Data#3 has held onto its role as the federal government's sole provider of Microsoft licensing solutions following a competitive pitch to join a newly created procurement panel.
The Digital Transformation Agency (DTA) today announced a new government buying scheme for software solutions and licensing panel for government agencies. Data#3 was appointed as the only supplier for the Microsoft licensing category, the first category announced for the panel.
Data#3 has been the federal government's exclusive Microsoft licence reseller (LSP) since 2008 as part of the volume sourcing arrangement (VSA).
Last year, the DTA decided to replace the arrangement in an effort to broaden its supplier base and allow for additional providers for Microsoft licensing.
Although there was the option to open up the panel to multiple suppliers under the new arrangement, Data#3 was once again selected as the sole provider.
The arrangement was worth $364 million from 1 July 2013 to 30 June 2016.
While the supply agreement offers significant revenue, software licensing to government is notoriously low margin.
In its recent half-year results, Data#3 generated $446.6 million in product reselling revenue but just $8.2 million of net profit – a margin of 1.8 percent.
Data#3 also has a services business that turned over $100 million in the half year. Services tend to be more profitable though the company suffered setbacks in the six-month period and reported net profit of $1.8 million for services.
Investors warmed to news of the government deal, and helped drive Data#3's share price up 7.4 percent on Friday afternoon to $1.82. Data#3's shares have been languishing around $1.60 most of the year after briefly hitting an all-time high of $2.00 on 8 December.
Commenting on the government win, Data#3 chief executive Laurence Baynham said: "Data#3 has provided software and services to the Australian government for many years. We are pleased that the skills and knowledge provided by our team across government is valued.
"In winning this significant contract, we have committed to a business relationship that is based on trust, innovation, and the delivery of successful outcomes. We look forward to working with the DTA and all associated entities, helping them to leverage innovative technology and to provide benefit to the Australian economy."
Earlier this year, Data#3 landed a contract to replace the Department of Finance's 12-year-old file sharing collaboration platform with 90,000 users with a new Microsoft Azure solution.