The U.S. Department of Agriculture is moving to a cloud-based system for e-mail, with its data being stored in Microsoft’s data center in suburban Chicago.

Cloud computing moves applications to the Internet, cutting costs and facilitating easier access to information. The USDA said it awarded a contract in May to Dell for Microsoft Online Services, aiming to move all of its e-mail, instant messaging and collaboration applications to the cloud.

Microsoft’s data center in Northlake opened in September 2009 and is home to thousands of servers that provide processing power and storage for the company’s cloud services.

Curt Kolcun, vice president of the U.S. public sector at Microsoft, said the Chicago center is one of the most heavily requested customer visit sites for the businesses he oversees. The facility is a way to show senior government officials, state governors and other officials a tangible representation of the cloud, Kolcun said.

The USDA said it is the first Cabinet-level agency to make such a move, and that it has been working with Dell and Microsoft during the last six months to migrate more than 120,000 users to the common system. Previously, employees were on 21 different e-mail systems.

Companies such as Microsoft and Google are competing to be the leading provider of cloud-based services to government agencies and other businesses. Last week, the General Services Administration announced it is the first federal agency to move its entire e-mail system to the cloud, using Google products. The agency said it expects to cut its e-mail costs in half over the next five years.

“Historically, many people would say that government is more risk averse,” said Kolcun. “But in this case, they are leading the charge, not only in the move to the cloud, but what are the appropriate security standards that need to be implemented. They’re not just sticking their toe in the water. They’re moving forward in a big way.”

Beyond messaging and collaboration, Kolcun said Microsoft is starting to focus more on “key line of businesses” within the public sector moving to the cloud. This shift could mean that within five to 10 years, the federal government could be using cloud-based services for a large-scale Medicare system, for example.

“The government is looking at how we can implement these large-scale systems and work to do that in more manageable bites or pieces,” Kolcun said. “Maybe historically, there would these large programs that would take many years to contract and implement. By the time they would be implemented, the solution would be behind the times…(This administration) is trying to be very focused on nimble solutions and ones that demonstrate results.”