Microsoft, Lotus battle hits Marines

The Marine Corps last week signed a deal with Microsoft Corp. for a 70,000-seat enterprise license for its Office desktop software, adding more fuel to a controversy raging across government regarding stacked competition and billions of dollars in lost savings in office automation software.

The Marine Corps deal, worth about $7 million, follows a series of informal protests by Sales Resource Consultants Inc., a reseller of Lotus Development Corp.'s SmartSuite product, which competes with Microsoft's Office suite.

According to SRC, the Defense Department and 19 other agencies have repeatedly refused to consider their unsolicited offer to provide the full complement of SmartSuite products, which SRC has offered to agencies governmentwide at $20 per desktop.

A Lotus official confirmed the pricing offer. In its Microsoft deal, the Marine Corps will pay $100 per seat.

Both Microsoft Office and Lotus SmartSuite offer users standard, widely used PC-based applications such as word processing, spreadsheets and graphics.

According to letters sent to DOD by Barry Nelson, SRC's vice president of sales, the SRC proposal of $20 per desktop could save DOD up to $2.5 billion during a five-year period compared with the cost of maintaining and upgrading Microsoft's Office product. Nelson sent similar letters to the other 19 DOD agencies, claiming that their savings would range from $1.4 million to $18 million annually, depending on the quantities purchased.

"For what the Marines paid for 70,000 licenses, they could have bought a million licenses of the SmartSuite [product] or 50 percent of all the DOD requirements," Nelson said. He added that SRC officials feel compelled to file a formal protest with Brig. Gen. Robert Shea, the Marines' chief information officer.

Marine Corps officials did not respond to FCW's request for an interview.

But Chip Mather, senior vice president at Chantilly, Va.-based Acquisition Solutions Inc., said price is not the only issue. Although a 1 percent or 2 percent difference in price in an enterprise deal may make a difference, this issue "also goes to the heart of requirements," Mather said.

"It is a good thing if you can introduce competition...but you have to put a viable alternative out there for it to work," he said. "You also have to have a company that is capable of supporting [agencywide] requirements."

Microsoft declined to comment. However, one Microsoft official said the company cannot confirm the pricing offers of another vendor's resellers.

Nelson, who recently filed a Freedom of Information Act request to obtain the purchasing documents from the Marine Corps deal, said SRC has been stonewalled repeatedly by federal officials who are bent on sticking with Microsoft.

In a letter sent Nov. 12 to Nelson, DOD CIO Arthur Money wrote that DOD's long-standing policy is to negotiate the terms and conditions of licensing Lotus products directly with Lotus and then to conduct a competition with third-party resellers, which the Navy did in its contract with Lotus. The Navy signed a deal with Lotus in November 1998 for up to 500,000 seats of Lotus products.

SRC claims that Lotus officials deny being contacted by DOD to negotiate licensing agreements relevant to SRC's offer or the use of SmartSuite in general. Lotus officials declined to comment.

The controversy over SmartSuite has spilled over into Congress.

Rep. Tom Davis (R-Va.), a member of the Government Management, Information and Technology Subcommittee, sent a letter dated Nov. 23 to Anne Reed, CIO at the Agriculture Department, stating that SRC's unsolicited proposal deserves consideration. "Based on the information that I have been provided, the savings to your agency warrants an evaluation of their unsolicited proposal to your organization," Davis wrote. "I understand change is not always a welcome event, however, policy does dictate that all agencies investigate competitive alternate solutions." Reed could not be reached for comment.

Nelson said that the Food and Drug Administration, Federal Trade Commission and the departments of Energy and Health and Human Services have indicated they are willing to discuss the offer.

However, in one of the few direct responses received by SRC, Edward Hugler, acting deputy assistant secretary for administration and management at the Labor Department, told Nelson in a written statement that "at this time, we do not believe it would be advantageous to begin a software pilot as you have suggested."

Likewise, in a Nov. 5 letter, officials from the Federal Emergency Management Agency said the agency already has contracted for enterprisewide Microsoft licenses for about 7,673 users and "established Microsoft as the software standard in 1995."

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