Microsoft EU numbers don't add up

Update 22/11/10: The reason why the Microsoft EU numbers don’t add up is spelt out here. It appears the EC numbers were calculated over the full four year term of the contract. So the total possible cost per user would be €187.50, a third more than the EC estimate discussed below.
In the conflict between proprietary software Smaugs like Microsoft and open source hobbits like Linux, money really matters.
The open source lobby must therefore have been dismayed to learn the EC had got a unit cost of €125 per user per year on its €49m contract for Microsoft desktop software.
That was for a package that included the Microsoft Windows XP operating system, Internet Explorer web browser, Outlook email client and Microsoft Office bundle.
If Microsoft software is that cheap it might explain why the EC could justify striking a €49m Microsoft contract with Fujitsu within days of fining the Windows software giant €680m for ignoring European orders to cease its monopolistic business practices.
But what if the EC didn’t get such a good deal from Microsoft after all?
Our calculations show the Microsoft deal may have cost between €250 and €500 more per unit than the EC claimed it paid.
This would mean the EC made its Microsoft deal sound at least €16m cheaper than it was over the life of the contract.
It would also have consequences for the open source strategy review the EC announced last week.
The numbers
The EC’s official contract notices said in 2008 the €49m deal included €27m for the cost of about 36,000 desktops used by EC staff. The rest of the contract included the cost of supplying PCs to staff at other European agencies who were piggy-backing the EC deal.
These numbers suggest a unit price of €750 (€27m total cost of EC units / 36,000 EC units) and a total of 65,000 units (€49m total contract value / €750 unit price).
The EC told MEPs in 2008 the deal was for €125.00 per unit per year.
The contract was to last two, three or four years, depending on whether two options where taken to extend its term. If the deal lasts four years, the unit price would therefore be €500, €250 below the unit price derived from the numbers in the EC’s official contract notice. It would also put the total cost of the EC’s 36,000 staff units at €18m, not the €27m given in the contract notice. And tere would be 98,000 units, 30,000 more than the contract numbers suggest.
The double-take
It appears the EC claimed the unit price on its Microsoft deal was far lower than it actually was.
If the deal was done over fewer than four years, the total unit price would be even lower still than the €750 suggested by the contract numbers. And the total cost of the 36,000 EC staff units would be even further away from the €27m given in the contract notice. It would be impossibly cheap.
There must be an explanation. Can the numbers be trusted? A €750 unit price derives from the actual contract values published in the official tender:
“The total amount of the contract for all participating institutions, agencies and bodies is EUR 48 913 119,27. The amount awarded for the EC is EUR 26 938 840,04. The duration of the framework contract is 2 years with 2 possible prolongations of 1 additional year each.”
The EC gave the figure of 36,000 (rounded) units in answer to a question asked by the Greek Christian Democrat MEP Georgios Papastamkos on 17 March 2008, two days after the Fujitsu contract was set. This figure was registered in the Interinstitutional Licensing Agreement (ILA) the EC struck with Microsoft Ireland on 22 May 2007, and which had jurisdiction of the Fujitsu/Microsoft deal. The EC said:
“According to the metrics defined in the ILA, the total number of end users at the Commission in 2008 can be estimated at 35 960 worldwide. This figure corresponds roughly to the number of PCs on which the reference configuration for client desktops (including software products from Microsoft and several other editors) is installed.”
The EC claimed the €125 per unit per year in the same Euro-Parliamentary answer to Georgios Papastamkos. It was given as a vague figure, with curious caveats:
“The Commission would point out that, by comparing its LAR expenditure in 2007 with the current total number of end users, one reaches a figure of around EUR 125 (per year and end user). It should be noted that this figure represents only a marginal part of the cost of operating and maintaining the Commission’s office automation environment. It does not correspond to any particular unit price laid down in the ILA, but to the right to use a combination of products acquired through the LAR.”
(The LAR is Fujitsu. The €49m contract was for a “large account reseller [of] Microsoft products (LAR 2007)”.)
The heck
If the numbers don’t explain the discrepancy, perhaps we are making too much of them? Any fool could see from the dexterous wording of the EC statement that the unit price was not actually €125.
Why then did the EC claim a unit price of €125? And why did it go beyond the call of duty to claim its €125 unit price was a bargain:
“In any case, one can note a significant decrease in comparison with previous years.”
Georgios Papastamkos had merely asked how much money the EC spent on Microsoft software.
The EC had been under pressure to prove its Microsoft deal wasn’t a waste of money. MEPs were asking more about open source alternatives. Just two days before the Fujitsu deal was struck, two Italian MEPs had asked why the EC continued to use Microsoft software when the German and French Parliaments had chosen open source alternatives.
Why, Liberal Democrats Marco Pannella and Marco Cappato asked, was the EC still using Microsoft software on its desktops after finding the software giant guilty of abusing its dominant market position?
These questions may be more pertinent in these days o f austerity, particularly since the EC’s Fujitsu/Microsoft contract is up for the last of its two renewals in February. Will it run for another year? And at what unit cost?