Defence Force leads change in IT strategy

The Defence Force is the fifth largest IT user in New Zealand. Photo / Martin Sykes

One of the country's largest technology spenders, the NZ Defence Force, is leading the charge as government departments review how they buy software from one of their main suppliers, global giant Microsoft.

The NZDF has begun the process of signing up a local Microsoft reseller to supply it with approximately $3 million of Microsoft software each year.

It also wants a reseller to handle the purchase of a further $7 million of non-Microsoft software it buys annually, as well as $2 million of computing hardware "appliances".

The NZDF's move to sign up a Microsoft reseller - a company that on-sells a software-makers products to businesses - follows a change in the way more than 240 government agencies do business with Microsoft.

Since 2000 the State Services Commission has negotiated three-year, pan-departmental deals with Microsoft, effectively setting an all-of-government discounted price for the company's products.

The 2006-2009 agreement expires on October 1 and in May, the commission said a six-month negotiation process aimed at setting a deal for the following three years had ended without a "formal agreement" being reached.

Microsoft had, however, agreed to provide "price certainty for agencies as a basis for their individual negotiations".

Microsoft New Zealand country manager Kevin Ackhurst said at the time the result of negotiations still meant government agencies had access to discounted software.

"We have always, and continue to, discount our software for government agencies," he said.

"The discount we provide to the Government of New Zealand is quite possibly the best discount which is provided in the world."

However, he declined to disclose pricing details.

According to Company Office records, Microsoft New Zealand made an after-tax profit of $6.4 million in the 12 months to June 30 last year, from operating revenue of $69.4 million.

In a proposal document circulated this week, NZDF said it was seeking the services of a "large account reseller" to manage its Microsoft purchases.

According to Microsoft's website the company has five such large account resellers in New Zealand: Axon, Datacom, Fujitsu, Gen-i and Insight.

Other government agencies are likely to follow the NZDF's lead in appointing resellers in a bid to get the best deal on Microsoft software following the demise of the pan-government deal.

When its talks with Microsoft on renegotiating the deal ended in May, the commission said it would be "supporting agencies to explore how they can maximise their ICT investment and achieve greater value for money".

This support included SSC staff giving a series of presentations to government agency IT bosses last month.

They used the meetings to explain the outcome of the negotiations and suggested ways they could save money through their subsequent negotiations with Microsoft.

Those tips included buying new Microsoft software before the 2006-2009 agreement ended, delaying the purchase of new desktop software, and finding cheaper alternatives to two Microsoft products: diagram-producing software Visio and Project, a project management tool.

The SSC said in its presentation that Visio and Project were "products that attract premium pricing but are typically underutilised". It said cheaper, effective alternative software was available.

The NZDF is a partnership between the Navy, Army and Air Force. It has 9300 PCs running Microsoft software, 550 Microsoft Windows 2003 servers, 850 users of Project and 650 Visio users.

CIO magazine lists it as the country's fifth largest user of IT, behind Auckland University, Fonterra, ANZ National Bank and Otago University.

Supporters of open-source software have suggested the demise of the pan-government Microsoft deal may help open the way for government agencies to consider replacing Microsoft software with cheaper open-source alternatives.

However, there is nothing in the NZDF's proposal documents to suggest it is considering such a move.

* IT arsenal

The NZ Defence Force's technology network is called the Defence Information Environment.

NZDF rates among the country's biggest spenders on IT, running 9300 PCs and 550 Microsoft Windows servers.

It spends about $3 million a year on Microsoft software, $7 million on other "off-the-shelf" software and an undisclosed sum on "military" software.