According to the full article "Under the deal, Google will provide e-mail, calendar, online chatting and other services to 30,000 city employees."
It mentions nothing about office apps, so I presume they will still be running the almost ubiquitous MS office.
Also their previous calender/email client was groupwise (a horrible evil nasty piece of software that anyone should want to replace) and only turned down a 'bid' from MS to use theirs (presumably outlook, which is wierd if they are already using office... maybe they aren't, but it would be highly unusual).
The most interesting thing about this article is the issues they raise surrounding security on a cloud based system, that these concerns were raised (and by all accounts quite loudly) but that it went through anyway shows that either 1) the people making the deal didn't understand the issues, or 2) google were able to satisfy them that these issues were able to be dealt with... if this second alternative is the case, then I'd like to hear more on how they achieved it.