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May 10, 2022
ITEM TITLE
Contract Award: Approve a Service Contract with Microsoft Corporation for Software, Subscription, and Licensing Services
Report Number: 22-0113
Location: No specific geographical location
Department: Information Technology Services
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt a resolution authorizing the City to enter into a contract with Microsoft Corporation for software, subscription, and licensing services.
SUMMARY
This action will renew the City’s subscription and licensing services with Microsoft Corporation including but not limited to Office 365 suite, Microsoft Azure storage, and Microsoft Windows/Server licensing.
ENVIRONMENTAL REVIEW
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines, therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not Applicable.
DISCUSSION
As part of the Information Technology departments’ Technology Improvement Program, the department has continued a methodical upgrade to the core systems throughout the City to include:
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1) Computer Replacement Program - 200 personal computers ( PC’s) per year replaced which started in 2015;
2) Network Upgrade – A complete replacement of the City’s computer network to one of the most robust and technically advanced networks available;
3) Internet Connectivity - Increased from 100 MB/sec upload/download to 2 GB upload/download;
4) Windows 10 Upgrades (City-wide) – Completed and testing Windows 11 upgrades;
5) Office 365 Upgrades (City-wide);
6) Telephone Modernization Project – Currently underway; deploying new Voice Over IP (VOIP) phone system;
7) Automation of Windows updates – Ensures latest security and feature patches are automatically installed on end users PC’s; and
8) Server Virtualization – A robust virtual server environment has been deployed to reduce the number of expensive physical servers and allows for rapid redeployment in the event of a software issue with any of the virtual servers.
As part of the Technology Improvement Program, the City wishes to continue its Enterprise Agreement for licensing and software with Microsoft to continue the upgrade path system-wide. This Enterprise Agreement will include continuous licensing upgrades for all Windows desktop operating systems to Windows 10 (and beyond), upgrades for Windows server operating systems, upgrades for Microsoft SQL serve r software, backend network management software, access to Microsoft Azure Cloud based storage for disaster recovery operations and the Office365 productivity suite.
Below are some highlights of the advantages of continuing the Enterprise Agreement as opp osed to other licensing models (Select or Retail pricing):
1) Lowest possible pricing for Microsoft products - This Enterprise Agreement includes Government “D” pricing (15% below OEM pricing) plus an additional 2.56% reduction in pricing on top of Government “D” pricing - which is a 17.56% total discount. This is normally reserved for only the largest agencies (10,000+ users). The 2.56% reduction includes Dell’s .56% reduction in pricing beyond the original 2% from Microsoft.
2) Ability to spread the licensing costs over three years, rather than lump sum payments. This is not available with Select or retail pricing;
3) Ability to implement and continue using Office365 (not available unless in an Enterprise Agreement);
4) Access to enhanced training options not available to non-Enterprise Agreement customers - including training vouchers for advanced training programs which are not free. This is not available under Select or retail pricing;
5) Microsoft Desktop Optimization Pack (MDOP) - suite of technologies available to help IT staff virtualize the user experience, applications and Windows; helps manage features within Windows; and rapidly restore user productivity after a system issue is encountered to ensure top operational efficiency; P a g e | 3
6) Windows Desktop Operating System upgrades - This Enterprise Agreement will ensure that the City is fully licensed to deploy Windows 10 throughout the IT infrastructure and sets forth an upgrade path to future deployments of Windows operating systems;
7) Windows Server Operating System upgrades – When the City began with its initial Enterprise Agreement, it had nearly 2/3rd of the server fleet (150+ servers) operating on Windows Server 2003 which does not receive any security patches or software updates from Microsoft. This continues to be a significant security and operational concern for the department;
8) Enhanced office productivity enhancements - Instant messaging, TEAMS (video conferencing), remote desktop sharing (for webinars), and Sharepoint. This is not available under Select or retail pricing;
9) Advanced security options - Encryption capabilities for desktop and server hard drives and email control of sensitive documents which should not be sent out of City or contain sensitive information (e.g., Social Security numbers). This is not available under Select or retail pricing;
10) Advanced archiving and eDiscovery features for email which will make compliance with the California Public Records Act much easier. This is not available under Select or retail pricing;
11) Mobility Suite - mobile device management software to ensure City mobile devices are secure and enables advanced functionality to wipe City information if a mobile device is lost or stolen. Also allows for remote access control for IT troubleshooting without need to bring device in from the field;
12) Enhanced Storage - 50 GB email storage per user, plus additional 5 TB files storage via OneDrive. Files are now accessible anywhere an employee can log into the internet. This is not available under Select or retail pricing; and
13) Employees may deploy Office365 on up to 5 PC’s, 5 Tablets and 5 Smartphones as part of this Enterprise Agreement.
There are many more features included with the Enterprise Agreement, all of which will significantly improve:
1) IT Management of software, hardware and network;
2) Workplace collaboration;
3) Data Security; and
4) Disaster Recovery.
As part of the Enterprise Agreement, Microsoft allows agencies to spread the licensing costs over a three- year period. Additionally, the City will be able to take advantage of Microsoft’s in-house planning consultants who will assist with the design of any major IT projects.
The County of Riverside has successfully negotiated very favorable pricing for th e Enterprise Agreement.
Normally, the City would qualify for Microsoft’s “Government D” level pricing of 15% off of retail prices. The County of Riverside was able to reduce those costs an additional 2.0%, which are the absolute lowest cost available to an organization our size. This represents a 17.0% reduction in costs over retail pricing. The vendor who is proposed to sell the licensing has included an addition .56% reduction in pricing which would reflect a total 17.56% reduction in pricing from retail pricing. There are over 800 governmental agencies in the State of California who have taken advantage of this contract.
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The County of Riverside agreement provides for ten different vendors who have been authorized by Microsoft to be the retailer for all o f Microsoft’s products included under the Enterprise Agreement (you cannot purchase direct from Microsoft). All ten vendors have provided their pricing markups based upon Microsoft’s Level D pricing. The chart below delineates each vendors markup percentag e based upon the various licensing categories. Dell Marketing, LP provides the lowest licensing cost across all the licensing products which the City purchases.
Ultimately, our Enterprise Agreement will ensure that the City is able to maintain a robust IT infrastructure as we continue to move forward with the City’s SmartCities initiatives. Technology changes so rapidly that unless the City can be agile and up-to-date with its IT infrastructure, it will be exceedingly hard to implement the technology that the City needs to keep providing high quality services to its businesses and citizens.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property holdings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware, an d has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
This Enterprise Agreement is for three years and will start June 1, 2022. The contract will end on May 31 st, 2025. The first year annual cost of the new agreement is $577,926.59. This represents an approximately $108,000 increase from the previous fiscal year. This is mostly due to the reduction in the pricing break from Microsoft for Level D pricing, increases in Azure Cloud Storage usage and increases in the number of Office365 licenses (as the City’s employee count has increased). This increase will be included in the Fiscal Year 2022-23 budget process.
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ONGOING FISCAL IMPACT
Years two and three of this Enterprise Agreement are $577,926.59 per year. The budget for these expenses will be included in the subsequent fiscal years proposed budgets and be considered by the City Coun cil as part of the normal budget process. If no additional licensing is required, then no additional appropriations will be required. This Enterprise Agreement will end on May 31 st, 2025. Prior to that time, staff will engage with Microsoft for renewal of the agreement and bring forward a new agreement for City Council approval.
ATTACHMENTS
Attachment 1 – Enterprise Agreement Enrollment
Attachment 2 – Enterprise Agreement Signature Form
Attachment 3 – Amendment to Contract Documents
Attachment 4 – Enterprise Agreement Renewal Final Quote Attachment 5 – Enterprise Agreement Product Selection Form Staff Contact: Edward Chew, Director of Information and Technology Services.