SSC set to play hard-ball in Microsoft negotiations

Value for money sought as fiscal outlook worsens

The government appears to be preparing to drive a hard bargain in its triennial negotiation with Microsoft over software licensing terms for New Zealand’s public-sector agencies.

Much has changed in the economic environment, government administration and technology since the previous agreement was negotiated in 2005-6, says the State Services Commission (SSC).

“The most significant factor is the global economic crisis and its impact on the New Zealand government’s fiscal outlook,” says a commission spokesperson.

“Other factors are the emphasis on value for money in the State Services Commission’s Development Goals for the State Services and a range of technology trends, such as desktop virtualisation and cloud computing.”

Last week, the commission announced that it is preparing to lead the next round of discussions, towards a contract to be known as the G2009 Framework Agreement. The SSC has established a steering committee comprised of senior executives from a range of public sector agencies to provide it with “high-level advice”.

Virtualisation is well known for complicating the matter of licensing, since it is difficult to keep track of the number of virtual servers that may be using instances of the same software.

The SSC says its research indicates that “Microsoft software will continue to be important for public sector agencies over the next three years”, but says it does not have any figures on whether the proportion of public-sector software provided by Microsoft is growing or diminishing.

The current G2006 Framework Agreement expires in June 2009.

Technology lawyer Guy Burgess, of Auckland firm Clendons, says several things have changed in the last three years that could change the tenor of the negotiations. He says Open Office is now a very viable alternative to Microsoft Office, especially since Microsoft opened its file formats this year.

“Absolutely, that give the government better bargaining power,” he says.

He says virtualisation is bound to be another area of focus as per processor licensing becomes less appropriate in a virtual world and when even basic PC will run more than one processor.

Technology industry veteran and XSol chief John Blackham also references the changed economic situation as a factor and points to a “flurry” of public sector departures from Microsoft into more open platforms since the last agreement was concluded.

On the other hand, he says, Microsoft’s products have become stronger over the past few years, with a more coordinated strategy evident among its components and platforms and a slightly more open attitude. He points particularly to initiatives around Sharepoint.

Attention is switching to the component approach to ICT, where Microsoft leads, Blackham says; so the company may be able to push back strongly against any government attempt to drive a hard bargain.

The triennial agreement applies to all public sector agencies, including central and local government, with the exception of schools and tertiary education institutes. These have separate agreements with Microsoft.

Being a party to the agreement does not commit an agency to buying any Microsoft licences, the SSC emphasises.

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