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 show that the working group was formed several weeks ago and is made up of technology officials from a range of California state agencies, including the Department of Social Services and Department of Fish and Game, as well as the Department of Toxic Substance Control and the California Coastal Commission.
Reached Wednesday, the group's chairman confirmed the project's existence and said it is part of a larger effort by California to centralize its IT systems with an eye to cutting costs and improving service levels.
"If these externally hosted services can meet your needs in terms of reliability and security, it's probably something you should look at doing," said John Ellison, technology officer for the California Resources Agency.
A move to hosted e-mail by the nation's most populous state would also provide a ringing endorsement for so-called software-as-a-service -- an increasingly popular arrangement in which computer users access applications via the Internet instead of the hard drives on their desktops.
In addition to Microsoft and Google, numerous other vendors, including IBM, SAP, and Salesforce.com, are chasing the growing SaaS market.
Ellison said Google's Google Apps hosted offerings are less costly "by an order of magnitude" than the Microsoft Exchange environment that most California state workers currently use for e-mail and messaging. That environment is supported and maintained by California's Department of Technology Services.
But that doesn't mean Microsoft is necessarily out of the picture when it comes to California's plans for a Web-based e-mail system. Ellison said the cost of a hosted Microsoft environment would be similar to the state's in-house setup, but said the hosted offering would be "superior in some technical aspects" and would offer cheaper storage and archiving options.
Ellison's group already has crunched some numbers as part of its effort to compare Google Apps with a range of Web services sold by Microsoft, including Exchange Online, SharePoint Online, and Office Communications Online, state records indicate.
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.
The Microsoft estimate also contains prices for a number of add-on services -- such as $9.95 per month, per user, for BlackBerry messaging support, $5.63 per month for managed collaboration services, and $2.10 per month for instant messaging services.
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.
Ellison emphasized that California has no definite timetable for moving to a hosted software environment for its communications needs and said further testing is required to assess the project's feasibility. "Our next step is to find some agencies to pilot the various offerings," he said.
The ultimate decision on whether the project gets the green light -- and which vendor is tapped -- resides with Clark Kelso, California's chief information officer, Ellison said.
In contemplating a move to hosted software, California has joined a number of other government agencies and private sector businesses -- including Procter & Gamble and General Electric. Advocates of SaaS trumpet its low cost and simplicity in terms of setup and maintenance.
Skeptics argue that SaaS presents security and reliability challenges beyond those associated with software that's maintained on an organization's local servers because it's externally hosted.
What's certain is that both Google and Microsoft see significant revenue opportunities in the hosted software market. Google laid down the gauntlet earlier this year when it introduced the Premier Edition of Google Apps -- a version that includes business-grade enhancements such as policy management and archiving tools.
Microsoft has responded with a range of new products under its Exchange Online and Windows Live brands.