OMB kicks off enterprise licensing

Reducing Cost and Improving Quality in Federal Purchases of Commercial Software

The Office of Management and Budget last week formally launched its enterprise licensing program, called SmartBuy, in which agencies will pool their buying power to purchase governmentwide software licenses, lowering the per-user cost.

The initiative, which the General Services Administration will oversee, will focus on a wide range of software, including network management, antivirus, database, open-source and office automation software such as e-mail. OMB predicts that the government could save more than $100 million a year under the program.

The Defense Department has used enterprise licensing since 1998 and has saved more than $1 billion in costs since starting it, according to DOD officials. Now OMB is extending the practice to civilian agencies.

Former OMB director Mitchell Daniels Jr., who left OMB last week, has pushed the initiative as a way to save money. When vendors sell licenses for large numbers of users, the cost is typically less per user.

The program, however, seems to contradict another initiative OMB is strongly behind: reducing the practice of contract bundling. Agencies often assemble several small contracts into a single large one, opening it to bid as a package. Small businesses often lack the resources to carry out the overarching contract, so they are relegated to a subcontractor role.

Enterprise licensing, then, "is interesting to come out of this administration, because this is the mother of all bundles," said Larry Allen, executive vice president of the Coalition for Government Procurement. "By focusing on enterprise licenses, you're going to shut out all small businesses as prime contractors. Which way does the government want it?"

The potential rewards may not be that great, Allen added.

"While I think there are probably efficiencies to be gained, I don't know that they're anywhere near the order OMB is projecting them to be," he said.

Another possible risk is that the software covered under an enterprise license might not fit the needs of a specific agency or department, said Warren Suss, president of Suss Consulting Inc. The cost savings could be minimal if too many organizations have to go outside the license to meet their needs.

"You need to be careful about forcing one-size-fits-all solutions on agency users," Suss said. "There's an enormous variety of requirements."

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Buying big

The SmartBuy program is designed to help the government capitalize on its technology buying power by standardizing software licenses across agencies. Here's how the program will work:

* Agencies must provide information to the General Services Administration on their existing software license agreements.

* Agencies must develop a strategy for moving from individual licenses to enterprise licenses as soon as possible.

* Agencies must consolidate common desktop and server software licenses under the supervision of the SmartBuy team.