HP Loses $36 Million in Office 365 VA Contract Termination

HP Loses $36 Million in Office 365 VA Contract Termination

Either something changed with the government's Cloud First mandate or with it's modernization policy because the VA just terminated a huge Office 365 agreement with HP due to "a change in the VA's requirements." 

In November of 2012, HP announced a huge deal ($36 million) with the Veteran Affairs Department to move the agency to the Microsoft Office 365 for Government cloud. The HP deal was made under the VA Transformation Twenty-One Total Technology program, which is the Veteran Affairs Department’s information technology modernization contract.

Under the terms of the original agreement, HP was to lead and manage the implementation of Office 365 to over 600,000 users, and was part of the Cloud First federal mandate.

Either something changed with the Cloud First mandate or with the modernization policy because the reason for the contract termination was described as a change in the VA's requirements. However, as noted in an article by The Business of Federal Technology, in 2012 the VA's Deputy CIO, Paul Tibbits, questioned the cost-effectiveness of moving to the cloud.

It will be interesting to see which direction the VA takes. Obviously, they have to do something, so I will be curious to see if this might actually be a termination in lieu of going with a competing product to Office 365. While this is a huge loss for HP, it's a much bigger loss for Microsoft considering the prorated loss in subscription revenue.

The VA still has to pay $150,000 for services rendered by HP, which consisted primarily of creating test accounts for Office 365, and also a termination fee.


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