SmartBuy: What's up?
- By Don Arnold
- Feb 22, 2004
he SmartBuy initiative, which was introduced last year with high expectations, seems to have fallen on hard times. The outlook is forlorn for any substantial savings from the program.
What happened to the $100 million in savings originally projected for fiscal 2003 and the numerous software enterprise licenses targeted for calendar year 2003? We're rushing through this year — we just got the fiscal 2004 spending bill — and still no SmartBuy contracts, no savings.
SmartBuy, on its surface, is tantalizingly simple: Use the government's buying power to secure "most-
favored customer" status and purchase commodity software at the lowest price. It promised software providers the opportunity to simplify their sales process and thereby reduce costs. Ultimately, differences in definition, motivation and objectives undermined the opportunities for both sides.
During early discussions about SmartBuy among government and industry officials, nobody seemed to hear or understand what anyone was saying.
Is enterprise licensing for commodity software an empty hope?
What do we mean by "enterprise licenses for commodity software"? The commodity software label is deceiving. "Common software" is a more accurate description for software that is widely used across government agencies. "Enterprise license" is a grand term, but it begs the questions: Which enterprise? And what do we mean by "license"?
There are two fairly common interpretations of enterprise licensing for software. It can mean the terms, conditions and pricing for software — think of General Services Administration's schedule contracts on steroids — or it can refer to a specific purchase of specific software for defined use within a defined enterprise. It is exchanging money for software usage rights.
Vendors' objective is to sell software. Government's goal is to minimize expenses during the life of the program, while managing software as a capital asset.
How do we make SmartBuy work? We have to agree on definitions, discuss objectives, respect varying goals and work for a win-win
Software asset management will produce benefits exceeding price reductions, a factor not well recognized in the discussions. Industry wants to either increase revenues or decrease the time it takes to collect them. Conversely, agency officials say, "How can I pay you before the requirements are established and funded by the individual purchasers?" Industry responds: "How can I reduce my price when you're not buying anything?"
To achieve the savings and economy of scale, government must actually purchase something. Industry must in turn offer significant life cycle savings in an agreement that provides real and documented savings to agencies. An enterprise license can reduce costs and contribute to objectives for all participants.
GSA Federal Technology Service Administrator Sandra Bates is too pessimistic when she says the original savings may be difficult to achieve. It is still possible to save $100 million, even in this fiscal year. We just have to listen to one another and find a compromise that serves both communities.
Arnold is director of business development for PeopleSoft Inc.'s federal sector.