DECISION UNDER DELEGATED POWERS PROCUREMENT OF MICROSOFT ENTERPRISE LICENCES. Report to the Cabinet Member for Residents and Resources

Transcription

1 27/08 DECISION UNDER DELEGATED POWERS DECISION CANNOT BE TAKEN BEFORE FRIDAY 6 JUNE 2008 Title PROCUREMENT OF MICROSOFT ENTERPRISE LICENCES Report to the Cabinet Member for Residents and Resources Purpose Outcomes Background 1. To support procurement of the Microsoft Enterprise Licence agreement with a contract value of approximately 788,000 over 3 years. This would also ensure full compliance on the Council s Microsoft software licence usage as reported to March s Audit committee. 2. If approved, the report will lead to (i) a contract to procure licenses to use Microsoft desktop software (such as Office, messaging system, database etc) for 3 years (ii) full compliance with all current Microsoft licences as per the recent software asset programme carried out. This would avoid any further penalties or even legal proceedings being brought against the Council for incorrect use of its Microsoft licences. (iii) Able to control releases of new software and avoid the costs that come with these, such as Office 2007 (which would cost approx 170,000), and utilise other software not currently used by IWC. 3.1 As reported to the March Audit committee, the Isle of Wight Council have taken part in a Software Asset Management audit programme with Microsoft. The purpose of this audit was to ensure that the IOW Council were legitimately licensed to use Microsoft s software. 3.2 This audit was completed on the 21 st May 2008 and it was highlighted that there was a shortfall of licences to the tune of approximately 74,000. The terms and conditions of this programme mean that payment must be completed within 30 days to gain full compliance with Microsoft s licence agreement. 3.3 On the 13 th of May 2008 the ICT department was contacted by our Microsoft account manager and made aware of price increases that will come into effect on the 28 th June 2008 for all of their software. The price increases that Microsoft have confirmed are: With effect from 28 th June 2008 all Select agreement prices will 1

2 increase by 10% (this is the current method used by IWC to procure licences) With effect from 28 th June 2008 all Enterprise Agreement prices will increase by 20% With effect from 1 st May 2009 Enterprise Agreement prices will increase by a further 20%. 3.4 The council is heavily reliant on its Microsoft software as we use their office solution, messaging system, databases and others. 3.5 In the recent SOCITM benchmarking survey the IWC was below average in its licence costs (e.g. highest costs). The survey also demonstrated that 75% of authorities taking part are using Enterprise Agreements to aid in controlling both the cost and management of licences. By doing this it will mean IWC can take advantage of reduced software costs along with the ability to utilise new software to support its modernisation agenda. In effect it would reduce the unit cost for procurement of software in line with best practise used in other local authorities. 3.6 The proposal is that for the majority of software the IWC uses are changed to use an Enterprise agreement contract. Some software will still continue to be purchased under our existing Select agreement where it is beneficial to do so. 3.7 An investigation has also been performed into the viability of not using Microsoft software as extensively as we currently do and shifting to a cheaper alternative product portfolio e.g. Free Open Source Software (FOSS). This is not seen as a viable option due to incompatibility between these products and our corporate systems e.g. Anite SWIFT and Open Text R/KYV. Strategic Context 4.1 The Isle of Wight Council currently procures its Microsoft software via a Select agreement, the contract of which was signed under the terms of conditions of the Office Government Commerce (OGC) / Microsoft Memorandum of understanding (MOU). This MOU expires on the 28 th June The terms of the contract allow for monthly price fluctuations in the cost of licenses. 4.2 The council is heavily reliant on using its Microsoft software particularly for use of Office, messaging ( and calendar system), databases and others. 4.3 As explained the Isle of Wight Council has also undergone a review of its software licenses to ensure compliance and avoid penalties that may occur through being under licensed. As a result of this to ensure regulation, the council would need to pay 74, By placing an Enterprise Agreement with Microsoft would ensure: 2

3 4.4.1 That the authority is best placed to take advantage of technology in its Modernisation programme That the council is procuring its Microsoft software in accordance with the principles of Value of Money (VFM) Avoids costs that would be incurred during the next 3 years in keeping up with technology such as upgrading its system, office suite and other software systems. It is anticipated that these costs would be in the region of over 1 million Provides control over the procurement of essential software licenses. By centralizing desktop software budgets, software would no longer be procured from within services when they have budget to do so. This will mean that the ICT department can implement new versions of software (such as Microsoft Office) in a controlled fashion, thus avoiding the current situation where there are approximately 12 different versions of office in the council. 4.5 A contract letting strategy was taken to Procurement board on Thursday 22 nd May 2008 and the report was approved to place the contract via the OGC Catalist framework under the terms and conditions of the Microsoft and OGC Enterprise Agreement MOU. 4.6 The timetable for achieving the Enterprise Agreement is very tight and would be as follows: 27 th May 08 Advert posted onto Catalist 11 th June 08 Closing date for advert 11 th June 08 Evaluation of responses 12 th June 08 Award report considered by Director of Customer Services 13 th June 08 Delegated decision made 12 th June 08 Award report considered by Procurement Board 13 th June 08 Contract start date subject to Procurement board / delegated decision Consultation 6. As part of the production of this report and the contract letting strategy, the author of this report has consulted with the Procurement Board members and finance. 7. In addition to this the Director of Customer Services has also been consulted along with Head of Procurement, Head of Compliance, Programme Lead for Finance and ICT Managers. Finally both Councillor Abraham, as the relevant Cabinet Member, and Councillor Miller, as Chair of the Scrutiny Committee, have also been consulted and have reviewed the report. 3

4 Financial / Budget Implications 8. In order to progress the procurement within the timeframe necessary to secure ongoing benefits, the initial costs of the contract will be funded from the ICT Business Continuity Reserve, pending a review of desktop software licence budgets which will be centralised to provide ongoing funding for a corporate programme of licences. Any ongoing base budget gap identified will be managed through the Council s three year Medium Term Financial Plan. 9. If we do not sign an EA by the 20 th June the cost implications are 174,436, and these implications are likely to increase in future years by up to 20% per annum 10. In signing the EA before the 20 th June 2008 the authority is reducing the immediately payable penalty from the SAM licence programme from 74,204 down to 1,636, generating a cost avoidance efficiency saving of 72, Due to the uncertain nature of the growth or shrinkage patterns of the council s corporate ICT estate, the budget projections are is modelled without any growth or shrinkage included. It is important to note that the Enterprise Agreement contractually requires the council to provide a current count to sure up the licence count on an annual anniversary of the contract start date. The implementation of a centralised budget and monitoring process will ensure that any variances in the number of licences used is controlled and within the normal scope of budget management. Decision Urgency 12. This decision has not appeared on the Forward Plan. The reason for the decision urgency is, as previously explained, Microsoft have announced increases to its licenses with effect from the 28 th June If the contract is not signed and completed with the successful tender in time for them to pass the contract to Microsoft by the 20 th June 2008 it will be too late for them to be processed in time before the price increases come into effect. The penalty for this would be in excess of 100, The tight timescales are also essential to ensure that the council meets its contractual obligation to pay for the unlicensed software established as part of the Software audit process within 30 days. This would result in the council needing to pay a value of 74,000 by the 20 th June Legal Implications 14. Legal agreements will be drawn up through contract negotiations. 15. The project will follow procurement rules for the tender and procurement of most appropriate solution. Options 16. The following options are available: I. Remain as is this in essence means we continue paying for software on an adhoc basis. It would mean that the council would have to pay the following: 74,000 to correct unlicensed software 4

5 Upto 1.05 million over 3 years to try and keep software upto date. II. Migrate all Microsoft licences to Free Open Source Software (FOSS) this would effectively remove all Microsoft licensing. However, FOSS is nowhere near advanced in terms of functionality as the Microsoft software and is not compatible with a number of our corporate systems (such as Social care system Swift, and Electronic Document Management system). This option is not preferred. III. Purchase Enterprise Agreement prior to 20 th June this would represent the lowest risk in terms of initial financial outlay, longer term costs and compatibility with existing corporate software. It also would ensure software is procured and installed centrally and would take advantage of existing costs preferred option. Costs are as follows: 1,636 to correct unlicensed software (the other 72,000 would be covered under the Enterprise agreement) Approximately 788,000 over 3 years which would ensure the council keeps upto date with latest software. IV. Purchase Enterprise Agreement after 20 th June same outcomes as above, except it would cost an additional 20% due to Microsoft price increase. Costs are: In excess of 1,963 to correct unlicensed software. Approximately 963,000 over 3 years for enterprise agreement. As can be seen this is an increase of about 175,000 on the previous option Risk Management 17. A number of risks in delivering the preferred option are evident from this approach, as follows: Failure to meet 20 th June 2008 deadline resulting in increased licensed cost of approx 175,000 Ensure necessary consultation is carried out the earliest possible stage with key decision makers. Aim to go for delegated decision by 27 th May 08 at the latest Difficulty in utilising existing budget to fund Enterprise Agreement Ensure year 1 costs are earmarked from existing reserve budget in the first instance. Year 2 onwards to be drawn from ICT service budgets. Recommendation 18. It is recommended that delegated decision is made to support the procurement of Enterprise Agreement Option (III) - in order to take advantage of current costs model, which cease on 28 th June 5

6 2008. To ensure this happens the contract needs to be awarded prior to the 20 th June Appendices Attached Background Papers 19. None 20. None Contact Point: Richard Williams, ICT Manager x6520 DEBBIE DIXON Director of Customer Services COUNCILLOR BARRY ABRAHAM Cabinet Member for Residents and Resources Decision Signed Date 6

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