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Computerworld - SANTA CLARA, Calif. -- Next month, Microsoft Corp. will release Office 2010 into an IT world that Google Inc. has been reshaping as use of its Google Apps services has spread to organizations like the Los Angeles city government and Genentech Inc.

With its release of Office 2010 on May 12, Microsoft will complete an effort to move its extensive portfolio of applications to the cloud, offering its business and government customers a new way to deliver services to users.

But while Microsoft has a vast installed base of customers who use its Office suite of products heavily, its mindshare is clearly declining as more and more users embrace Google Apps.

Google moved early to make this a contest over which company offers the best contract terms and legal protections in cloud environments. The city of Los Angeles, which may be Google's marquee government user, has been frank in disclosing details of its agreement. By the end of June, Los Angeles expects to complete a transition of some 30,000 employees to Google Apps.

In a sense, Kevin Crawford, Los Angeles assistant director of IT, is Google's de facto public sector evangelist. He doesn't market Google directly, but he answers questions from many other local government and state officials who want specifics about the city's deal with Google. Indeed, at the SaaScon conference on cloud computing and software as a service here this week, Crawford has been peppered with questions about the contract terms.

Los Angeles has been frank about the contract, which includes unlimited damages for a data breach, provisions allowing audits, guarantees that the data remain in the contiguous 48 states, and penalties if Google's services are unavailable for any longer than five minutes a month.

The contract also gives the city the right to cancel its contract with Google "for convenience," Crawford said.

Contract terms aside, Tim O'Brien, the senior director of the platform strategy group at Microsoft, believes that his company has an advantage in the cloud business because of its experience in the enterprise market.

"We know a lot more than potentially any vendor in the industry about the types of questions [business customers] have because we have been through the enterprise software discussion before," O'Brien said in an interview here.

O'Brien argues that Microsoft's 15 years of experience with cloud-based services, which began with its acquisition of Hotmail in 1998, gives it particular strength in this environment.

Google's DNA is "primarily consumer Web," said O'Brien, noting that when the vendor agreed to allow Los Angeles to make a quick migration to another provider, it might not have considered the problems associated with such a move and the switching costs involved.

A major issue in cloud services is avoiding vendor lock-in by having application and data portability. There are no established means of accomplishing that, and O'Brien doesn't see agreements for them arriving quickly.

"There isn't one single center of gravity for cloud standards in the industry today," said O'Brien, who nonetheless says that Microsoft would embrace portability "because it levels the playing the field with vendors."

Genentech, a South San Francisco-based biotechnology company, adopted Google Apps for its 16,000 corporate users in 2007 but let the users decide whether they wanted to move to Google Docs. About 8,000 now use Docs.

The company's IT approach is give its users choices where possible, said Todd Pierce, senior vice president of IT at Genentech. "People will choose things that will really work for them," he said.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com.

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