Last month, China banned Windows 8 in government offices because of 'security reasons' and now it's Microsoft Office 365's turn. Even though Microsoft, in partnership with 21Vianet, a carrier-neutral internet data center services provider in China, made Office 365 available in the whole country, the purchasing center of central government agencies has released a notice which states that all computer related products which are purchased by the government are not allowed to install Microsoft Office 365 or Microsoft Windows 8.
According to reports, China's finance ministry has denied the accuracy of such notice, but it's obvious, they want to give an edge to local software companies like Kingsoft. Keep in mind, In 2011, Kingsoft Office was granted funding from the Chinese government and received further orders from central ministries in China.
China believes that American software potentially contains spyware and because of NSA being involved in everything, it's not secure enough to be used on government computer related products. Germany also canceled their contract with Verizon over the same beliefs. They stated, "There are indications that Verizon is legally required to provide certain things to the NSA, and that's one of the reasons the cooperation with Verizon won't continue."
This is basically hurting the U.S. based companies which are trying to provide services to their overseas customers. Microsoft, Verizon, and a few other companies are taking on the U.S. government because of this. At the GigaOM Structure Conference, Microsoft's general counsel, Brad Smith stated that, "The longer we wait or the less we do the worse the problem becomes. We are seeing other governments consider new procurement rules – procurement rules that could effectively freeze out U.S. based companies."