Microsoft lands state deal

In a groundbreaking deal for Microsoft, the company has sealed a three-year, $23.6 million arrangement to install its Windows NT operating system and other applications on every state government computer in Pennsylvania.

The state's 40,000 computers will run Windows and use standardized Microsoft software for word processing, spreadsheets, and email. But when it comes to browsing the Net, the state's agencies and departments will still have the power to choose Netscape Communications' browsers or Microsoft's Internet Explorer.

Pennsylvania called the statewide deal the first of its kind.

"We approached four software companies and asked them to present a proposal about how we could use software to reengineer state government and create a model for the 21st century," Scott Elliott, a spokesman for the state's Office of Information Technology, said today. "Our second goal was to look for a strategic partner to provide services across the state."

Microsoft's proposal was chosen over those of Lotus, Corel, and Netscape, Elliott added.

Pennsylvania said it will save $9.2 million in licensing costs through the deal. About 15,000 of the state's computers already run Microsoft Office products.

In addition, Microsoft also will provide retraining for state employees and academic support centers and teacher training for K-12 schools. On top of that, Microsoft agreed to give out $12.7 million in grants for economic development and education projects over the next three years. "Microsoft's plan was head and shoulders over what everyone else did," Elliott noted.

For Microsoft, the deal marks another notch in its private-public partnership belt. The Redmond, Washington-based firm has been bullish about pursuing the K-12 and university markets since launching its education customer unit last year.

"The commonwealth of Pennsylvania certainly represents one of the largest enterprises in Pennsylvania, so they were an attractive customer to work with," said Michael Ferreri, Microsoft's enterprise customer unit manager in the greater Pennsylvania district.

"Microsoft is increasingly getting more aggressive in its education investments," he added. "Our competitors have done very well in this market segment historically. We may not have applied as much focus as we could have."

In March, the software giant sealed a $6 million agreement with Indiana University (IU) to offer its suite of products to the college's 100,000 students and staff.

IU was slated to spend $20 million over the next four years to equip its campuses with the latest applications and to switch from Novell's NetWare and UnixWare operating systems to Microsoft's Windows NT.

The landscape has not been entirely smooth for the Microsoft, however. The company, along with three others, pulled out of a proposed ten-year, $300 million deal to technologically retrofit the California State University system's 23 campuses by the year 2000.

In exchange for seed money to start the high-tech face-lift and subsequent upgrades, CSU promised to develop revenue streams with the companies to ensure they would get a decent payback. The plan was expected to pull in an estimated $3.8 billion in revenues over the next decade, but the partners could not decide who would take the bulk of the financial risk for the partnership's ventures or how future revenues would be distributed.