Google Offers 71% Discount on Cloud Services to U.S. Government

In a significant move to mend relationships with the Trump administration, Google has agreed to offer substantial discounts on its cloud services to the U.S. government. This decision follows a similar concession made by Oracle, reflecting a broader trend among Silicon Valley tech companies to avoid the confrontational dynamics experienced during Trump's first term.

A senior official from the U.S. General Services Administration (GSA) revealed that Google's cloud service contracts are expected to receive discounts similar to those offered by Oracle. Last week, Oracle agreed to provide a 75% discount on certain software contracts for a limited period and significant discounts on its broader cloud computing contracts. Google had already agreed in April to provide a 71% "temporary price reduction" on its Workspace contracts with the U.S. government, effective until the end of September. The final agreement is expected to be finalized within a few weeks.

Microsoft Azure and Amazon Web Services (AWS) are anticipated to follow suit with similar discounts, although negotiations with these companies have not progressed as smoothly as those with Google's parent company, Alphabet. These four companies collectively account for a significant portion of the government's annual cloud service expenditure, which exceeds 200 billion dollars.

This initiative is part of the Trump administration's efforts to reduce IT procurement costs, driven by the so-called government efficiency department. Tech giants are eager to avoid a repeat of the adversarial relationship they had with the Trump administration during his first term.

Oracle set the benchmark for price reductions. The company reached an agreement last week to offer a 75% discount on certain software contracts for a limited period and significant discounts on cloud computing contracts. A GSA senior official stated that Google's cloud service contracts "are likely to reach a similar level." The official emphasized, "Each of these companies fully understands and supports this mission. We will reach agreements with all four participants."

The GSA's cost-saving efforts are led by Acting Administrator Stephen Ehikian and Federal Procurement Service Commissioner Josh Gruenbaum, in response to a series of executive orders signed by Trump to save costs in federal procurement. In recent months, the GSA has reached agreements with Adobe and Salesforce. Salesforce will reduce the price of its messaging service Slack for government use by 90%, effective until the end of November. The agency is also renegotiating contracts with ride-sharing companies.

This cost-cutting measure follows similar actions taken by the Trump administration against consulting firms. Tech leaders are actively seeking to repair their relationships with Trump. Executives from Meta and Google, including Sundar Pichai, made high-profile appearances at Trump's inauguration and halted corporate diversity initiatives. Jeff Bezos is also working to rebuild his relationship with the president, whom he had previously criticized as a "threat to democracy." During Trump's first term in 2019, the 100 billion dollar Joint Enterprise Defense Infrastructure (Jedi) cloud project was awarded to Microsoft instead of Amazon. AWS sued, alleging that Trump used his power to retaliate against Amazon due to personal grievances with Bezos.

Ultimately, the Jedi project was canceled during Biden's term and replaced with a 90 billion dollar contract, divided among Amazon, Google, Microsoft, and Oracle. This series of events underscores the strategic importance of cloud services in government operations and the willingness of tech giants to make significant concessions to maintain favorable relationships with the administration.