NEWHAM LONDON Borough Council has scrapped the controversial 10-year Memorandum of Understanding (MOU) it signed with Microsoft in 2004 and drawn up a new agreement with a new set of deliverables.

It appears Microsoft's flagship government contract failed to demonstrate its value, four years after it was signed.

The revelation will be a boon to the open source movement after years of being faced down in the public sector by the shining example of Newham, which chose Microsoft over open source on the strength of a cut-rate deal and a report commissioned by the vendor itself.

Richard Steele, CIO of Newham Borough Council, said Newham had drawn up a second MOU.

"The deliverables have changed," he said.

However, he added: "It was originally a three year agreement".

Steele originally presented the MOU to the elected council as part of a 10-year deal, though it was recognised that the agreement might be modified in the future.

A key element of the agreement was that it must demonstrate that it had helped Newham become a top performing council. This target was not met.

The original MOU, a copy of which was obtained by the INQUIRER, said that it would sustain Newham in the "upper decile of best performing councils in the UK. "

It would "improve Common Performance Assessment results and Star Ratings," which are the measures the Audit Commission uses to rate councils.

Keeping it up
In 2002, before the Microsoft MOU was drafted, Newham was a two-star council, according to the Audit Commission's Common Performance Assessments (CPAs) of Newham.

By 2003, when the MOU was drafted, it was already close to the top 18 per cent of performing councils. But in the following years, other councils left it behind in the rankings.

By 2007, Newham sat outside the top 37 per cent of performing councils. It's overall three-star rating had not improved since 2003, the year before the Microsoft deal was signed.

Steele said it was necessary to look at another Audit Commission measure to get a true gauge of the deal's success.

"The only [relevant] Audit Commission assessment is an element of the use of resources - that, we do get the top score for," he said.

Newham already had a top 4-star rating for use of resources in 2003, before the Microsoft deal was signed. It fell in 2005, and picked up again in 2006 thanks to the quality of its financial reporting. It sustained its rank in 2007 with help from its "internal controls", which do incorporate ICT infrastructure.

Value for money's contribution to Newham's "use of resources" score, however, dragged behind at three-stars for the last two years.

The original MOU said the deal would provide: "Significant Costs Reduction – both operational and capital costs of service delivery to do focus on doing more with less."

Moreover, it's headline benefit was that it would raise the council's game in all areas.

It would: "Achieve transformation of services to the citizens, businesses, other Government bodies, partners and stakeholders in the Borough and neighbouring communities."

Bragging flagging
All these and other claims were used to justify Newham's wholesale adoption of Microsoft software against a recommendation that open source would be better value for money.

Yet the partnership has not delivered what it told the Council would be one of its key aims, which was to develop its own benchmarking methodology with Microsoft.

This would place Newham among "Upper quartile of top performing Councils, it specified..

It would do this with "a new Microsoft 'Value for Local Government' Initiative," by developing "benchmarking methodologies to prove the value of ICT investments".

Steel said Newham and Microsoft were just starting to develop the benchmark.

The deal would suffer a funding shortfall of £1.5m that would last its first three years to this month, the Council was told in 2004.

The shortfall would drop to £400,000 between this month and the financial year end in 2011. It would then fall to £200,000 for every subsequent year of the contract.

The council nearly opted for open source in 2004 because it was the the cheapest long-term option, but Microsoft cut a last minute deal to make its software more attractive.

"Where the MOU hadn't achieved at the end of last year," Steele told the INQUIRER today, "is this specific commitment to benchmarking."

"That's now where we are, in the process of finalising the benchmarking," he said.

"We are looking at benchmarking against the organisations that Microsoft would identify as best in class, not just in the UK," he said.

"We are trying to go beyond traditional means of benchmarking. That's not happened today anywhere," Steele added.

Cud do better
Yet there had been other benchmarks, he said, where Newham met the MOU's performance targets.

"Based on the benchmarking we did, we remain in the top quartile," he said.

"All the Socitm surveys say we are in the top quartile," he said.

Steele is a vice president of Socitm (the Society of IT Managers), which offers private consulting services to the public sector. It's performance measures of Newham were not published outside the council.

Most of the cost of the 10-year deal was attributed to an IT hardware deal with Hewlett-Packard. HP's component of the costs came to £1.4 million a year. The costs attributed to Microsoft were £500,000 a year. But Microsoft was also providing "investments in kind" up to a similar value.

The deal would involve a technology refresh after four years, but
Computer Weekly revealed in September that the refresh had been delayed.

Another of the key reasons why the council chose Microsoft over open source in 2004 was that it saw the vendor as a safe option.

It wanted to ensure that, "effective working with external partners is not compromised by incompatibility of office systems."

The refresh, said Weakly was delayed because Vista, Microsoft's latest operating system, would not be compatible with other software used by the council.

"Microsoft should have raised this problem earlier on," Steele told the paper.

The Newham MOU was the prototype for a government-wide agreement Microsoft struck with the Office of Government Commerce later in 2004.

The deal's term having concluded, the OGC is currently renegotiating another MOU with Microsoft. The negotiations are already months behind schedule.

The OGC said this week that it was trying to negotiate "better communication channels between Microsoft and the Public Sector."

Communication channels appear to have been working well in the other direction. Steele has been singing Microsoft's benefits ever since he signed the deal four years ago.

This was always a requirement of the MOU. It said Newham would be expected to ditch all "competitive technologies" in favour of Microsoft and then present itself as a "best practice" site in Microsoft promotions. µ