Navy, Lotus reach agreement

The Navy has reached an agreement with Lotus Development Corp. to purchase up to 500,000 seats of its entire suite of groupware as part of the Navy plan to build a massive, worldwide intranet that would support everything from electronic commerce to battlefield communications.

The Navy has agreed to a four-year deal to buy initially 500,000 seats for its users and wants to negotiate an option for another 200,000 seats for the Marine Corps. Rear Adm. John Gauss, commander of the Space and Naval Warfare Systems Command, who sources said negotiated the Navy and Marine Corps-wide pact, declined to comment on the full extent of the pact, but he did confirm that Spawar has a pilot program with Lotus products under way at the command's headquarters in San Diego.

The deal would support a worldwide intranet for the Defense Department that would support so-called knowledge-centric warfare— a strategy of overwhelming enemies by gleaning battlefield knowledge from computers rather than building bigger weapons. Adm. Archie Clemins, commander in chief of the U.S. Pacific Fleet, outlined the proposed intranet project this month in a speech at the Armed Forces Communications and Electronics Association's TechNet Asia-Pacific '98 Conference and Exposition in Honolulu (see related story, Page 1).

The Lotus agreement is a big step in building the intranet. According to Michael Sheehan, Lotus director of government sales and marketing, the pilot tests of Lotus' Domino server and Notes client products should lead to a "firm contract for an enterprise license" by the end of the year.

"We are undergoing testing now with the idea that there will be an enterprise license with the Navy as soon as we prove to the Navy that we can do what we say we can do," Sheehan said. Under the consulting agreement, Lotus will test for integration into existing systems Domino 5.0, the beta version which was released in October and will be available by the end of the year, and Notes applications.

Gauss described such enterprisewide agreements as an essential piece of the Navy's strategy to develop and deploy the worldwide intranet in a year. Gauss said he wants to use such agreements to "leverage" the Navy's tight information technology budget. "We want to buy licenses in bulk for the enterprise...to get bigger discounts," he said.

The enterprisewide licenses can create enough leverage to reduce prices considerably. A 90 percent discount is not unusual, said Chip Mather, senior vice president at Acquisition Solutions Inc. "There is an understanding that if you buy up front, you will get huge discounts," he said.

Sources said news of the Navy/Lotus pact rocked the Microsoft Corp. federal marketing arm, prompting Microsoft chairman Bill Gates to make a personal pitch to Gauss to use Microsoft's competing Exchange server and client.

According to a Microsoft spokesman, the company is in negotiations with the Navy and cannot comment on any such agreement.

Sheehan would not comment on how much Lotus discounted its products. He said the contract would be a standard enterprise license, with Lotus knowing up front how many users are included. And not including the Marine Corps, that license could include "anywhere up to 500,000 users," he said.

According to one Lotus reseller, the best enterprise license deal they have seen is about $30 per seat for "a couple hundred thousand seats." This pricing would make the Navy deal worth about $15 million, but with 500,000 users the Navy will probably be able to negotiate a better deal, the reseller said.

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