The New Zealand Government and the Microsoft Deal

Late last month the State Services Commission dropped a bombshell; they would not be renewing their pan-government agreement with Microsoft. This agreement covered the use of Microsoft software in our state departments, and the announcement was widely covered in both the mainstream and technical press:

In typical digg fashion the headline was rather sensationalised:

While Slashdot juiced it up just a little bit:

At first glance this appears to be a victory for competition and open standards in government IT, and certainly it removes one barrier that competing software vendors were facing. However by itself this announcement does not mean that Microsoft solutions are any less favoured than before. Effectively this agreement means that Microsoft is free to negotiate with each state department individually, and you can bet that few departments are in any sort of position to switch wholesale to competing solutions.

So the problem is that many departments (and most businesses in the country) are hopelessly dependent on Microsoft’s products, so when they approach the negotiating table few of them will have much leverage. In this way Microsoft will most likely extract more out of the NZ government than it did under than pan-government deal.

On the positive side this will demonstrate to those state departments the cost of using Microsoft’s products, and opens the door to alternatives. While Microsoft were the only option before, they are now simply the most favoured one. Indeed the harder Microsoft plays them, the more motivated our government departments will be to seek alternatives.

I see this as a victory for both sides – Microsoft can negotiate better rates for its products, and state departments are free to choose the software vendor. In the short term Microsoft wins, but in the long term I think we all will.

Implications for Education

I put these musings into a different section, as it’s a different angle. I work in the education market, and the Ministry of Education is a state service, so this is going to have an impact on our company, although probably not a major one.

The Ministry of Education also negotiates a separate deal for the use of Microsoft software in schools, and it is important to note that this is a separate deal. The pan-government deal is for state services, thus it would cover the Ministry of Education’s internal IT systems but not schools themselves. This comment from the Ministry of Education clarifies the point:

The Microsoft Schools Agreement is totally separate to the pan-government Microsoft licensing agreement that was mentioned in the Computerworld article. The new Microsoft Schools Agreement is still under negotiation, but talks are proceeding well. The current agreement lasts until December 2009. The new agreement would cover the period from January 2010 to December 2012. The products covered by the new agreement are likely to remain largely the same. An announcement regarding the new agreement will be made to schools once negotiations have been concluded.

So an agreement to bulk-license Microsoft software in schools is still likely. However if the talks break down it will be interesting to see what the impact on other vendors is, as Novell also have a bulk license deal with the Ministry. I look forward to the announcement.

Further reading: http://computerworld.co.nz/news.nsf/news/561FB33C30FEB478CC2575C400737916

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