In basic terms, the University of California decided it could get Google Apps up and running faster and for less money.
The University found out that to move to Office 365, it would have had to do a double migration -- first to an on-premise version of Exchange, then to the online version in Google Apps. This pokes a hole in Microsoft's claim that Office 365 is a true cloud-based competitor to Office 365. (This double migration wouldn't be required in all cases, but it's NEVER required with Google Apps.)
Here's where Google had the biggest advantages:
Cheaper support during the migration - since other universities in the UC system have already migrated to Google Apps, Cal can rely on them to provide some support. With Microsoft, it would have to turn to Microsoft Consulting Services "at a significant cost to the project."
Faster to set up - Deploying Gmail will take six to ten weeks, and the university will be able to keep some recent changes it made to its email routing system. With Office 365, the university has to move from its current system to an on-premises version of Exchange first. Then, it can move from Exchange to Office 365. It will also have to throw out most of the routing infrastructure it just installed.
Works with existing software - Gmail integrates with other Google products that some university departments use, and with the document storage and management system from Box, which the university already bought. Office 365 can work with SharePoint and Lync (which it mistakenly calls Lynx), but it was not interested in those solutions and didn't even consider them.
Easier to develop on - More people on campus know how to work with Google Apps than with Microsoft's Exchange.
Migration of email groups - Google has a product that could be used to migrate Cal's existing Mailman mailing lists to Gmail. Microsoft recommended against even trying to migrate Mailman to Exchange.
The solutions were pretty close in other areas, like delegated administration (neither was great, but Google was slightly better), user familiarity (it depends on what product people are using today), and mobile support.
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