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Anatomy of the Microsoft-L.A. County Office 365 Deal

Microsoft unveiled a mega-deal with the county of Los Angeles this week that covers Office 365 seats for 100,000 employees of the most populous county in the United States. Here are some key channel takeaways from this five-year deal worth $72 million.

MCS Out Front: Microsoft Consulting Services (MCS) is a source of controversy for the channel. Partners who represent Microsoft products in the enterprise often come up against MCS in deals and sometimes complain that Microsoft swoops in on projects that its partners could credibly deliver. While there is a partner on this deal, the partner is on the licensing side. MCS will do the deployment.

It's not surprising that MCS is out front on this deal, and it doesn't mean by itself that MCS is going through one of its more aggressive phases. Over the years, Microsoft has frequently talked about the framework it uses when deciding whether MCS should be involved in a project. This deal seems to fit two major criteria, either one of which would be enough for Microsoft to justify putting its own people in the deal. One is if a project is what Microsoft calls a "lighthouse" project. This clearly is, first for its size but also for its sensitive security and privacy requirements for law enforcement departments and for health-related departments.

The other criterion is whether the customer wants "skin in the game" from Microsoft. Given the considerable public relations problems that attended the rollout of Google Apps in the city of Los Angeles, there is every reason for county officials to want only Microsoft throats around if someone needs to be choked for quicker progress.

An LSP Win for En Pointe Technologies: The named partner in this deal is En Pointe Technologies. Although En Pointe does systems integration work, Microsoft's news release on the deal is clear that it's the licensing solution provider (LSP) side that will be involved here. "Microsoft Consulting Services will begin the migration to Office 365 in July, and Microsoft partner En Pointe Technologies will manage the agreement," the release stated.

Even absent systems integration work, it's a big win for En Pointe. The company was previously managing Microsoft Enterprise Agreements (EAs) for several L.A. County departments. Now En Pointe manages a consolidated EA for all 15 departments. It's not clear what LSPs may have gotten boxed out in the consolidation.

"Our relationship and credibility with both Los Angeles County and Microsoft is cited as the reason such a large deal was placed in our hands," En Pointe President Michael Rapp said in a statement. (En Pointe did not immediately respond to a series of specific questions about the deal.)

A Blow for Google Apps: When Google won a contract in 2009 to move 30,000 employees of the city of Los Angeles from on-premises e-mail to its cloud services, it was a clear shot across Microsoft's bow (even though most of the e-mail servers involved were GroupWise). There was another big player in the cloud space with the ability to sell major customers on its service. That deal ran into trouble when Google was unable to comply with FBI requirements for police department e-mail that meant the L.A. Police Department (LAPD) couldn't move to Google Apps.

To be clear, the Google deal was the city, the Microsoft deal is the county, so we're looking at different entities. Nonetheless, Microsoft's win relates to Google's in three ways.

First, Microsoft makes a point of noting in the first sentence of its release that the Office 365 for Government deal includes "roughly 20,000 law enforcement personnel." Without mentioning Google by name, Microsoft is going out of its way to highlight its ability to comply with the Criminal Justice Information Services (CJIS) standard that posed a problem for Google and the LAPD.

Second, part of the Google contract involved incentives if Google and its partner Computer Sciences Corp. (CSC) could get L.A. County departments onto the system, as well. Microsoft's ability to wrap up a deal for all county departments suggests that crossover never occurred.

Third, Microsoft's deal with the county is much bigger than Google's deal with the city -- covering 100,000 employees rather than the originally announced 30,000. The deal literally surrounds and dwarfs Google's foothold in the city of Los Angeles.

Reasons for the Win: Most of the reasons Microsoft won the deal involve money, with the cloud driving expenses out of IT. En Pointe's news release says the deal will save the county $2.5 million annually after the first year. According to Microsoft, cost savings will come from consolidating EAs, decreased collaboration costs across departments due to a unified platform, the ability to pay only for services used by existing employees and the avoidance of upfront capital expenditures.

The county's CIO Richard Sanchez also says the move to Office 365 will help the county's employees become more mobile. Microsoft also cited the CJIS and HIPAA compliance as factors.

It was not clear whether Google or anyone else was competing for the contract, and clearly Microsoft's deep presence due to the existing 15 EAs played a role.

Crazy Q4 Office 365 Deals: Microsoft always pushes hard to close business in its fourth quarter, which ends this month. Partners are seeing a lot of extra incentives on Office 365 right now. Some sort of extreme discounting, beyond the usual deal size discounts, was probably a factor here. In any case, it's a good time for partners to be closing Office 365 deals across the board.

Don't Mess It Up! This week the L.A. County deal counts as a victory for Microsoft. One or two missteps and it will be an embarrassment (see Google and the city of Los Angeles). You can bet there will be Google and CSC reps eagerly waiting to pounce on any delays or problems. There will also be officials who got into trouble over the Google problems and politicians looking to score points keeping a close eye on Microsoft's progress. The stakes are very high in a politically-fraught environment. Yet another reason for Microsoft to keep this deal in house with MCS (see above).


Posted by Scott Bekker on June 19, 2014