License Deals: Buyer Beware

 
 
By eweek  |  Posted 2002-05-06 Print this article Print
 
 
 
 
 
 
 

As IT managers prepare to decide whether to sign up for Software Assurance, they might want to consider a tawdry little story now playing out in California.

Remember software assurance, Microsofts controversial enterprise license agreement that purports to offer corporate customers big savings if theyll just commit in advance to buying a certain volume of Microsoft products and paying an annual fee? The deadline for enterprises to sign up for the plan is July 31. As IT managers prepare to decide whether to sign up for Software Assurance, however, they might want to consider a tawdry little story now playing out in California. The 7-year-old office of the CIO—otherwise known as the state Department of Information Technology—and its director, Elias Cortez, have come under withering criticism for a $95 million software ELA they negotiated, and the state government signed, a year ago to buy enough Oracle8i database licenses for 270,000 users. According to a recent report by the state auditor, the Oracle ELA may turn out to be the worst deal since the Red Sox sold Babe Ruth. According to the report, rather than saving money, the state may end up overpaying by as much as $41 million.
Here are a few of the things the state did wrong, according to the report:
  • Failed to determine whether various state departments wanted or needed Oracle8i. The audit showed that many departments and thousands of employees had no need for 8i;
  • Accepted vendor financial numbers at face value. Cortezs team and other state officials never validated claims by Oracle and its reseller that the state would save millions of dollars on the deal; and
  • Accepted a term length that was far too long. The ELA called for a six-year deal with a four-year optional extension. Vendors love ELAs because they lock enterprise customers into long-term commitments. Its up to IT managers to do their homework before signing on the dotted line. Do ELAs make sense? Let me know at jeff_moad@ziffdavis.com.
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