Microsoft lost $100m due to IT price inquiry

The Australian Government has confirmed Microsoft’s damning testimony at the parliamentary inquiry investigating local technology prices caused the company to lose $100 million in government business over the next four years.

Microsoft's Pip Marlow

The Federal Government yesterday announced a range of measures designed to save $4 billion to offset its decision to dump the carbon tax in favour of a floating price.

One of those measures was to implement ‘more efficient procurement of software’.

The Federal Government has spent around $142 million a year on Microsoft software licenses over the past four years. Last month the Government renegotiated the deal for another three years.

The Finance department declined to comment on the overall cost of the updated deal. It will release that information in 12 months time.

During a March IT price inquiry hearing, Microsoft Australia managing director Pip Marlow admitted the local arm of the global software giant set Australian prices based on what the market could bear.

The revelation earned Marlow and the company the wrath of the parliamentary committee for 'charging what it could get away with'. 

Marlow said at the time if customers didn’t like it, they could move to other options. 

The committee reviewed 47 Microsoft and rival products and found on average the software giant’s products were priced around 66 percent higher in Australia than the United States. 

The Finance Department today told iTnews this hearing had informed the contract negotiations. 

It said no other contracts would be affected by the inquiry.

“In this contract, the Government secured significantly greater discounts resulting in closer alignment with the benchmark pricing paid in the United States,” a spokesperson said.

“The Government has put considerable effort into improving whole-of-government procurement processes and around $100 million in savings will be found through more effective procurement of Microsoft software licences.”

The Federal Government also yesterday announced it would implement reforms to public service management structure, to the tune of 800 jobs reaping $248 million in savings. 

It would not rule out IT job cuts.

The exercise will affect senior executive service-level as well as executive-level employees. 

“Agencies will determine individually how they meet their public sector management savings.”