Government seeks savings through licence shuffle

Summary:Against a background of massive cuts to public spending, Value Licensing believes it has spotted an opportunity to broker Microsoft licences between public-sector organisations

In a climate of cuts, the government says it wants to encourage the re-use and reallocation of software licences, while repeated culls of civil-servant positions mean a number of licences are no longer being used by government staff.

The UK taxpayer funds over a billion pounds a year on government software licences. In 2009, the government spent £17.9bn on ICT, of which eight percent, £1.4bn, was on software. Licence reallocation as a cost-saving exercise featured in a Government ICT Strategy document published in October 2011.

But as keen as the government is on the reallocation of software licences as part of efforts to cut public spending, companies with large government software contracts, such as Microsoft, are just as loath to discuss the subject of public-sector licensing.

However, the combination of fiscal pressures and new access to government IT for SMEs is pushing developments in this area. The Cabinet Office is currently renegotiating its contracts with Microsoft, and expects that prices may go up in April, giving extra impetus to cost saving measures.

Licence broker

One small UK business — Value Licensing — believes it has spotted an opportunity to act as a broker between public-sector organisations to recycle Microsoft volume licences.

The government has enterprise-wide agreements that were signed with Microsoft in 2009 to provide software across government bodies. Microsoft is one of the largest software suppliers to government, taking around £286.4m from the government for licences, or 1.6 percent of the total ICT spend.

With the axing of various government bodies, the public sector has a chance to reallocate licensing agreements worth hundreds of thousands of pounds per body, according to Value Licensing.

Reallocating licences

The terms of Microsoft public-sector enterprise agreements allow organisations to reallocate licences within the public sector, according to Microsoft licensing agreements seen by ZDNet UK.

In 2009 Microsoft signed a confidential three-year licensing agreement with Buying Solutions called the Microsoft UK Public Sector Business and Services Agreement (MBSA). Microsoft is currently negotiating a fresh deal with the public sector, due to be signed by the Cabinet Office in April.

Customers can transfer licences to other government customers.

– Framework document

A document that specifies enterprise terms of the 2009 agreement, seen by ZDNet UK, allows transfer of Microsoft volume licences between public-sector organisations.

"Customers can transfer licences to other government customers," says the UK Public Sector Enterprise Agreement Framework ID N39. "Enrolled affiliate may transfer licences acquired under a perpetual enrolment to another government customer."

An 'enrolled affiliate' is an organisation that has entered into a public-sector enterprise licensing agreement with Microsoft.

Legal basis

Law firm Pinsent Masons told ZDNet UK that brokering transfers of perpetual Microsoft enterprise public licences was not prohibited under Microsoft terms.

"There is nothing in the Public Sector Enterprise Agreement terms or under English law that would in theory prevent a third-party intermediary from 'brokering' or 'facilitating' permitted transfers between public-sector bodies, provided it is not 'reselling' the licences itself, outside of Microsoft's authorised reseller scheme," Pinsent Masons associate Joanna Alderson told ZDNet UK.

Whitehall departments

In a climate of cuts, Whitehall departments are seeking to encourage the re-use and reallocation of software licences.

Alderson said that a government licensee could transfer licences to another public-sector body provided that the licences are fully paid up perpetual licences, the transfer is permanent, the transferee accepts the terms and restrictions of the licence in writing, and Microsoft is notified.

Value Licensing wants to arrange the transfer of Microsoft from insolvent to solvent public-sector bodies. "We [want to] broker licences from insolvencies," Value Licensing director Jonathan Horley told ZDNet UK. The company would then negotiate a fee based on a percentage of the value of the transaction.

Bonfire of the quangos

Value Licensing is in the process of acting as a broker between the NHS and an unnamed quango that had its funding drastically reduced after public-sector cuts.

Chancellor George Osborne announced cuts to quangos in May 2010 as part of £6.2bn slashes to public spending. The government published a full list of quangos (PDF) to be axed in October 2010.

One quango that has had its budget slashed is Business Link, a government advisory service to business. Before November 2011, Business Link was an organisation with over 400 employees, under the auspices of Department for Business, Innovation and Skills (BIS), with a website administered by HMRC. In November, the service jettisoned most of its employees, retaining only the website part of the organisation, BIS told ZDNet UK.

BIS declined to say exactly how many people had lost their jobs due to the Business Link closure. "The regional Business Link services were delivered by different providers that were contracted out through the Regional Development Agencies (RDAs)," said the spokesman. "It was their responsibility to discuss with staff arrangements for future employment or redundancy."

In November 2011, Value Licensing was appointed by administrators to redistribute over 400 Microsoft licences from a quango that went into administration. Value Licensing declined to tell ZDNet UK whether that organisation was Business Link.

Value Licensing said it approached an NHS body to try to redistribute the licences. The NHS then approached Microsoft to enquire about...

Topics: Government : UK, Tech Industry


Tom is a technology reporter for, writing about all manner of security and open-source issues.Tom had various jobs after leaving university, including working for a company that hired out computers as props for films and television, and a role turning the entire back catalogue of a publisher into e-books.Tom eventually found tha... Full Bio

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