The scope of the agreement could later be expanded to include all 43 million students at 210,000 Catholic schools in 102 countries, Microsoft on Thursday.

The OIEC expects that with Office 365 students will be able to collaborate on projects, jointly edit documents, communicate via e-mail, IM and video conferencing, and create and maintain websites. The agreement also calls for Microsoft to design an Azure-based social network for Catholic schools called Social Network of Catholic Education. Tralcom, based in Mexico, will be the deal's supporting technology partner.

The students will use Office 365 for Education, a version of the suite tailored for schools and universities that will become generally available this summer, replacing Microsoft's free cloud-based suite for schools and universities Live@Edu, .

Microsoft is in a dogfight with Google in the cloud-based enterprise e-mail and collaboration market, where Google Apps has been available since 2006. Google Apps also has a special version for the education vertical which is free. Although Microsoft dominates the on-premise enterprise e-mail and collaboration market, it is facing competition from Google and others as more and more customers opt to switch to a cloud-based model for this software.

In this war, it's very important for Microsoft and Google to nab educational institutions as customers. Those students become familiar from early on with either Office 365 or Google Apps, creating in them a potential preference for one or the other. Once they enter the workplace, their opinions about the suites may help influence their employers' decisions in this area.