DOD branch eyes mega software deals

The health care arm of the Defense Department is considering huge departmentwide blanket licensing deals to supply office automation e-mail and database software for the tens of thousands of workstations throughout the branch's Military Health Services System (MHSS).

Sources said the DOD Health Affairs branch last week submitted blueprints of its information technology infrastructure to Microsoft Corp. so that the company could quote a price for putting one of its office automation products on the 100 000 medical-center workstations throughout MHSS.

If the enterprise software licensing (ESL) plan is accepted it would be one of the largest-ever software licensing deals in the federal government. "No one else is at this scale that I know of " said Randy Koran chief of acquisition management for DOD Health Affairs.

ESL is an alternative to the traditional method of buying software licenses piecemeal for batches of workstations. DOD Health Affairs officials believe ESL could cost tens of millions of dollars but still less than the piecemeal approach.

Koran said ESL is key to reining in escalating IT expenses at DOD Health Affairs. "What was happening was the cost of per-unit care to our population was escalating at such a rate that we would consume the entire Defense budget " he said.

ESL also would ensure that software across the branch would be standard which is increasingly important to DOD health care providers because the Pentagon is putting in place more managed-care practices to monitor and manage the costs and benefits of providing care.

Koran would not confirm that his office is negotiating with Microsoft as part of its ESL market research. And Rahn Jackson government account executive for Microsoft declined to comment on any DOD/Microsoft discussions.

But one procurement industry insider familiar with DOD confirmed that Microsoft and department officials have discussed what it would cost to agree to an enterprisewide licensing agreement.

DoD Health Affairs officials are meeting with other software companies about additional ESLs. If the ESL strategy gets the nod enterprisewide licensing agreements might be forged for an e-mail program relational database software and a database mining program Koran said and DOD technologists are identifying other areas that may be suitable for enterprisewide agreements.

DOD Health Affairs acquisition officials will present their plans Aug. 27 to the colonels of DOD's surgeon generals. The ESL plan will be presented next month to the deputy surgeons general of the military services who will make the decision on whether to pursue ESL agreements.

If the ESL plan is approved Koran said he hopes to have a license in place by the beginning of fiscal 1998.Koran is hoping that DOD can realize savings if his research is promising enough to propel the department toward an actual ESL agreement.

"I'd like to pay 10 [million dollars for one license] " said Koran who admitted that a license of MHSS' proportions could cost many millions more than that. He said an ESL should guarantee at least a 40 percent savings over the traditional software licensing approach.

Vendor Attraction

Although the discounted agreements deliver less revenue than traditional licensing ESLs are appealing to vendors because the revenue stream is steady said Patricia Cicala a research director in the IT management group of consulting firm Gartner Group Inc. Stamford Conn. "These are businesses " she said. "Most of them are public. They worry about their stock."

ESLs however lock agencies into one solution. "On the user side you're locked in " Cicala said. "If you commit too much up front you can't adjust."

The Big Picture

Critical to any ESLs will be how they are incorporated into a massive "total solutions" project that DOD Health Affairs will award in four lots in coming months. The project - the Defense Medical Information Management/Systems Integration Design Development Operation and Maintenance Services II (D/SIDDOMS II) - is worth an estimated $4 billion over five years. Winning vendors will provide a variety of IT services software and hardware tasks in all of DOD's medical centers from naval hospitals to hospital ships to battlefield medical units.

It will be up to the D/SIDDOMS II vendors to roll the software of the ESL agreements into any work done under the contracts when supplying services to military medical centers. "We would hope that [vendors] would include in the mix the software [for which DOD already has licensing agreements] " Koran said.

"It's a win-win situation " said Terry Irgens program director for Northrop Grumman on Lot II of the original D/SIDDOMS contract. Northrop Grumman has bid on a piece of business on D/SIDDOMS II. "It's a positive move both for MHSS and Northrop Grumman because it centralizes the [software acquisition] process and allows for a more cost-competitive price."

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