The contract is probably for 3 or 5 years, so the yearly cost is probably around $110 - $190 per user per year. $190 would probably be a bit on the high side, but it depends on the technical and security requirements.
We did a similar proposal for university-wide e-mail last year, the bid is for a 3-5 year contract usually. You can take a look on Google's website and they will actually give you the per-user expected $ figure. There are several articles also which compare the two services (sorry just Google for them, I am about to go to bed), but the price is basically < $120 per user, per year.
The email part of it costs maybe a $1, if that. But throw in ridiculously high privacy, data protection, and access right standards (both for redundancy reasons, archiving, and privacy protections), and $500 sounds about right.