April 10 (Reuters) - Google will offer steep discounts

to U.S. federal agencies for its business apps package as the

company looks to capitalize on the Trump administration's

cost-cutting push and chip away at Microsoft's ( MSFT ) longstanding grip

on the government software market.

The move comes amid U.S. President Donald Trump's drive to

minimize federal spending through billionaire ally Elon Musk's

DOGE government reform team, which is working to cancel

contracts and shrink agencies.

The 71% discount as part of an agreement with the U.S.

General Services Administration (GSA) could generate up to $2

billion in cost savings for federal agencies if there is

government-wide adoption, Google said on Thursday.

The GSA, which manages federal property and services, was

among the first agencies targeted by Department of Government

Efficiency (DOGE) layoffs.

"The Workspace agreement marks a step forward in GSA's work

with Google and other companies to create cost savings for the

federal government," the GSA said on Thursday.

Pricing will be based on the "volume of the entire

government", rather than the lower discounts previously

available through separate agreements on an agency-by-agency

basis, the GSA added.

The discounts, effective till September 30, could help

Google entrench itself deeper into government spending

contracts, which are otherwise dominated by Microsoft ( MSFT ).

Microsoft's ( MSFT ) share of the U.S. government software market was

estimated to be about 85% in 2021, according to research firm

Omdia.

Google has been attempting to beef up its offerings with the

addition of a slew of AI features powered by its large language

model Gemini to its Workspace suite, as it competes against

Microsoft ( MSFT ) for a bigger piece of consumer, enterprise and

government budgets.

Workspace has already been in use by some government bodies.

The Air Force Research Laboratory, which supports the U.S. Air

Force and the U.S. Space Force, has been using its products

since 2021, Google said.