At Last, Microsoft's New Products Are Helping Its Troubled Partnership With HP

Meg WhitmanHP CEO Meg Whitman

Photo: Flickr/TechShowNetwork

The tech industry has been riveted by a question about Microsoft’s bold moves into providing cloud software and making its own hardware: Can it keep PC partners like Hewlett-Packard and Dell happy and help them get a piece of the pie while fighting off Google and Apple?A new deal suggests the answer is yes.

Microsoft racked up a big win for Office 365, its cloud-based answer to Google Apps. The Department of Veterans Affairs has hired HP to move 600,000 users to a government-approved version of Microsoft’s online software.

That tops the previous biggest, publicly announced Office 365 contract, Toyota’s 200,000 worldwide users.

The department will pay HP’s Enterprise Services unit to move its workers over on a five-year contract worth $36 million, according to the press release. HP has been the government agency’s go-to tech services company for 13 years.

And $36 million worth of new work is really good news for the beleaguered unit, which has been hit hardest by HP’s layoffs and restructuring plans.

For Microsoft, it’s not as big a deal financially as, say, the Toyota contract, since Toyota was moving off a rival product, IBM’s Lotus Notes, to Office 365.

Veterans Affairs signed a big, comprehensive contract with Microsoft in July, covering a host of older products for 400,000 PCs and 100,000 mobile devices. The department has now added Office 365 to the mix, and we’d wager that cost the government agency not much more than what it had committed to spend in July.

For Microsoft, this is more about bragging rights that Office 365 can handle a customer as big as this—and that longtime partners like HP can play a role.

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