$20m window of opportunity in new deal

By RICHARD WOOD

Government departments and agencies plan to bring more than $20 million of annual business under one software licensing agreement with Microsoft.

The Government purchasing group, led by the IT departments of Internal Affairs and Defence, has 144 organisations representing 85,000 "seats", or users.

This could top 100,000 seats if other organisations join.

A Government source speculated that Microsoft would need to offer about $250 a seat on the desktop side for such a large buying group.

Desktop software likely to be available includes Office, Windows XP, Outlook and the client access licences needed to connect to servers.

Microsoft's New Zealand manager, Ross Peat, said it would be the company's largest commercial deal in New Zealand, but he would not discuss pricing.

He said New Zealand companies and the Government had always received good pricing from Microsoft.

"We've done very well in terms of securing great arrangements for our New Zealand customers."

Purchasing group representative Warwick Sullivan would not confirm the financial targets, but said the group certainly would not be paying as much as $500 a seat - a figure attributed to a major local corporate deal.

The arrangement is being developed from a deal three years ago with a smaller group of Government agencies.

It does not require a commitment from the Government on the number of users. Participants can also choose to go with other agreements with Microsoft if they prefer.

Sullivan said the group had a target of 100,000 seats, which would move it into a higher quantity price bracket with Microsoft.

But Peat said there was no price break for the group at 100,000.

"We tend to negotiate this scale of arrangement, particularly with this market reach and when you are talking about Government relationships."

He said the deal was not unusual around the world.

"All we do is create a framework for the Government, then individual departments and agencies make their own decision under that umbrella."

Sullivan described the deal as "syndicated procurement".

Any agency owned 51 per cent or more by the Government could join before or after the deal was done, and could use only as much as required. He said the deal had to be structured that way because of the independence of participants.

"Under the Public Finance Act, we are all independent entities with requirements to satisfy our ministers and boards of trustees if we have them."

The 51 per cent rule opens up the possibility that the largest site in the country, the 14,700-strong Air New Zealand, may join the group.

Sullivan said the group would have indicative pricing in September, and wanted the deal completed by March.