Key insights
- The Pentagon awarded Microsoft a $9.7 billion, five-year contract to consolidate software licenses. This is not new spending, but a renewal and consolidation of existing budgets. The deal provides Microsoft with a guaranteed foothold across the U.S. armed forces. The market impact is slightly positive for MSFT as it secures future revenue streams.
By Mike Stone
WASHINGTON, May 27 (Reuters) - The Pentagon on Wednesday announced a five-year, $9.69 billion agreement to consolidate Microsoft and other enterprise software licenses scattered across the military services, the intelligence community, and the U.S. Coast Guard into a single contract vehicle, officials said.
The cost-cutting effort hands Microsoft a guaranteed enterprise-wide foothold across the U.S. armed forces while squeezing out duplicative spending that officials said had quietly ballooned across years of fragmented, go-it-alone procurement.
The deal, called the Core Enterprise Technology Agreement, is not new spending because baskets of Pentagon software contracts came up for renewal simultaneously. The funds come from existing budgets already being used to purchase Microsoft 365 subscriptions — covering email, Word, Excel, PowerPoint and related tools — along with cloud subscriptions and on-premises licensing, into one place where the full purchasing weight of the department can be used to drive down costs.