Government strikes £70m software savings deals with Microsoft and SAP

The government has renegotiated deals with Microsoft and SAP which will deliver combined savings of £70m, largely from discounts which also give users across government greater licence re-use and transferability. Potential savings across the public sector, including maintenance fees, could be £150m by 2015. The £70m figure comprises an estimated £65m in savings from Microsoft, which includes an agreement providing better commercial terms and a revised discount schedule for the public sector, and £3m from SAP discounts. The Microsoft negotiation includes an agreement that the government will avoid having to pay the price increase that will affect many other Microsoft users from next month. The SAP savings could reach £5m depending on the volume of licences purchased: there are about 125,000 users of SAP software in central government. The deal also includes a 22% improvement in year-on-year software maintenance charges. The government said both deals will also benefit councils, health trusts, police authorities and other bodies that can access the deal through the government procurement service. Such public sector organisations typically account for around two-thirds of total public sector spend with Microsoft, which the government says will deliver further savings of tens of millions of pounds. Cabinet Office minster Francis Maude said: "The old days of signing huge, inflexible IT contracts are gone forever. We have skilled negotiators within government and we are building up this expertise, taking a strategic view and acting as the taxpayer's champion. These new deals will provide better IT at cheaper prices for police, NHS and council workers across the country. "This is better for business, too – we now work more intelligently with our big suppliers and there's more transparency over future buying plans. Microsoft and SAP are showing leadership by grasping the opportunity to work more intelligently with public sector. "This new approach to doing business goes right to the heart of the efficiency agenda. We are delivering unprecedented savings – figures for last year are currently being audited and are expected to show that over £5bn was saved through more efficient government." Dr Nicola Hodson, General Manager Public Sector, Microsoft, said: "We are delighted to have reached this agreement with the Cabinet Office, which fully supports the government's goals of reducing public sector expenditure, while at the same time transforming public services through the adoption of new technologies. "We look forward to continuing to work with the Cabinet Office and public sector organisations and our 30,000 partners in the UK – the vast majority of which are small businesses - to deliver improved outcomes." David Mills, head of public sector UK and Ireland at SAP, said: "SAP is delighted to be continuing our relationship with the UK public sector and this agreement highlights a more mature way of us working together. The agreement allows for the sharing of SAP resources across the whole of the public sector, therefore creating more flexibility and reducing overall costs." Jos Creese, the chief information officer at Hampshire county council and chair of the Local Public Services CIO Council, said: "SAP is widely used across larger local authorities, many of whom increasingly need to be able to work together. "Having access to a single and flexible framework that makes this possible and reduces costs is, therefore, very welcome. Sixteen large local authorities and regional governments have so far supported this ambition and the activity which has led to this agreement. I hope more contracts can be shared more readily in this way across the different tiers of government." Negotiations with the two suppliers, which the government said had been tough, took nine months with Microsoft and six months with SAP. They follow similar agreements with Oracle and Capgemini. What has also emerged is the extent to which governments around the world are now sharing information on their IT costs to bear down on suppliers' pricing. The government indicated that it had had discussions on IT usage and costs with a number of other administrations, including the US, Canada, the Baltic states and the Netherlands. On Thursday the government will reiterate its "one government as customer" message to suppliers in a meeting in which it will solicit feedback on its approach to ICT procurement. Bill Crothers, executive director for commercial relationships at the Cabinet Office, said many vendors had accepted the government's position, but others had yet to fully take on board its message. "This approach is not going to go away. This is now how we do business," he said. This article is published by Guardian Professional. For weekly updates on news, debate and best practice on public sector IT, join the Guardian Government Computing netwo