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APPROVE MOTION TO AUTHORIZE A MICROSOFT ENTERPRISE AGREEMENT FOR THE USE OF MICROSOFT OFFICE 365 AND OTHER MICROSOFT SOFTWARE AND SERVICES
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RECOMMENDATION
Staff recommends the City Council approve a motion:
1. Approving findings which support and justify an exception to the competitive bid process;
2. Authorizing the City Manager to execute an agreement with Insight Public Sector (Attachment A) for a Microsoft Enterprise Enrollment term of 36 months, including an option to renew for one additional 36-month term (Attachment B), for an annual estimated cost of $735,000 in FY 2018-19, $900,000 in FY 2019-20 and $1,115,000 in FY 2020-21 for Microsoft Office 365 and other Microsoft services under the terms established in the County of Riverside cooperative purchasing agreement (Attachments C and D); and
3. Authorizing the City Manager to take necessary and appropriate actions to carry out the purpose and intent of this motion.
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Summary
Three years ago, the City migrated from Novell’s GroupWise email system to Microsoft Exchange/Outlook utilizing Microsoft’s Enterprise Agreement (EA) through a cooperative purchasing agreement. This migration greatly expanded the productivity and technology tools available to City employees and created a far more stable and robust email system. In addition, Microsoft Office offered new document management and online collaboration systems for employees, resulting in greater efficiency and teamwork.
A new Microsoft EA will allow the City to continue to use Microsoft Office 365 as our cloud-based email system. In addition to Outlook, Microsoft Office 365 includes Word, Excel, PowerPoint, Publisher, OneDrive, and SharePoint. Additionally, Microsoft Office 365 provides for centralized document storage and meets regulatory and eDiscovery requirements. An additional element, Microsoft Azure, is included in the proposed Microsoft EA to begin a strategic transition of data storage and services to the cloud. Including Microsoft Azure cloud services will allow the City to move services from the City’s data center to Microsoft’s secure cloud, resulting in a more streamlined and flexible data storage environment.
DISCUSSION
Background
The Information Technology (IT) Department’s highest priority is to continue to provide a range of systems that City departments can rely on to efficiently carry out their work, including email, calendar, and email address directory as well as ease of email access from all devices. In addition, the IT Department recognizes that an integrated suite of office productivity software, online document management and collaborative online work spaces are becoming an industry standard and will allow City departments to work more effectively and collaboratively. We continue to strive for an easy-to-use, reliable, secure, 'always on' IT infrastructure on our client’s behalf.
The migration to Microsoft Office 365 and complementary Microsoft products has greatly expanded the productivity and technology tools available to City employees. More importantly, this migration established email, employee directory and document management on a stable, reliable and robust platform. Over the past three years, Microsoft Office 365 has provided employees with much needed tools to work in a more effective and collaborative way.
Riverside County has negotiated a Master Microsoft Enterprise Agreement through a competitive solicitation process. This Master Agreement has been used by more than 900 organizations in the State of California and is the basis for the State of California Department of General Services enterprise program. This program allows cities like the City of Stockton to respond to rapidly changing technology needs without completing repetitive, resource intensive processes to procure the latest software.
Present Situation
The IT Department supports Microsoft Office 365 and other Microsoft business products for approximately 1,700 employees. These applications are the primary productivity tools used for managing day-to-day business functions and communication. The current Microsoft EA licensing term for Office 365 and other products expires on June 30, 2018. Staff recommends leveraging the investment in migrating to Microsoft Office 365 by executing a new Microsoft EA to renew licensing for an additional 3-year period with an option for an additional 3-year term. Beyond the fact that there are limited options for other email and office productivity tools, significant staff time has been invested in learning and maximizing the tools available through Microsoft 365. Transitioning to other tools would require additional resources and training, impacting efficiency and productivity.
Staff recommends procuring Microsoft services through a Microsoft EA for Microsoft Office because the agreement allows the City to pay an annual fee and subscribe to the needed software at a set price. The price is locked in for the term of the agreement. The City continues to receive the latest releases without paying additional fees. In addition, Riverside County established a cooperative purchasing agreement to include all government entities within the State of California. Riverside County completed a new solicitation for Microsoft services since the last Microsoft EA was executed by the City of Stockton. This competitive process included seven Licensing Solution Providers, and the County’s Evaluation Committee determined Insight Public Sector, Inc. to be the lowest responsive and responsible bidder for the County. Insight Public Sector offers an even greater discount (-0.35% markup) over the typical government discount of 7.5% (Attachment E) offered through the Master Microsoft EA. Leveraging the Riverside County cooperative agreement saves the City time and resources and achieves cost savings that the City could not attain on its own.
The annual investment for Microsoft products is estimated at $735,000 in FY 2018-19, $900,000 in FY 2019-20, $1,115,000 in FY 2020-21. These conservative estimates represent the amount of services that we anticipate using for three product areas. Although the package of services procured will fluctuate based upon the needs of City departments, and the City will only be charged for actual services provided, a preliminary plan is summarized in the chart below. Office 365 represents the ongoing and anticipated growth costs for email, Word, Excel, PowerPoint, One Drive, and SharePoint. Office Productivity represents updates to other Microsoft software products such as Project and Visio. Azure represents Microsoft’s cloud services, including server, application, and backup hosting.
|
Business Solution |
FY 2017-18 |
FY 2018-19 |
FY 2019-20 |
FY 2020-21 |
|
Office 365 |
$450,000 |
$450,000 |
$500,000 |
$550,000 |
|
Office Productivity |
NA |
$135,000 |
$150,000 |
$165,000 |
|
Azure Cloud |
NA |
$150,000 |
$250,000 |
$400,000 |
|
Total |
$450,000 |
$735,000 |
$900,000 |
$1,115,000 |
Costs for the core Office 365 products in future years are comparable to current costs, with incremental increases for procurement of new licenses for new employees, additional SharePoint storage as that service is fully implemented and new servers should the need arise.
The new costs for Office Productivity represent an investment in Microsoft Project and Visio as City staff use these products for many critical City operations. However, user licenses are out of date, with a majority of employees on old versions without full capabilities and support. Migrating current Microsoft Project and Visio licenses to a subscription-based model is estimated at $135,000 per year. A one-time update to Microsoft Project and Visio licenses would be $190,000 but would quickly become out of date as product upgrades become released by Microsoft.
The new costs for Microsoft Azure services are to purchase space for storage, network, and virtual machines in the Microsoft Cloud. IT Department long-range planning anticipates phasing data storage and other network services from our current data center to the cloud. Each year of the three-year term of the Microsoft EA, the City will purchase additional space in Microsoft Azure as services are methodically transferred from the City’s data center to the cloud. This is important because it will allow the City to reduce the 400 E Main datacenter to avoid building a costly new datacenter at the Waterfront Towers. Within the first year of purchasing cloud services, there is an estimated $111,000 of reductions in equipment and materials that would otherwise need to be replaced on-site and a $25,000 reduction in annual operational costs.
In summary, the Microsoft EA purchases a broader package of services that provide additional tools for City employees to work more productively. This package provides tools within an integrated system, includes automatic updates and upgrades to all products and shifts maintenance and security responsibilities to Microsoft. This package provides modernized tools and follows best practices in the technology industry, including greater flexibility in our operations. This approach frees up IT staff time to work on other projects. It also provides important flexibility in providing data and applications services to the cloud.
Findings:
Stockton Municipal Code section 3.68.070 provides an exception to the competitive bidding process in cases where the City Council has approved findings that support and justify the exception. The proposed findings are as follows:
• Continuing to utilize current Microsoft technology will leverage investments in employee training resulting in greater efficiency and collaboration realized through this technology.
• Continuing to utilize current Microsoft technology will generate an increase in user productivity by enabling integration with other automated systems the City is currently using.
• Microsoft offers suites of office productivity, communication and collaboration tools that are not available in the same integrated service model.
• Riverside County has established a cooperative purchase agreement with Insight Public Sector, Inc. and offers all entities within the State of California the same Terms and Conditions, the same price and for the same effective period.
• Riverside County established these cooperative purchase agreements pursuant to a competitive bidding process.
• The bid specifications used by Riverside County have been assessed by Procurement as compatible to the City of Stockton standards with regards to the formal process, lowest pricing, awarded contract, and cooperative purchasing language allowing public agencies to avail of such process and pricing.
• By using the Riverside County cooperative purchasing agreement with Insight Public Sector, Inc. for Microsoft software and services, the City will realize substantial savings.
FINANCIAL SUMMARY
Expenditures for the Microsoft EA for Office 365, Office Productivity, and Azure are estimated as follows:
|
Fiscal Year |
Amount |
|
FY 2018-19 |
$735,000 |
|
FY 2019-20 |
$900,000 |
|
FY 2020-21 |
$1,115,000 |
Appropriation of funds will be included in the FY 2018-19 budget of the Computer Internal Service Fund, account number 502-5101-571, in an amount sufficient to fund the FY 2018-19 estimated cost of $735,000. Future annual costs will be included in the annual budget appropriation process.
As noted above, cost estimates include conservative growth in the number of user licenses, storage and new servers. The combination of new licenses and servers purchased will fluctuate based upon the needs of the City. The Microsoft EA authorizes purchase up to the estimated amounts, but will be charged based on actual purchases. The annual cost increases in future years are consistent with IT Department financial projections for the services provided. The cost increases to begin phasing in Microsoft Azure cloud services will be offset by some cost savings as data center equipment is not replaced. However, for a three to five-year period, costs may be higher as the City maintains the data center while transitioning to cloud based services.
Attachment A - City of Stockton Agreement with Insight Public Sector
Attachment B - Microsoft EA Enrollment
Attachment C - Riverside County Cooperative Contract
Attachment D - Riverside County Microsoft Master Agreement
Attachment E - Riverside County Cooperative Contract Discounts