Departments sign £300m Microsoft deals

HMRC and Defra ink long-term software contracts

Credit: Pxhere

Two major government departments have each signed new £100m-plus contracts to fulfil their needs for Microsoft products and services over the coming years.

HM Revenue and Customs and the Department for Environment, Food and Rural Affairs have both recently signed multi-year engagements covering the mass provision of software licences, as well as cloud hosting and support services. A cumulative total of almost £300m is expected to be spent via the two deals between now and 2028, according to freshly published procurement documents.

The HMRC contract came into effect at the beginning of this month and runs for five years. The deal was won by IT firm Bytes – which replaces another of Microsoft’s biggest UK reseller partners, Softcat, as the tax agency’s core provider of the vendor’s products.

The department’s previous Microsoft agreement ran for four years and was valued at £105m. The new deal will be worth £166.3m to the chosen provider.

The text of the contract indicates that HMRC – which is one of government’s largest departments, with about 66,000 staff – asked bidders to demonstrate “depth of experience and skills in managing the Microsoft estates of Public Sector customers of comparable scale and complexity”.

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Prospective suppliers were also required to show “how and where you will deploy capabilities to deliver savings, operational or financial efficiencies, and any other benefits”, as well as committing to demonstrating how they would help the department plan its future tech deployments and offer the flexibility required to scale usage up and down.

The Defra contract commenced on 12 June and runs for nearly 40 months, concluding on 30 September 2026.

The deal is valued at £124,5m and was awarded to the department’s existing primary Microsoft supplier, Phoenix Software – which previously won a three-year £46m contract in summer 2020.

The replacement agreement is set to see the environment department ramp up its usage of Azure cloud services, with £55m expected to be spent in this area during the lifespan of the contract. 

The deal also covers core system and productivity applications for 32,000 devices across 29,000 users, as well as 3,100 server software licences, according to the contract.

“[Defra] recognises the value in software support services in optimising its software estate,” the document said. “Over the term of the contract, [it] will be looking to exploit opportunities to generate savings and improve ICT services for end users. Considering this, [Defra] is interested in the value-added activities and license expertise, that can be offered to take the relationship [with the] supplier to a new level.”

It added: “[The supplier] must have an in-depth understanding, and be able to demonstrate, how to gain the maximum leverage within the software market. [Defra] is looking for a supplier to work collaboratively with its in-house teams in order to share knowledge and evaluate longer term strategies for the IT landscape, whilst meeting the ever-increasing needs of the business and reducing its total cost of ownership. [Defra is also] looking for a supplier who can add value to the organisation by not only offering a seamless and integrated approach to IT assets purchasing but actively help it to reduce its operating costs – a supplier with a proven track record in software license management and procurement practices.”

Sam Trendall

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