Cabinet Office renegotiates software supply contracts

The government says its tough talking is set to save millions of pounds of taxpayers' money on software deals. The Cabinet Office has unveiled £70m worth of savings from renegotiating licensing and maintenance contracts with SAP and Microsoft.

New agreements will run up to 2015 with the two software vendors, which see some £65m shaved off the government's Microsoft software licence bill, with up to an additional £5m worth of SAP savings.
Negotiations with Microsoft lasted for nine months, whilst SAP's lasted six months, the government revealed. It is hoped that across the whole of the public sector, not just central government, savings "north of £150m" could be achieved.

The new deals are the latest in a series of supplier renegotiations being led by Cabinet Office minister Francis Maude.

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."

Both deals will also benefit councils, health trusts, police authorities and other bodies who can access the deal through Government Procurement Service. These organisations typically account for two-thirds of total public sector spend with Microsoft, delivering further tens of millions of pounds in savings. SAP is used by a number of police forces and NHS trusts in England as well as over 50 local government organisations, all of which will now be able to benefit from the improved terms on software licences.

Jos Creese, Hampshire county council chief information officer 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." He hoped more contracts could be shared across different tiers of government.

Earlier this year, the government announced similar deals with IT companies, Oracle and Capgemini. According to Maude contract renegotiations in the first 10 months of this government saved £800m and savings of a further £140m will be delivered for the 2011/12 financial year.

Commenting on the deal, 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 and help build a better Britain."

David Mills, head of public sector UK and Ireland, 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."