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CHIPS Articles: Enterprise Licensing in the Department of the Navy

Enterprise Licensing in the Department of the Navy
By Floyd V. Groce - January-March 2002
The Department of the Navy (DON) is currently undergoing a sea change in the way information technology (IT) is acquired and provided. Nowhere is this more apparent than the changing view of IT as a service rather than a product. This centralized delivery of IT as a service, such as the Navy/ Marine Corps Intranet (NMCI) and the shipboard Information Technology for the 21st Century (IT-21) programs, provides the infrastructure necessary for the DON to realize significant savings and efficiencies for common-use IT.

Although providing a highly innovative approach to delivering IT services, these programs initiatives do not satisfy all mission requirements, nor do they relieve the enterprise from performing IT capital planning and investment control. The enterprise, whether a field command or major claimancy, must tailor its IT services and ensure proper integration in order to effectively meet mission requirements. Now more than ever, the need for better enterprise level management of IT assets has become paramount.

The focus of Enterprise Licensing is on the fundamental challenge of procuring software for the enterprise: to reduce the high price and expense of software acquisition, distribution, training, maintenance, and support. Enterprise Licensing is an essential tool for the Department of the Navy Chief Information Officer (DON CIO) to use in achieving successful enterprise integration. As a tool, Enterprise Licensing is used to coordinate multiple IT investments and leverage the buying power of the enterprise for commercial software products.

By consolidating software requirements and negotiating Enterprise Agreements with software vendors, the DON realizes significant Total Cost of Ownership (TCO) savings in software acquisition and maintenance. The goal is to develop and implement a process to identify, acquire, distribute, and manage software entitlements from the enterprise level.

Enterprise Licensing is the DON component of the Department of Defense (DoD) Enterprise Software Initiative (ESI). The ESI is a joint initiative to streamline the acquisition process and provide best-priced, standards-compliant software products to DoD customers and authorized DoD contractors.

In September 2001, the ESI was approved as one of ten "quick hit" initiatives under the DoD Business Initiatives Council (BIC). The Under Secretary of Defense for Acquisition, Technology and Logistics chairs the BIC Council and its members include the Secretaries of the Navy, Army and Air Force, and the Vice Chairman of the Joint Chiefs of Staff. Under BIC sponsorship, the ESI will be established as the benchmark acquisition strategy for commercial software within the DoD.

This acquisition strategy uses Executive Agents from the military Departments and Defense components to negotiate and manage Enterprise Software Agreements (ESAs). For example, the DON has responsibility for negotiating and managing enterprise software agreements ESAs for Office Suites, including the entire product and service offerings of Microsoft. These ESA are open to all DoD, the U. S. Coast Guard, and Defense contractors when authorized by their contracting officer.

Enterprise Licensing has also been positioned as an enabler for the NMCI. The NMCI prime contractor is authorized to use enterprise agreements, and has made judicious use in packaging NMCI service offerings. A current list of ESA is provided in the Designated Software Table of the ESI Web site at http://www.esi.mil/.

Organizing and coordinating the overall effort is critical to success, and a team approach was used composed of members from across the DON. The Enterprise Licensing Team is responsible for coordinating DON-wide requirements, and also provides primary support to the ESI for assigned software product areas. The team approach is a proven method to operate across organizational lines, leverage team expertise and include the private sector in developing innovative solutions to multifaceted acquisition problems. In addition, Enterprise Licensing incorporates the following principles to reduce risk and improve chances for success:

(1) Enterprise Licensing is a key enabler of Software Asset Management (SAM). SAM is a process within IT asset management that brings together the physical, financial and contractual attributes of software to enable the delivery of cost-efficient, timely business solutions. In essence, it is the process of proactively managing software as an asset of the organization rather than a consumable or an expense item. It is a practical business approach that supports other essential processes such as IT Capital Planning. SAM embodies IT Capital Planning Process methodology, but extends the methodology to make enterprise software use a management consideration. This approach helps to prevent overbuying of licenses (entitlements), and supports effective use of software through resource sharing and reuse. Liability for software misuse (piracy) is also a major consideration for an organization to manage its software resources as enterprise assets.

(2) SAM is implemented through a framework of recommended procedures, methodology, and techniques that are used to establish an enterprise-wide process. The framework sets forth a practical, flexible and adaptable approach to support mission requirements.

At the core of Enterprise Licensing is the concept of an ESA combined with a streamlined acquisition process. One approach that has been successful for establishing an Enterprise Agreement is a Blanket Purchase Agreement (BPA) placed against a General Services Administration (GSA) schedule with a software publisher or reseller. This recognized best practice leverages the favorable GSA contract terms and conditions with quantity price discounts negotiated by the Enterprise Licensing Team. The Team targets common-use commercial software products. Before engaging one or more software resellers in discussions, the Team first works with the software publisher to understand their pricing and licensing model, including terms, conditions, and product use rights.

The Team may need to meet with the software publisher several times to reach an understanding of the model as well as each party's incentives for entering into an Enterprise Agreement and maintaining it over time. If needed to help establish the business case, the Team enlists the help of the software publisher in identifying the installed base of their software in the DON or DoD enterprise. This helps validate demand and can provide additional negotiating leverage so that the installed base of software can be grandfathered into the Enterprise Agreement.

Following this approach, the Enterprise Licensing Team can achieve savings for current customers as well as discounts for future software investments. As a result, Enterprise Licensing has produced some significant success stories, measured by ease of use for both large and small customers, efficiencies in procurement, tracking of software purchases, and substantially reduced prices. Discounts from the GSA Schedule pricing have reached 84 percent for some special solutions ordered through ESA.

The benefits of Enterprise Licensing have also been shown in acquiring IT hardware and services in addition to software products. For example, significant savings have been achieved with expanded access to the premier IT research and advisory service companies through the use of ESA. These research and advisory services facilitate adoption of industry best practices.

Enterprise Agreements can be used to better integrate government and commercial business processes. Since all Enterprise Agreements are open for use by authorized contractors, the enterprise shares in the savings of reduced cost of software acquisition. In addition, Enterprise Agreements include requirements to ensure products are compliant with the DoD Joint Technical Architecture (JTA) standards, thereby promoting interoperability. The Enterprise License process and end products are designed for flexibility, and are suited to multiple operating environments that support the mission of the enterprise.

The Enterprise Agreement model, itself, is carefully constructed to better allocate and manage risk between the parties. As a risk management tool, the Enterprise Agreement protects the enterprise's interest while reducing TCO and improving performance and schedule. The end result is a shorter acquisition lead-time to meet the customer's needs. Enterprise Licensing also improves the software acquisition system with a focus on better use of buying professionals. Responsibility for negotiating Enterprise Agreements is assigned only to offices with demonstrated specialized knowledge and expertise.

A marketing program is also used to advertise Enterprise Agreements to DON and DoD customer groups. This program includes Service policy memoranda, appropriate promotion brochures, publications, and presentations at technology symposia. Lessons learned from each Enterprise Agreement negotiation are captured in a database for future reference, and end users are encouraged to communicate directly with the Software Product Manager by using the communications feature of the ESI Web site.

Enterprise Licensing success depends on establishing an enterprise process that remains viable to support the organization mission and satisfies the needs of its customers. Leading edge Internet and electronic commerce technology are employed to implement improved business processes. For example, Enterprise Agreement products are "stocked" and available for ordering online through various virtual IT stores accessible to customers. Web technology is incorporated into the Enterprise Licensing business processes to facilitate improved coordination and information exchange among Team members.

Finally, regular reviews of the status of Enterprise Agreements are conducted for potential improvement, additional consolidation, and expansion of customer base.

The DON Enterprise Licensing process is proving to be an essential tool in enterprise integration, and will have a significant, positive impact across the DON and DoD. By leveraging buying power, the DON will realize significant savings in TCOlower prices, ensure IT investments comply with DoD-wide standards, architectures, policies and procedures, and enable ordering and tracking of licenses through a common, enterprise-wide coordinated process.

Floyd V. Groce is the DON CIO Enterprise Licensing Team Leader.

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