Washington DC's 38,000 government employees will start using Google Apps for internal business needs instead of the age-old Microsoft Office suite.

Google Apps is a collection of web-based ("cloud computing") applications that includes free versions of existing software solutions, such as Microsoft Word or Excel, as well as various collaboration and productivity tools — Gmail, Calendar, Talk, Video, Sites. It also features security for on-premise email.

The number of users on the service is growing by about 3,000 per day, according to Google. About a half million organizations adopted the service in one form or another since its introduction in August 2006, including giants like Genentech, GE, and L'Oreal.

Microsoft has expressed interest in launching a similar web-based product, but never followed through. It has, however, added a number of workspace-sharing functions — like direct linking and email notifications — to Microsoft Office Live Beta.

The contract that will migrate the government over to Google was signed in June by Vivek Kundra, District CTO. It is worth about $500,000 per year, Bloomberg estimates.

A study finds that, while 20% of Americans are aware of online office suites, 90% have not tried one as of December 2007, wrote Ars Technica.