High stakes in the battle for Britain
http://www.guardian.co.uk/online/story/0,3605,1133032,00.html
Michael Cross reports on Microsoft's campaign to woo the public sector
Michael Cross
Thursday January 29, 2004
The Guardian
Microsoft chairman Bill Gates found time in a busy diary this week to oil
the wheels in the relationship with his most important non-US customer - the
British public sector. While in London for a high-profile appearance with
Chancellor Gordon Brown, Gates also met two men responsible for making
software decisions that could be worth billions to his company: Sir Peter
Gershon, head of the Office of Government Commerce and Richard Granger,
director general of NHS IT.
Government is the biggest customer in most countries where Microsoft does
business. The UK, however, has a special role. First, it spends a lot on
government IT: twice as much as Germany, Europe's next biggest spender,
according to research firm Gartner. Second, the UK is a de facto ally in
Microsoft's campaign against open source systems.
Unlike countries that have adopted an ideological preference for open
source, UK government decisions are supposed to be based on value for money.
Gershon, head of the Treasury's Office of Government Commerce, says this
policy puts pressure on Microsoft - and other suppliers such as Oracle - to
cut prices.
Not good enough, say open source enthusiasts, who claim that Microsoft has
deep enough pockets to ensure that key decisions go its way. "Every time we
have a client where we deploy a Linux desktop, Microsoft comes in with all
guns blazing and makes them an offer they can't refuse," says Eddie
Bleasdale, of consultancy Netproject, which promotes open source
architecture.
Recent procurements have called attention to Microsoft's role in two public
sector markets. The first is the £5bn round of contracts to computerise the
NHS in England. Microsoft pulled out all the stops to win the business, even
sending executives to shadow Granger on business trips to the US. However,
the deal didn't go all Microsoft's way. While three out of five NHS regions
picked contractors supplying systems from iSoft, Microsoft's main health
partner in the UK, the other two picked a US-developed system called IDX,
which runs on Hewlett-Packard's Nonstop fault-tolerant architecture.
How much of the NHS's £5bn goes into Bill Gates' pocket is highly uncertain.
Granger chose the day Gates came to town to announce a deal with Oracle,
Microsoft's arch rival. The agreement allows the NHS to standardise its
patient record databases on Oracle technology. The pricing is secret, but
claimed to represent a saving of "up to £100m". It specifically mentions
iSoft and IDX products migrating to Oracle's infrastructure.
The NHS said the deal is "the first of a series" being negotiated with
suppliers. Granger will use the Oracle agreement - and small scale pilots of
Sun's open-source based systems - to put pressure on Microsoft to come up
with some hefty discounts.
Local government is the second sector in the spotlight. One area in which
the UK's 470-odd local authorities have almost complete autonomy is in their
choice of IT. With most councils upgrading and joining up systems in the
quest for e-government, this market will be worth £2.4bn this year.
Over the past few months, the London borough of Newham has achieved an
internationally high profile by testing an open source architecture
developed by Netproject. It engaged consultants Cap Gemini Ernst & Young
(paid for by Microsoft) to evaluate the system. In December, it decided to
stick with Microsoft after being offered new terms. Richard Steel, the
council's head of ICT, said: "While the growing open source software
movement continues to move towards developing a credible alternative upon
which to base strategic ICT development, council officers consider that to
attempt a major migration at this time would pose an unacceptable level of
risk to services."
Steel said last week that he hopes to get a new deal with Microsoft "wrapped
up by the end of March". He said that he is talking with the OGC about
making the terms available to other councils.
Bleasdale cries foul. "I think we were just being used as a Patsy, to beat
Microsoft over the head." He claims that although the result is good for the
taxpayer in the short term, authorities accepting the terms will find
themselves locked in to Microsoft technology.
Microsoft argues that while open source is "free" in the short term, over
the lifetime of a system it will cost more in integration and training.
"Open source is viewed as free, but we have this vacuum of understanding of
the total value of ownership," says Maggie Wilderotter, Microsoft's senior
vice president, business strategy.
Microsoft is busy doing deals with other parts of the public sector. In
December, it signed an agreement with the British Educational Communications
and Technology Agency (Becta) to cut at least 20% from the cost of software
for schools. Charles Clarke, the education secretary, said the deal will
"help schools to get more out of ICT".
In central government, the OGC is putting pressure on Microsoft to sign new
discounts when a two-year-old memorandum expires this year. Open source is
one of the levers. In December, Gershon signed an agreement making Sun
Microsystem's desktop technology available at cut prices. Last week, he met
public agencies interested in piloting the Sun technology.
Both Gershon and Granger say they want to avoid dependence on one supplier.
But Bleasdale says that this is what is happening. "The UK is getting locked
in, and doing it willingly."

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