It’s bad news for Microsoft and good news for Google as it today emerges that the New South Wales Department of Education will dump Outlook in favor of Gmail.

SMS Management and Technology, together with subcontractors, Google and Telstra, will supply the NSW Department of Education with 1.5 million student email services using a customised version of Google’s Gmail service, AustralianIT reports.

With the $9.5 million deal, comes more storage for students. According to AustralianIT, the education department’s Gmail roll-out will increase current email storage allocated to students by a multiple of 170 times, from 35MB to 6GB.

Storage aside, there’s also huge monetary savings to be made. According to the Washington Post, the previous deal with Outlook cost the NSW Dept. of Education $33 million Australian dollars. It was built in 2003 but took four years to go live and has only been accessible by students since last year. As mentioned before, the deal with SMS is worth $9.5 million and could be live by the end of this year.

This is supposed to be one of the largest private deployments of Gmail and is Googles second major win with regard to Australian education. Last year saw Sydney’s Macquarie University switch 68,000 (31,000 students and 37,000 alumni) accounts over to Gmail. Director of IT Services in the college said the switch wasn’t about saving money,

“It’s not so much about what it is saving us; it is more about what we can give students without spending hundreds of thousands of dollars we don’t have.”

In the decision to sign a contract with SMS, the NSW Department of Education rejected bids from Kaz, Unisys and Hewlett-Packard.