DOD melds IT buying

Top Pentagon officials have put in motion a plan to replace a hodgepodge of information technology contracts scattered throughout the Defense Department with enterprise licensing agreements that could drastically cut DOD's software costs for all 2.2 million users in DOD.

The plan also calls for the establishment of point-and-click electronic malls, where DOD users could purchase commercial PCs, printers and other hardware.

DOD's deputy chief information officer, Marv Langston, said last week that DOD must find ways to reduce overhead costs for IT acquisition while also using IT savings to drive down costs. Outsourcing the acquisition of hardware commodities and purchasing IT software enterprisewide "would allow us to tap into a fairly mature market for [acquisition] of commercial IT products that does not have to be managed by the government," Langston said.

The plan most likely will meet stiff opposition from major DOD IT acquisition organizations, such as the Air Force Standard Systems Group (SSG), the Army Communications-Electronics Command Acquisition Center and activities at the Navy's Space and Naval Warfare Systems Command, all of which purchase commercial IT hardware and software. These organizations "will fight this idea to the death because it will put a lot of jobs on the line," said a source familiar with the organizations.

Langston agreed that his approach could have significant consequences for DOD's existing organizational structure but said the point of the plan was to create a more efficient process that could result in taking away some functions from the government.

For software purchases, Langston believes DOD can get more bang for its buck by purchasing software on an enterprisewide basis rather than through numerous contracts administered by contract shops in the Army, the Navy, the Air Force, the Marines and Defense agencies. The Pentagon can provide incentives for enterprise software with purchases through a working capital fund -- what Lang-ston called a head tax -- which would spread costs "across the whole [DOD] population.... This would provide us with economies of scale."

Initially, Langston said, any DOD enterprise license scheme would involve, for example, "two or three kinds of word processors [and] two or three kinds of database packages."

Earlier this month, Lt. Gen. William Donahue, Air Force director of communications and information, said he wants to go one step further and consider adopting a standard product, such as the Air Force's recent decision to use Microsoft Corp.'s Exchange as its standard messaging product.

Langston said that eventually DOD could reach the point "where we can standardize and use our buying power to get down to one package."

Mary Ellen O'Brien, national accounts manager for Microsoft Federal Systems, said enterprise software agreements would allow DOD "to reap volume pricing discounts...better than they get now."

But DOD will only achieve those discounts if it delivers the volume of business that will make it possible for Microsoft to pass on the savings. O'Brien said DOD must approach any such agreement as an enterprise, not a collection of what she termed "fiefdoms" striking separate deals that could eat into the volume necessary to support an enterprise pact.

Microsoft also would not want to sell software as a commodity into any enterprise without providing support services "because that is a recipe for failure," O'Brien said. Any enterprise agreement must include a servicewide support plan that includes Microsoft's consulting arm and the company's premier support program, both of which come with a price tag. But, O'Brien said, Microsoft would provide "a very aggressive cost proposal" for support services, which would still keep the overall cost of software lower than the Pentagon pays today.

Bob Dornan, senior vice president of Federal Sources Inc., McLean, Va., said DOD could use an enterprise license agreement to drive down the cost of software, but to do so "the Pentagon has to make an up-front commitment, and that's a term that is virtually unheard-of in the government."

DOD has assigned the Navy CIO organization, which Langston once headed, to lead the desktop and office automation software steering group. Langston indicated the Navy could have a wider role in turning the enterprise plan into reality. "I anticipate that the people in the steering group would become the buying agent," Langston said.

But an industry executive who has a long association with Air Force SSG said, "The Air Force would fight this every step of the way.... SSG will think [the job of managing acquisition of enterprise software licenses] is theirs."

Pat Gallagher, an industry consultant and a former sales manager for Zenith Data Systems Inc., said he believes enterprise licensing by DOD "is long overdue. Baseline computability is critical today."

Still, Gallagher said the plan concerns him. For example, he said he wonders how an enterprise vendor and DOD leadership would deal with commands that already have enterprise licenses.