AICTE is Microsoft's biggest cloud computing client

A visitor uses his mobile phone as he walks past the Microsoft booth with a logo for cloud computing software application at the CeBit computer fair in Hanover, March, 6, 2012.

LONDON (Reuters) - Microsoft(MSFT.O) announced its biggest-ever customer for cloud computing - software that it hosts on behalf of clients and delivers over the Internet - after winning a contract to provide free services to the All India Council for Technical Education (AICTE).

Microsoft, which was built on the sale of expensive software that is installed on individual computers, has been forced by competition from Google (GOOG.O) and others to branch out into the fast-growing world of cloud computing.

The U.S. software giant said on Thursday it would provide its Live@edu communication and collaboration software to more than 7 million students and half a million teachers through a deal with the AICTE.

The service, which Microsoft is providing for free as part of its education initiative, includes email, Office Web applications, instant messaging and storage.

For users, cloud computing is inexpensive and simple, because it removes the need to spend time and money on installing software and managing servers.

Large government departments are prime targets for vendors such as Microsoft and Google.

Last June, Microsoft unveiled a revamped online version of its hugely profitable Office software suite.

(Reporting by Georgina Prodhan, editing by Jane Baird)