Military Signs Most Comprehensive Microsoft Contract Yet

In a bid to trim information technology costs, the Department of Defense last month signed a three-year, $617 million enterprise license agreement that will give the military its lowest prices ever for Microsoft software and services.

The blanket purchase agreement, awarded in December to Microsoft partner and InformationWeek 500 awardee Insight Enterprises, Inc., gives the military its lowest-ever prices and "more favorable" contracting terms for the military.

The deal is the most comprehensive licensing agreement Microsoft has ever struck with the Department of Defense, which is Microsoft’s single largest customer, and covers almost 75% of all DoD personnel.

[ A Microsoft-government deal last summer was one of the biggest cloud contracts ever. Read Vets. Dept. Signs $36 Million HP-Microsoft Cloud Deal. ]

The new contract was awarded by the Army contracting command and also includes the Army, Air Force and Defense Information Systems Agency. The joint enterprise license differs from the historically fragmented approach of the military: In the past, military services and even groups within the services have done their own deals with Microsoft.

For example, as recently as last July, the Navy announced a multi-year, $700 million enterprise licensing agreement with Microsoft in a deal that consolidated multiple older Navy licensing agreements with Microsoft. And previously, the Army had done business with Microsoft through another contractor, SoftArt Government Services.

The new approach follows through on an effort by DoD CIO Teri Takai and other top military officials in the recent past to look for ways to spend money more efficiently and to leverage the joint purchasing power of the military by bringing multiple branches of the armed services into cross-DOD contracts.

In fact, the military stands to save hundreds of millions of dollars from the deal. According to the Armed Forces Press Service, the official DOD news agency, the Air Force estimates $50 million in annual savings, the Army $70 million in annual savings, and the Defense Information Systems Agency (DISA) 10% as compared to its existing Microsoft contracts.

The new enterprise license agreement includes a broad array products, and gives the Air Force, Army and DISA immediate access to the latest Microsoft software, such as Windows 8, Microsoft Office 2013 and SharePoint 2013. The Army and Air Force have been working with Microsoft to create standard Windows 8 configurations, and could begin adopting the new operating system soon.

The military is a long-time big user of Microsoft products and services. DOD is always among the first to test new versions of Windows and Office and has been subject to numerous Microsoft case studies, and Microsoft has a team of employees dedicated to its DOD customer base.

Federal agencies must increase server utilization and energy efficiency as they squeeze more computer processing into fewer data centers. The new Data Center Optimization issue of InformationWeek Government explores how the Army, Homeland Security, Veterans Affairs and others are doing that. (Free registration required.)