The Department of Justice’s complaint against Oracle alleges that the government was overcharged for software licenses despite the company’s agreement to discount prices to the government at a level equal to or greater than the discount given commercial customers.  DOJ alleges that the practice continued for almost a decade and cost taxpayers hundreds of millions.   

Software licensing is a good fit for shared services.   Purchasing and managing software licenses is high volume depending on the software, contracting processes for software and even contract language can be standardized from one vendor to the next, it is not high touch – from the customer’s perspective, there is no ambiguity about the scope of the activity and the cost of negotiating enterprise software licenses can be determined with precision.  Most importantly, enterprise licenses means leveraged buying.    Negotiating a government wide contract vehicle for software agencies commonly use is better than leaving each agency to negotiate (possibly better but more likely worse) terms of sale.  GSA acted in much the same way a shared services center would act if enterprise licensing was one of its services.  We got this part right.   

The Federal Government is the elephant in the room when it comes to office, business and information software.    If the  US Government was a company it would be one of the largest if not the largest in the world.   GSA in including “most favored” terms in the agreement with the software company, was spot on in insisting that the federal government as one of the largest users of the company’s software should get the best rate.  Why?  Because size matters when it translates into sales volume.  Wal-mart knows this.  So do their suppliers.    But the vendor will likely not offer a volume discount, since, after all, the discount cuts into profit.  So it falls to the high volume buyer to insist on  it.  We got this part right.

So far, so good. But where did we get off track?

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