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  (Source: Jason Mick/DailyTech LLC)
Contract offers near $90 USD per workstation -- but the good news is that upgrades may finally be in the works

The U.S. Navy's Space and Naval Warfare Systems Command (SPAWAR) on Tuesday announced that it had closed a $9.1M USD "Custom Service Agreement" (CSA) with Microsoft Corp. (MSFT) to provide support for the the enterprise client version of the 14-year-old Windows XP, and for the 12-year old Office 2003 and Exchange server 2003 software.

I. Living in the Past

The contract had actually been announced back in April, but didn't receive final approval until this week.  A release from USN-SPAWAR stated:

Across the United States Navy, approximately 100,000 workstations currently use these applications. Support for this software can no longer be obtained under existing agreements with Microsoft because the software has reached the end of maintenance period.

The agreement describes:

[Microsoft] will provide hotfixes to minimize risks while ensuring support and sustainability of deployed capabilities.

Basically, Microsoft will continue to provide patches and hotfixes for known Windows XP security flaws to CSA subscribers.  However, that doesn't necessarily mean that those patches will be delivered at the same speed as those for active operating systems under the Windows Update program.  In fact, the pace of patching can generally be expected to be slower, albeit better than doing nothing.

Support for all consumer and most enterprise SKUs of Windows XP expired last April.  Customers were advised to upgrade to a new operating system, such as Windows 7, or Windows 8.1 -- both of which are eligible for the free consumer upgrade to Windows 10 on July 29.

US Navy edition
[Image Source: Jason Mick/DailyTech LLC]

But given the number of holdouts whose excuses for not upgrading ranged from stubborness to sloth to stubborness,  Microsoft offered a bit of relief, albeit a pricey alternative.  That relief came in the form of CSAs -- special agreements to support the company's more ancient, retired products.

CSAs are nothing new, but what is atypical is how many customers have agreed to use CSAs to extend support for Windows XP.  That traces partly to the ease of use and popularity of Windows XP and partly to the unpopularity of Windows Vista and Windows 8/8.1 three out of the four operating systems that have come since.

CSAs are by their nature overpriced.  In this case the U.S. Navy will spend roughly $90 USD per client workstation per year to buy support from a somewhat unwilling seller (Microsoft).  Taxpayers will foot the bill.

The good news is the Navy does have an upgrade effort under way, the bad news is that it's well behind schedule.  Much of the current Windows XP and Exchange Server based infrastructure was developed under the Navy Marine Corps Intranet (NMCI) (shore-based) and Sea Warrior (SWP) (PMW 240) programs that launched in 2000.

Naval networks

A follow on effort to NMCI -- the Next Generation Network (NGEN) directive -- launched in 2006.

Naval networks
 

In theory SWP and NGEN were supposed to together drive the move away from Windows XP both on shore and at sea, but clearly that hasn't happened.

II. CSAs May Inflate Annual Costs 50 Percent or More

Part of the struggle has been an inherent reflection of the U.S. Navy's difficulty in adjusting to the realities of modern networks.  Traditionally the Navy has operated under the expectation that Naval vessels will go prolonged periods deployed at sea with any minor maintenance being performed at sea.

While the traditional electromechanical maintenance model could potentially be applied to a high tech systems/software upgrade, at present the the U.S. Navy largely lacks the crew expertise to perform such upgrades at sea and lacks the remote administration capabilities to do such an upgraded remotely on a deployed ship.

U.S. Navy
Upgrades at sea are typically off the table, but scheduling dock downtime to upgrade ship based networks is often difficult to plan for.

Hence for the most part, each and every ship outfitted with Windows XP computers will have to eventually chug into a dedicated dock site and be service on land.

The Navy is also struggling with the cost of software support.  Traditionally the Navy's maintenance budget was based primarily on fundamental mechanical maintenance and maintenance of the onboard electrical network.  With the proliferation of onboard client computers, though, a major new ongoing maintenance cost (and headache) is introduced.

And like most problems, ignoring that headache doesn't make it go away -- it makes it worst.

Whatever overruns might have came from swapping out XP have almost certainly ballooned due to the cost of CSAs, which come in addition to the annual bulk licensing fees paid to Microsoft.  Traditionally the cost of licenses for large entrprise clients fell under Microsoft "Software Assurance Program" (SAP), which spreads the cost of licensing out over three years.

U.S. Naval technician
In this shot from 2004, Information Systems Technician 3rd Class Lakita Corey, of Williamston, N.C., troubleshoots a computer aboard the nuclear aircraft carrier USS George Washington (CVN 73), during a deployment to the Persian Gulf.  More serious upgrades often require a return to port.
[Image Source: Wikimedia Commons]

A 2004 study [PDF] by BearingPoint, an IT strategy firm, found that an enterprise-scale deployer (like the Navy) could get these three year licenses for ~$21 per client plus and additional $9-10 for the subscription to the SAP plan.  And premiere support would cost around 50,000 per year, which works out to a little under $9 USD/client.

All said that works out to around $40 USD per client per year in licensing and support costs.  Of course that figure doesn't include the cost of payroll -- hiring your own local IT folks to manage the deployment and upgrade schedule.  Add in the cost of licensing Office and server licensing costs and you're looking at some thing like $60 USD per client per user (including the costs for the server licensing, but not for IT payroll and hardware).

Dropping out of SAP and simply paying licensing costs up front could seemingly save an entity like the Navy up front.  But the problem comes in the long term, as there's a tendency to fall into complacency and not upgrade.  At $90 USD per client per year machine, Microsoft is likely reaping a premium of at least 50 percent from its clients who choose not to follow its upgrade path.  Thus in the long run entitites like the Navy who don't upgrde may face even bigger budget hits for their sluggish actions.

III. Microsoft Eradication?  Unlikely Given the Lack of Affordable Alternatives

The U.S. Navy's recent agreement is actually its second annual CSA.  The original one -- signed in April 2014, was supposed to bide it enough time to upgrade.  Chief of Naval Operations (CNO) Admiral Jonathan W. Greenert had last year called on "Windows XP Eradication Efforts" and threatened that any machine not upgraded to Windows 7 by April 2015 "risk disconnect from all Navy networks."

US Navy Adm. Greenert
Adm. Greenert, seen here addressing an audience at the 24th Annual Surface Navy Association Symposium in 2012, has tried to push for replacement of Windows XP on naval networks. [Image Source: Flickr/U.S. Navy]

However, the CNO has largely failed to back up that threat.  On the sea-based (SWP) side, his patience perhaps makes sense, given the logistics and financial costs of such a major upgrade.  But more puzzling is the fact that many of the Navy's ground based facilities (under the auspice of NGEN) are still stuck on Windows XP as well, despite having far less execuses.

The language of the latest contract hints that an upgrade will finally be completed in time for next April, commenting:

The proposed additional effort will allow the USN time to migrate from its existing reliance on the expiring product versions to newer product versions approved for use in Ashore and Afloat networks.

That sounds like progress, but beware its basically the same thing that was said last year, as well.  The CNO's memo suggests that the Navy should explore alternatives to Microsoft (e.g. Red Hat Enterprise Linux (RHEL) from Red Hat Inc. (RHT)).  That effort is dubbed the "Microsoft Eradication Team".  But the U.S. Navy appears to be having little success upgrading much alone eradicating its aging Microsoft software presence.

Indeed the idea of escaping Microsoft would likely bring even higher costs, according to that same Bearing Point analysis, which found lifetime costs for full support were actually highest for Red Hat, followed next by Micro Focus International plc (LON:MCRO) subsidiary Novell, who offers enterprise users a SUSE Linux based solution.  Microsoft's costs for a five year deployment were actually the lowest -- roughly 9 percent lower than Novell and 60 percent lower than Red Hat.

Windows XP box

Based on recent market research, perhaps the Navy should focus its efforts first on an upgrade instead of splitting its time between searching for alternatives to Windows/Office and trying to figure out an upgrade plan.  Because as it stands nothing is getting accomplished (or not much at least).

While the U.S. Navy is by far the branch of the U.S. Armed Forces with the most legacy Windows XP and Exchange/Office 2003 dependence, it's not entirely alone.  The U.S. Army still has 8,000 machines (which it signed a CSA with Microsoft to support).  And other sections of the U.S. Department of Defense (DOD) also have older machines as well.  And that's not to mention the numerous federal agencies that are stuck on XP.

While in a way this presents a strategic challenge to Microsoft, who needs to promote enterprise adoption of its more recent operating systems, it also represents a financial opportunity for the tech giant.  Knowing that there's perhaps no cheaper, more reliable alternative to its enterprise software and support offerings, it's content to sit back and charge parties like the U.S. Navy a modest markup on its licensing and services.

Sources: FBO [grant page], via Ars Technica





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