Microsoft pays customer $250,000 to use Office 365

The University of Nebraska is dumping Lotus Notes for Microsoft’s Office 365, and getting $250,000 from Microsoft to help make the move, the institution said.

“Microsoft is providing $250,000 in business incentive funds to help us migrate from Lotus Notes to Office 365,” the school said. “That funding will pay for some consulting and licenses to convert a large percentage of our users from Lotus Notes to Office 365. We will also use that funding to pay for a Microsoft Premier Support agreement covering email and Microsoft Office applications for the entire University.”

Clearly, customers buying in bulk have some leverage in negotiating contracts with Microsoft, and education customers typically get better deals to begin with. For example, the Google Apps basic service for schools is free, with discounts for security and compliance software. But the scope of discounts provided by Microsoft isn’t usually revealed in public.

“I don’t know how common it is, but it certainly happens,” Microsoft licensing analyst Paul DeGroot of Pica Communications tells Network World in an email. “In this case, you can see that it came down to a choice between Microsoft and Google, and Microsoft probably threw in $250,000 in BIFs [Business Incentive Funds] to cement the deal. This stuff generally isn’t public, for good reason: customers might get the idea that if they’re serious about Google, Microsoft may sweeten the pot to win the deal. Wouldn’t want that to get out, would we?”

Nebraska will still be paying, though. The university’s current costs are nearly $1 million per year, a number that apparently includes both software licenses and internal resources like hardware and staffing. That number will be cut to less than a half-million dollars per year.

“It is estimated that the annual operating costs associated with delivering an e-mail service can be reduced by more than 50% from the current cost, which is just under $1 million,” the university said. “There will also be one-time upfront costs associated with migrating current Lotus Notes accounts to a new system, rewriting some applications and providing training, but significant savings will be realised over the long term.” Nebraska will start the migration in the fall and finish by summer 2012.

Office 365 for educational customers includes Exchange, SharePoint, Lync and Office Web Apps, and costs $10 per month for each faculty and staff member, but is free for students. Office desktop software can be purchased for another $14 per month for faculty and staff, or $2 for students.

Those are list prices, of course, and can be negotiated downward.

Microsoft would not reveal details of the program that Nebraska used to get $250,000 in incentives.

“MSFT does not disclose terms of individual customer deals,” a company spokesperson said. “We do however, support a variety of programs designed to help customers adopt and deploy our solutions.”