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Microsoft renews cloud contracts with amid ongoing legal spat with on-prem licence reseller

Lawyers, say hello to the Digital Transformation Agreement 2021

Microsoft has signed a fresh Memorandum of Understanding with the UK government to sell cloud services and biz apps at pre-agreed discounts amid accusations it is stifling the resale of excess on-premises software licences in the public sector.

The MOU, specifically known as the Digital Transformation Agreement 2021 (DTA21), is a three-year contract that runs from 1 May. It covers Microsoft 365, which includes products such as Teams, the current Azure Pricing Arrangement, as well as expanding for the first time into new areas such as Dynamics 365, Power Platform and other Business Applications.

Premier and Unified Support services are being wrapped into the agreement too, including Solutions Assessments and training courses designed to improve skills and promote use of Azure. DTA21 replaces DTA18.

Microsoft has not specified the level of discounts negotiated by Crown Commercial Services (CCS), the UK's largest procurement body, an Executive Agency of the Cabinet Office.

Philip Orumwense, commercial director and Chief Technology Procurement Officer at CCS, said: "This agreement recognises the significance of cloud computing to the UK public sector as it continues its digital transformation and aims to build back better. It is another example of CCS’s commitment to achieving outstanding commercial value for our customers across the public sector."

CCS told us: "There is no committed spend. Public sector organisations will budget for this spend in the usual way, and can access any MOU signed by CCS to get discounted pricing with the suppliers they choose. The eligibility criteria covers the vast majority of the UK public sector."

Back in 2013, the government launched its Cloud First policy and the direction of travel ever since has been obvious. In 2015, Microsoft made it clear to departments that buying its cloud wares would be cheaper than sticking with on-premises versions.

The policy was reviewed in 2019 and in 2020 the One Government Cloud Strategy was born. Microsoft was the first to sign up with new Azure pricing, and was followed by Google, IBM, HPE, UKCloud, and AWS.

In a canned statement, Gareth Rhys Williams, Government Chief Commercial Officer, said: "This new agreement with Microsoft builds on the Government's One Government Cloud Strategy, which supports the key principle of treating government as one single customer. It shows the Government's determination to drive transformation as well as adopt value for money technologies that improve services and ensure government departments and their staff have the digital tools they need, now and in the future."

DTA21 includes Teams, 365 E5 Security and Compliance, Phone System Calling, Dynamics 365, PowerApps, Azure Cognitive Services and AI, Azure Analytics, Azure Synapse, and Azure Arc.

The thinking, Microsoft said, is to prepare the British public sector to "improve the management of hybrid and multi-cloud and support the transition from legacy IT to cloud."

However, not everyone is happy with the setup. Last month, The Register revealed that reseller ValueLicensing is suing Microsoft over claims it has restricted competition by adding clauses into contracts that prevent customers from reselling their excess licences.

The UK reseller wants £270m in damages and, according to a letter seen by us, last month instructed lawyers Charles Fussell & Co LLP, to write to CCS CEO Simon Tse ahead of the anticipated DTA refresh.

It states: "Our client has reason to believe that the present DTA, and/or its predecessor the Cloud Transformation Arrangement, and/or its 2020 enhancement, the Azure Pricing Arrangement, include provisions obliging government departments, local authorities and police forces to relinquish, retain or otherwise refrain from selling Microsoft perpetual licences (and/or other obligations that have the effect of precluding such sales) in exchange for access to Microsoft subscription licences and/or Azure services on discounted or otherwise preferential terms (for concision, 'Anti-Resale Terms')."

According to responses ValueLicensing said it got to a series of Freedom of Information requests, the Department of Health and Social Care, and the Foreign, Commonwealth and Development Offices have "confirmed" that they relinquished perpetual licences, and that HMRC (tax collection agency) has "no residual Microsoft Software Assets."

The letter stated that some of the other departments contacted had refused to respond, and the Home Office had cited commercial confidentiality

"Our client is concerned that Anti-Resale Terms, insofar as already agreed between Microsoft and other parties, have contravened the Chapter 1 prohibition under the Competition Act 1998 (and, when applicable, the corresponding provisions of the TFEU and EEA Agreement); and that any Anti-Resale Terms in the renewed DTA will lead to further breaches."

"To the extent that the CCS, and/or government departments, local authorities and police forces, have been or become party to Anti-Resale Terms, they may be liable in tort."

The lawyer asked CCS to confirm that it would not enter into a new agreement with Microsoft that contains the "Anti-Resale Terms."

Clearly that request was ignored. ®

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