Adam Gifford: Software secrecy equals bad government

COMMENT

The Government has signed a secret deal to put Microsoft software into every state and integrated school.

The fact there is a deal is not secret - but the price is. Education Minister Trevor Mallard tried to fudge that point, saying it was "part of a wider Government programme of bulk purchasing and licences for schools including anti-virus and Apple software, worth a total of $27.45 million over three years".

Despite being asked by the Business Herald about the deal since the beginning of the year, the minister's office didn't want the news circulating widely.

Mallard signed the deal last Tuesday, then left the country and did not respond to requests for an interview.

Challenged about the timing of the announcement, Mallard's press secretary, Astrid Smeele, told the Herald : "The IT world is not the target audience of this announcement at all. Schools are."

So much for the Government's procurement policy, which calls for transparency of information on contracts "with the aim of improving market information for all potential suppliers, domestic and international".

Message to Mr Mallard and Ms Smeele: You don't make secret deals with Microsoft. It's not good for Microsoft and it's not good for the Government.

Microsoft has just declared a profit for the March quarter of US$1.32 billion ($2.1 billion) or 12USc a share on revenue of US$9.18 billion, which was up 17.1 per cent on the same quarter last year.

Profit would have been 34USc a share except for the US$1.6 billion it paid Sun Microsystems to settle long-standing intellectual property disputes and the US$613 million fine it paid the European Commission for abusing its virtual monopoly in desktop operating systems.

Microsoft is still engaged in seven anti-monopoly cases after this month settling one with the state of Minnesota, taken on behalf of customers overcharged for software.

A sniff of software dumping in far off New Zealand could lead to subpoenas for people to explain their actions to any one of these trials.

It's not far-fetched - some Microsoft NZ executives were unable to travel to the United States during the Microsoft-Netscape trial because of incorrect rumours that Microsoft here gave away Internet Explorer free in corporate Windows deals to keep out Netscape.

Microsoft is more than able to explain its pricing, high or low. If it can't, it is the Government which should be asking the hard questions.

Cheap software deals for schools suit Microsoft's public relations objectives, while also preparing another generation of consumers to consider Microsoft the only option.

Even the settlements various US states have made in class action lawsuits rest on the assumption charity to schools is virtuous. Typically, overcharged consumers are told they can get discounts on future software or hardware purchases.

The vast majority of customers don't fill out vouchers, and Microsoft splits the unclaimed amount with schools, which receive copies of the company's software.

Such deals are cheaper for Microsoft than cash settlements.

As for not wanting to tell the IT world the story, this is the biggest software deal to be done in this country, covering 100,000 seats and products, including Microsoft Office 2003, Office for Mac, Works, all Windows operating system upgrades, BackOffice client access licences, FrontPage 2003, Publisher 2003, Visual Studio .Net Professional, the Encarta Reference Library and Microsoft Class Server student licences. It runs for three years.

The IT industry is intensely interested in the way the Government buys IT, and is in fact highly vocal and critical about it.

Mallard, in his role as State Services Minister, drove the GoProcure debacle, which tried to impose a shared procurement model on the entire state sector. How he handles procurement in his largest portfolio is of concern.

The ministry justifies its bulk purchase on the basis that even before the first deal two years ago more than 93 per cent of schools were already using Microsoft software.

The server-side picture is not so clear cut, with some schools running other systems like Novell, Apple and Linux, so schools won't get Microsoft server software for free.

However, an extremely competitive price has been struck - schools will pay just $99 a year for Windows Server 2003, compared with the $3000 or so a business would pay.

Independent schools won't get the core software free, but they can buy it at the same unit prices negotiated by the ministry.

Datacom will distribute the software and licences, replacing MultiServe in that role, and will continue to run the ministry's information and communication technology helpdesk.

There is no requirement for the schools to use the bulk-purchased software, with the exception of the eTrust anti-virus software supplied by Computer Associates.

But to preserve the competitive environment, the ministry should also be negotiating bulk purchase agreements with vendors like Adobe and Macromedia, whose software is also used in schools and competes with Microsoft's offerings.

That would seem to be the logical outcome of this shared procurement strategy.

As former White House legal counsel John Dean says, secrecy smells of bad government.