President Donald Trump shakes hands with Microsoft CEO Satya Nadella during an American Technology Council roundtable at the White House in Washington on June 19, 2017.
Nicholas Kamm | AFP | Getty Images
Microsoft has agreed to give the U.S. General Services Administration $3.1 billion in potential savings over the course of a year on cloud services used at government agencies.
Since President Donald Trump’s return to the White House in January, the GSA has sought to aggregate spending through a strategy called OneGov that’s meant to lower prices. Adobe, Amazon, Google and Salesforce have already come forward with discounts.
Agencies have to buy through the GSA to take advantage of the Microsoft savings through September 2026. The lower prices will be available for three years, resulting in total savings of over $6 billion, Microsoft said.
The discounts apply to Microsoft’s Office productivity subscriptions, as well as Azure cloud infrastructure, Dynamics 365 business applications and Sentinel cybersecurity software. Microsoft is throwing in a year of free access to the Copilot artificial intelligence assistant for millions of workers with Microsoft 365 G5 subscriptions, the company said.
Agencies can easily switch to the lower price, said Josh Gruenbaum, who left his director position at private equity firm KKR to become commissioner of the GSA’s Federal Acquisition Service after Trump’s second term began.
The GSA oversees about $110 billion in spending on common goods and services from many agencies, out of about $450 billion in total spending across the federal government, Gruenbaum said in an interview. The GSA is working to absorb procurement for NASA and the National Institutes of Health, to comply with an executive order Trump signed in March, Gruenbaum said.
Around $80 billion in spending is tied to IT, and Microsoft’s annual U.S. government revenue probably stands in the mid- to high-single-digit billions of dollars, Gruenbaum said.
“It’s no surprise that Microsoft is one of the most critical partners for the federal government in terms of its software and the tooling that we use around both the civilian side and the defense side,” Gruenbaum said.
Gruenbaum said he spoke numerous times about the deal with Microsoft CEO Satya Nadella.
“I think the biggest piece is he wants to partner with this administration and get this right for AI adoption,” Gruenbaum said of Nadella. “But I also think he wants to go and take market share from some of the other tools and services that are out there.”
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