Microsoft, New York City Ink Deal for Cloud Application Licenses

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 Microsoft. 

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 computers. 

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 application deals.