City of Chicago chooses Office 365, will save $1.3 million over 4 years

Microsoft and Google are competing for large and small businesses to use their cloud-based productivity services. Google recently claimed they want to steal 90 percent of Microsoft Office users and have them use Google Apps. Today, Google Apps apparently lost a fight for a major government entity to Microsoft Office 365.

Microsoft's official blog has revealed that the city of Chicago has signed a deal that will enable 30,000 of the city's employees access to Microsoft's cloud software. The blog states:

The City will consolidate its three disparate e-mail systems into one Microsoft Office 365 environment in an effort to improve collaboration, enhance security, and provide both mobile and desktop access for anytime, anywhere productivity. This new strategy will deliver more than $1.3 million in cost savings over the next four years – a whopping 80 percent decrease in cost per employee – while ensuring City workers have access to Web-based versions of the Microsoft tools they rely upon every day, including Microsoft Outlook, Word, OneNote, Excel, Lync and PowerPoint.

Microsoft did not give any specifics on the total cost of the Office 365 contract with the city of Chicago. A press release from the city says that the migration to the cloud service will be fully completed by the end of 2013.

Source: Microsoft | Image via Microsoft

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Just wait for one day when the server outage happens for whatever reason or MS cloud server get hacked and then cows will come back to home. LOL

Outage more likely than hack, but you have a valid point. You're giving up some control. And do you know that both Google and MS assume a given amount in-house unscheduled downtime when calculating Cloud savings with regards to email? If you have a well-built Exchange Environment and Maintenance window policy, you should have no unscheduled downtime. If you're on Exchange 2007 or higher, what is email downtime? LOL. Seriously.

I'd really like to see what that price per seat they negotiated was. This seems to be more of a savings on licensing and not actual hosting costs.

For certain industries the cloud makes sense, but stories like this that lack vital information (to Xeno's point) only tend to 'cloud' the issue.

Edited by Dashel, Jan 3 2013, 9:23pm :

You should probably consider cost savings on things like floor space, electricity, staffing, infrastructure, and so on. Depending on the level the city is taking it, they're could be savings that go well beyond simply saving on licensing costs.

Hmm.. I think you might be able to figure that out from the article. Think of it as a math word problem.

30,000 employes, 1.3 million in savings and it is 80% decrease in cost per employee.

so hmm maybe I can do this...

Let X = the initial cost of whatever they were using previously.

X * 80% = 1.3 million
X = 1.3 million / 0.8 = 1.625000 million
1.625 - 1.3 = 0.325 million
0.325 million / 30,000 = $10.83 per employee.

Lol, Idk. That sounds low. Maybe I did something wrong. Hehe.

Edit: wait it is 1.3 million over 4 years... thats much more complicated. oh well.

I'm sure the bulk of the saving came from eliminating licensing, maintenance & support, and associated hardware and support to maintain 3 disparate email systems. One could have been Lotus Notes, another could be mainframe which eliminating that licensing could be hundreds of thousands a year. Just hard to say without details.

Clearly, savings in that amount is coming from "reassigning" staff that was previously maintaining 3 email systems (they'll be doing something else, vapor savings but that's how it's calculated) and licensing and maintenance for those systems. If you replace an in-house Exchange Environment (2007 or higher) you're not going to save much if anything if your environment is well-built and functioning properly.

Shadrack said,
Let X = the initial cost of whatever they were using previously.

X * 80% = 1.3 million
X = 1.3 million / 0.8 = 1.625000 million
1.625 - 1.3 = 0.325 million
0.325 million / 30,000 = $10.83 per employee.

Lol, Idk. That sounds low. Maybe I did something wrong. Hehe.

Edit: wait it is 1.3 million over 4 years... thats much more complicated. oh well.


I doubt they're paying $325,000 for 33,000 employee licenses...

really depends on the software/systems. Annual support and licensing is a cash cow of the industry. Peoplesoft licenses come to mind.

That would be a steal. By my math, even with a Govenment/Non-Profit discount they would still be at about $1.2 Million on the Office/Exchange licensing alone. ($34x30K + $6x30K and change)

MorganX said,
I'm sure the bulk of the saving came from eliminating licensing, maintenance & support, and associated hardware and support to maintain 3 disparate email systems. One could have been Lotus Notes, another could be mainframe which eliminating that licensing could be hundreds of thousands a year. Just hard to say without details.

Clearly, savings in that amount is coming from "reassigning" staff that was previously maintaining 3 email systems (they'll be doing something else, vapor savings but that's how it's calculated) and licensing and maintenance for those systems. If you replace an in-house Exchange Environment (2007 or higher) you're not going to save much if anything if your environment is well-built and functioning properly.

You are probably right.

Nas said,

I doubt they're paying $325,000 for 33,000 employee licenses...

Does that sound too high or too low to you? To me that sounds too low to be honest.

Shadrack said,
Does that sound too high or too low to you? To me that sounds too low to be honest.

I second that - most licensing I've heard normally works out at about $25 per user at the low end. Unrelated to your post, $1.3 million over three years may not sound a lot but lets just assume that is at a health clinic and $1.3 million is saved, that could work out to an extra 20 elective surgeries for low income families where the full cost can be paid. $1.3 up front sounds small but when you think about what the money could be used for then you suddenly realise the old saying, "take care of the pennies and the pounds will take care of themselves".

Shadrack said,
Let X = the initial cost of whatever they were using previously.

X * 80% = 1.3 million
X = 1.3 million / 0.8 = 1.625000 million
1.625 - 1.3 = 0.325 million
0.325 million / 30,000 = $10.83 per employee.

Lol, Idk. That sounds low. Maybe I did something wrong. Hehe.

Edit: wait it is 1.3 million over 4 years... thats much more complicated. oh well.

Your math is correct. It will come out to be $10.83 per employee and that too for 4 years. Earlier cost was $54 per employee for 4 years.

surprised? don't be. Google job candidates need office experience because google itself doesn't use the mess that is Docs. If you want to get work done, google docs is like a horse ad buggy and office is a modern car.

I think they're looking for people with extensive Office experience so they know what features to steal next.

neonspark said,
surprised? don't be. Google job candidates need office experience because google itself doesn't use the mess that is Docs. If you want to get work done, google docs is like a horse ad buggy and office is a modern car.

Putting that aside for the moment, the strength of Microsoft is: Integration, Integration, Integration, Integration!

This is sort of news makes it harder and harder for me to convince clients that the "cloud" is not a one-to-one replacement to in house services in terms of reliability and control. the cloud and specifically Microsoft 365 is great but I've tried it and my own server results in quicker email exchanges, more control of spam filters, and more reliable Activesync.

You will always have more control over your own deployments, office 365 makes it easy to operate without the need for an extensive IT department.

I know the benefits of the cloud. My point is as I said, news like this makes it harder to weigh value in on-premise solutions against cloud solutions. Price is tangible, quality is less so.

So your saying you will get less business if companies go to these solutions?

Microsoft support is usually better then third party support when it comes to their own products. For a lot of business calling the product makers themselves for support is much better then relying on a third party.

My point really isn't that complicated. The cloud isn't the end all be all and to prove that to people who don't know any better only gets harder when they see news like this.

I'm not sure how you claiming to be an IT person automatically gives you authority to say it's bull. Especially considering that my experiences with 365 and Hosted Exchange on several different accounts have all had the same results. I receive email instantly with my own server where 365 has inconsistent delays. I also have complete control of anti-SPAM techniques. I also don't have consistent issues connecting to Activesync with my own server.

Xenosion said,
This is sort of news makes it harder and harder for me to convince clients that the "cloud" is not a one-to-one replacement to in house services in terms of reliability and control. the cloud and specifically Microsoft 365 is great but I've tried it and my own server results in quicker email exchanges, more control of spam filters, and more reliable Activesync.

I'm using Office365 be it just the Exchange functionality and to be perfectly blunt the reliability is no better or worse than my experience using my own employers email setup nor is it more customisable once you drill down into the nitty-gritty details. The biggest question that needs to be asked for many of these organisations is whether having an 'on site' server can be justified by some quantifiable measurement vs. pushing it into the cloud with slight less functionality but saving a reasonable amount of cash as a result. Question is, assuming your scenario is true, is the 'superiority' of your experience really worth $1.3 million at the end of the day?