"The city of Los Angeles, the second-largest city in the nation, made a world-class decision today to support a state-of-the-art e-mail system," Councilman Tony Cardenas, who made the motion to approve the Google system, told The Los Angeles Times.

Microsoft -- no stranger to hardball power-playing -- paid City Hall lobbyists tens of thousands of dollars to make the case against Google, the paper reported, much as it does in Washington, DC.

"Both companies treated City Hall as a key battleground in a larger struggle for the estimated $20-billion market for e-mail and office software that Microsoft now dominates," tech writer David Sarno wrote in the Times, reporting that the contract was approved pending an amendment that would require Google to compensate the city in the event that the system was breached and city data exposed or stolen.

"We're obviously happy with how this turned out," said Dave Girouard, president of Google's enterprise division. "We're going to put a lot of energy into making sure this is a great success for the city."

The switch from Novell to Google is expected to save the city millions over the long term, but recent cloud computing outages have stoked concerns about the technology, especially among emergency first responders.

Last week, at a feisty city council hearing, advocates and skeptics of cloud computing squared off over the switch. Critics of the $7.25 million contract, including Consumer Watchdog, a Santa Monica-based group, urged the committee to put sanctions into the contract that would penalize Google for any security breaches. Skeptical city council members asked for some kind of clause holding Google financially liable should the service not perform to the city's satisfaction.

The switch -- from Novell's (NOVL) GroupWise software to a Google enterprise platform -- was approved by the city council's Information Technology and General Services committee earlier this year.

L.A.'s new email system will cost $24.5 million over five years -- $1.5 million more than the current system. Despite the added cost, City Administrative Officer Miguel Santana recommended the Google-based system, saying, "the benefits that will be gained by this additional capacity justify the costs of implementing the new system."

Addressing security concerns, Santana said sensitive data will be stored in "dedicated facilities within the continental United States and managed by individuals who would be subject to high-level security clearances, including FBI fingerprint checks."