Buy Lines: Savings can be found in enterprise licensing

Bob Dickson

The Department of Homeland Security recently awarded a six-year contract worth more than $100 million to Dell Inc. for a Microsoft software enterprise license. The deal will support approximately 144,000 personnel, and promises to produce significant savings for the agency.

With many agency budgets stretched to the limit, it's time to focus on the real savings that can be achieved through enterprisewide licensing solutions for buying commercial software. The government has not done a great job buying such software at discounted prices. However, the Office of Management and Budget and the General Services Administration are working together to develop guidance that will help significantly. That guidance will be announced later this summer, and industry will have an opportunity to weigh in.

Federal agencies also can take a lead from the Defense Department, whose Enterprise Software Initiative (ESI) has become a center of excellence in this area. Leveraging its buying power, the ESI team from 1998 through 2002 entered into 24 licensing agreements, tracked 9,000 software orders and documented more than $1 billion in cost avoidance.

The ESI team has negotiated prices as much as 84 percent below GSA Federal Supply Schedule prices for the same software products, with discounts usually between 15 percent and 70 percent.

Recently, OMB announced the SmartBuy interagency initiative, led by GSA's Neal Fox, assistant commissioner in the Office of Automation. SmartBuy -- Software Managed and Acquired on the Right Terms -- is intended to replace agency purchases or renewals of software licensing agreements by the end of fiscal 2003.

OMB and GSA are intent on working with agencies and the SmartBuy team to insure success, and are committed to promoting competition and opportunities for the small-business community. SmartBuy is planned as a participatory initiative that will extract detailed agency information on existing agreements, including unique terms and conditions. Under the program, agencies also will develop migration strategies and integrate common software licenses.

SmartBuy will provide common vehicles to maximize commercial software competition across the federal government as an enterprise, and it is expected that agencies will partner with one another as well as with industry. Nonproprietary solutions acquired through SmartBuy will contribute to information-sharing initiatives of e-government as well.

To start the initiative, GSA's Federal Supply Schedules will be the baseline for the agreements. Vendors or resellers must have a schedule contract to participate in SmartBuy. The initial rollout will not include all types of software.

Also, some agency enterprise agreements will be converted to SmartBuy contracts in the coming months. Migration is expected from agencies as existing agreements expire. GSA is planning to keep agencies and vendors informed of what is happening through FedBizOpps and e-Buy.

Cost savings are clearly a huge benefit and a driving reason to enter into enterprise licensing agreements. However, there are many other compelling reasons, not the least of which is helping to standardize configurations and promote interoperability for end users.

The enterprise license process itself is a tool for providing agencies flexibility, and is suited for missions with multiple operating environments. The approach better uses personnel by developing and following specialized acquisition expertise to enter into strategic solutions.

These enterprise software licensing initiatives are a positive development that deserve continuing support. For many of those involved, the challenge is to move from concept to program execution and ultimately to successful implementation. The key to this is building the licensing initiative into a robust software asset management and redistribution environment, complete with metrics, as forward-thinking organizations in the public and private sectors are doing. You get what you measure.

Bob Dickson is vice president of Acquisition Solutions Inc., Chantilly, Va. His e-mail address is

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