Google, and the rest get a great deal on their Microsoft license, a Google spokesman said in a statement.

Follow Gabriel Perna on Twitter at @GabrielSPerna