The State Information Technology Agency (SITA) and Microsoft SA today signed a three-year software licensing agreement at an estimated value of R468 million. The deal is a world first for Microsoft and the first of several mega-deals SITA plans to conclude.
[VIDEO]The deal covers the use of Microsoft software across 100 000 seats, with Windows 2000, the Office suite, Exchange 2000 and SQL Server 2000 included. It also encompasses services and support to SITA.
[VIDEO]SITA CEO Colin van Schalkwyk says the R468 million payment will be incremental over the period as current licences come up for renewal. "Government is not locked into the deal," he says. "This is based on individual sales, and if sales don't take place there is no payment."
[VIDEO]Van Schalkwyk describes the R300 million it is estimated government will save on Microsoft products over the three years as mind-boggling, and says similar deals will be pursued with the likes of Novell, Corel and IBM Lotus. "I would guesstimate that we spend R200 million with Lotus in the defence force alone," he says.
[VIDEO]Microsoft was at pains to make clear that its channel had not been excluded from the deal, despite the direct negotiations. "Each individual department in government will contract with a large account reseller, and a margin will be passed along to that reseller per deal," says Microsoft SA MD Mark Hill.
Microsoft is to act as a primary contractor to SITA, and will make the payments to partners. According to Hill, the savings to government will not be passed on to the channel by way of reduced margins.
[VIDEO] "Our partners will in fact be looking at higher margins than they otherwise would have in such deals," he says. "Microsoft will bear the brunt of savings."
One of those partners, Business Connection, says there would still be money to be made even if Microsoft started giving software away for free. "Government is now licensed, but they have to use the software," says CEO Isaac Mophatlane. "There are opportunities for more revenues in other areas."
[VIDEO]Mophatlane also believes the deal, and SITA's involvement, will make for a more level playing field as far as government business is concerned. "Previously a few suppliers dominated in government because of personal relationships with individuals inside departments," he says. "Now it will be up to SITA and the departments to decide, with a selection process we can see."
Microsoft expects similar deals in future, both with large companies in SA and with other governments across the world.
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