Fed govt spending more on Microsoft licensing

The amount of money the federal government spends on Microsoft desktop licences annually has jumped by a third, marking the first significant movement in a number of years.

The Department of Finance recently inked a three-year extension to its volume sourcing agreement with nominated Microsoft licence reseller Data#3. The central agency procures core desktop licences for products like Windows and the Office suite on behalf of Commonwealth agencies, and then distributes them per seat.

The new three-year deal, which takes Finance out to June 2019, is worth $200 million, or roughly $67 million per year. It represents a large jump in federal agencies’ overall licence spend when compared to the pattern set in previous years.

Analysis of contracts posted on the Austender website shows that Finance’s annual whole-of-government Microsoft licence buy has consistently sat around the $50 million mark since 2009-10.

The new deal represents a one-third increase in the value of the annual spend.

The Department of Finance attributed the growth to "a combination of price increases in Microsoft products over the last three years and the expanded range of products covered by the extension”.

The agency’s procurement bosses have just renegotiated the Commonwealth’s pricing deal with Microsoft, known as the volume sourcing agreement, with the third iteration of the framework coming into effect on May 2016.

VSA3, as it is known, adds the Microsoft server cloud environment to the suite of products that federal agencies can buy according to centrally negotiated prices and which aren’t contingent on volume deals.

Data#3 has been the exclusive core desktop licence reseller to the federal government since 2008. It won back the contract in 2012, for three years with three options for Finance to extend the deal.

Finance has now used up one extension, and said it would “conduct a review in due course as to whether to approach the market or to exercise a further option(s) of 12 months”.

After this point, it will be forced to market test the contract with another open tender.