'Tougher deals' to save £70m as government plays hard ball with Microsoft and SAP

Central government, local council and NHS join for forces to negotiate software licences

Hot on the heels of earlier deals this year with Oracle and Capgemini, the government has announced that new deals with Microsoft and SAP should save taxpayers as much as £70m by 2015.

The negotiations will save, says the Cabinet Office, £65m on Microsoft software licences alone, and £3-5m on SAP software.

The savings, explained the Cabinet Office's executive director for commercial relationships, Bill Crothers, at a press conference this morning, are due mostly to imitating the way the private sector negotiates contracts.

"Previously, each [government] department would do business with the supplier as a client in its own right," said Crothers, "but in the private sector you'd add together all the business that each subsidiary does with the supplier and you'd take that single figure."

Former CEO of Micro Focus and "government crown representative" Stephen Kelly added that the IT supply deals with Microsoft and SAP had allowed the administration to "move away from complete dependency on legacy software, improve competition, and use it for leverage in terms of aggregation."

Kelly talked of how the government is now keen to use this added flexibility to start moving its technology outlook forward.

"We're keen on open source, a level playing field, cloud computing and moving to a variable cost structure, rapid project delivery and agile methodologies," said Kelly, before adding that the new contracts allowed "enough flexibility to be able to move licences as the whole structure of the Civil Service is set to change."

Kelly revealed that many of Microsoft's agreements in negotations with the government were "driven by discussions and relationships with NHS trusts."

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'Tougher deals' to save £70m as government plays hard ball with Microsoft and SAP

Central government, local council and NHS join for forces to negotiate software licences

"The way we think about these things," said Kelly, "particularly in NHS, is that £10m pays for 300 nurses, so we can, through office savings with suppliers and through much smarter commercial negotiations, [directly] improve front-office services to citizens and patients."

Kelly cited this as the "first time we've seen significant" agreement between central government, local government and NHS "acting as one entity", citing the results of this alliance as being "best in class anywhere in the world, of what the UK has been able to negotiate with these software companies".

Jos Creese, Hampshire County Council CIO and chair of the government's local public services CIO council, added that local government in particular has been proud of its involvement in the software negotiations.

"Sometimes local government feels we are the latecomers to the party," said Creese, "or being hard done to by wider government strategy. That's certainly not been the case here. Working together, we've got better value here than we would have working separately."

Creese added that if software companies focus deals on the way individual organisations use their software, rather than on overall management with rolling, impersonal deals, as in the past, they may be left with "a chance of competing with some of the smaller organisations in the private sector, with whom they find it difficult to do business with purely because of scale."