Mayor Michael Bloomberg and Microsoft CEO Steve Ballmer announce new cost-cutting site license for all New York City employees based on per use rather than per seat.
Mayor Michael Bloomberg and Microsoft CEO Steve
Ballmer announced today that the two organizations have entered into a
wide ranging IT partnership that will let approximately 100, 000 City
employees use cloud-based Microsoft applications.
The agreement, which will be tailored to fit
the varying needs of different types of city workers, is expected to
save New York City $50 Million over the next five years. Previously
city agencies entered into forty separate license agreements with
Bloomberg, in a prepared statement, said that
the agreement will give city employees the same technological resources
that are available to employees in the private sector. The agreement
also gives Microsoft a significant win over Google, which recently
entered into an agreement with Los Angeles
to provide cloud based applications to about 30,000 employees.
Google's agreement with LA costs about 50
dollars per employee per year for cloud applications and services.
Microsoft's agreement differs because it's based on actual use rather
than on the number of employees who have access to the software.
The City's announcement also said that the use
of cloud applications and services would support collaboration and
document sharing between users. Microsoft also agreed to three levels
of licenses, occasional users, basic users and power users, with
varying license costs for each tier. The Microsoft applications will
include real-time updates, so that the IT department will not have to
be involved in the regular round of updates for each of its
The new agreement with Microsoft is part of the
city's Citywide IT Infrastructure Services program (known as CITISERVE
to NYC computing cognoscenti) which is also engaged in consolidating
the city's existing 50 data centers into a single centrally managed
facility. The Microsoft cloud services will also support extension of
the data center into the cloud.
The agreement is a change from the way
Microsoft has done business in the past in which the company has
insisted on bundling a group of applications (Microsoft Office, for
example). In the NYC agreement applications would be unbundled into the
three usage type categories. Most city workers, for example will only
be using e-mail and Microsoft Word. As a result the city won't have to
pay for unnecessary software.
The move to cloud based applications is also
expected to save the city money by reducing the need for servers in the
new data center. Most Microsoft software will be cloud-based, and the
applications will be located on Microsoft's servers rather than the
city's hardware. Microsoft will also be required to ensure the security
of the data that the city stores in the cloud. Deputy Mayor Stephen
Goldsmith told the New York Times that Microsoft will be held to the
city's existing security standards.
Goldsmith also noted that the competitive
environment helped the city negotiate the favorable deal. Microsoft is
facing significant competition from Google, which has been aggressively
selling its Google Apps to public and private sector
organizations, and IBM, which has been marketing applications centered
on Lotus Notes. In this case, part of Microsoft's success came from
offering a broader range of applications than are available from
Google. City users, for example, will have access to new features and
applications such as conferencing using Microsoft Communicator.
The broad availability of Microsoft's cloud
based software will bring technology tools to the entire city
workforce, Goldsmith said. He noted that currently many city employees
don't even have e-mail. At least one New York City resident expressed
surprise to eWEEK that city employees don't already have e-mail.
The big question that's now in play is whether
the New York City agreement with Microsoft will set a precedent. While
the sheer size of the NYC work force would clearly be an incentive for
Microsoft to cut a deal, Microsoft has not gone on record as saying
that similar arrangements might be made with smaller cities.
On the other hand, the company hasn't ruled out
such a deal, perhaps with other large cities, or even with groups of
cities in a single state. Of course, there's always the next
step. The U.S. Government
is currently in the process of awarding a Web services contract. Might
it also decide to start looking for a contract for cloud applications
such as Microsoft offered to New York? While the federal government's security requirements
will preclude cloud based applications in some areas, it certainly wouldn't do so in every area.
One Microsoft executive said that New York City
was setting the pace in terms of the innovation of using cloud
computing and cloud based applications. This comment would make it seem
likely that Microsoft envisions other, similar, agreements with other
government entities in the future.
Such a move would make sense given the intense
competition between Microsoft and Google to win large-scale cloud