How Redmond Won Newham

Microsoft chalked up a couple of government contract
wins in the UK this week. But while Redmond touts total cost of ownership studies (TCO), an open source
consultant says the numbers don’t add up.

The Wall Street Journal reported that Microsoft will sign a new three-year
memorandum of understanding with the United Kingdom government’s
public procurement office. The news follows Monday’s announcement that
Redmond won a 10-year commitment from the London Borough of Newham to make
Windows the platform of choice for the next 10 years. Newham will be the
focus of the UK’s bid to host the 2012 Olympics.

Microsoft has touted the deal as proof that Windows is a better value
than Linux, but others say Redmond slashed prices to get the business.

Newham’s decision to partner with Microsoft follows an extensive
platform evaluation at the borough. According to a Microsoft press release,
IT consulting firm Capgemini advised the borough that Microsoft was the
cost-effective choice.

But Eddie Bleasdale, president of netproject, an IT consultancy
specializing in helping businesses migrate to open source, disputes those

“We have a copy of that Capgemini study, and the one we have totally
contradicts what’s being claimed,” he said.

Microsoft said that Capgemini conducted a 12-week assessment comparing
the costs, business benefits and risk profiles of Microsoft Windows XP,
Microsoft Office System and Microsoft Windows Server 2003 versus unspecified
open source software.

According to Microsoft, Capgemini said the Windows platform could allow
the council’s technology team to maintain its current level of service while
reducing support costs by 13.5 percent. It also found that going with Microsoft
could double the cost savings from improvements in productivity compared with
moving to open source.

But Newham had funded a previous study by netproject to assess moving to
an open source platform. “We actually implemented a Linux-based desktop
architecture for Newham, based on work we’ve done for other clients and for
the European Commission,” Bleasdale said. “They then had a credible

When Richard Steel, Newham’s IT director, asked Bleasdale if he could
give a copy of netproject’s study to Microsoft, Bleasdale agreed, with the
provision that he would also receive a copy of the Microsoft-funded study.

“In no way does that Microsoft report reflect what’s being talked about in the
press,” he said.

Bleasdale believes that Newham used netproject’s work as a club to get
Microsoft to slash prices. “We’re making a damned good living advising
people on how to move to an open source environment,” he said. “If people
want to use the information to beat Microsoft over the head to get the
prices down, good on them.”

Microsoft executives didn’t respond to requests for comment.

The company is fighting back hard against the threat of open source
operating systems to its core business. Many foreign governments have
adopted Linux or are considering making the switch, either for cost
benefits to avoid being locked into a relationship with a single vendor or
to be able to easily customize the software.

In January, Microsoft began a marketing campaign called Get
the facts on Windows. The centerpiece of the campaign is a Web site
featuring total cost of ownership studies from IT research heavyweights
Forrester and Yankee Group saying that Windows is the cheaper option.
Another analysis by IT consultants BearingPoint found that licensing and
support costs were similar for enterprise server software.

Some of those analyst reports came under fire
because Microsoft funded them.

“What the real value of these studies is, I’m not clear on,” said
Directions on Microsoft analyst Michael Cherry. “They have to publish the
algorithms they used to do their calculations. Unless they do that, it’s
hard to take a study that was done on one company or one industry and
extrapolate it to your company or your industry.”

“There’s a long-term trend where Microsoft is engaged in rhetoric to
combat the challenge of open source,” said Stacey Quandt, head of the open
source practice at Robert Frances Group, a business consultancy. “Part of
the rhetoric is that Linux is not free.”

But behind the rhetoric are real questions about the relative TCO of
Microsoft and open source products — questions without clear answers
despite the dueling research reports.

“It all depends on where you’re starting from,” Quandt said. “If you
already have an investment in Windows, it might make sense to stay the
course. Migrating applications is non-trivial. However, the long-term
savings of running applications on Linux could potentially be lower than on

JupiterResearch analyst Joe Wilcox noted that the huge installed
base of Windows machines complicates the TCO question. “The cost comparisons
might be different if this were 1991 — if this were just Linux versus Windows
in a growth market. But it’s a mature market, where Windows is already
installed in a lot of PCs and servers. You can show Linux might be cheaper
to acquire, but there are still switching costs that are hard to get
around.” (JupiterResearch and are owned by Jupitermedia.)

But the real battle may be fought on price, not TCO. And that’s the real
import of Microsoft’s latest deals, Quandt said.

“Longer term, Microsoft likely will be under pressure from Linux to
reduce the cost of licenses, and hence these efforts to lock customers in
for 10 years. That’s what I think they’re actually doing.”

Meanwhile, netproject’s Bleasdale said businesses that are really serious
about moving to open source have taken vows of silence in order to avoid
being besieged by sales calls.

“They don’t want brouhaha, they don’t want
journalists to ring them up, and they don’t want Microsoft to ring them up.
They don’t want to talk about it. They just want to do it.”

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