Electronic software distribution is a hit at Defense

Some estimates
put ESD sales as high as several billion dollars per year
by 2000.

Defense Department employees are at the head of the line for installing Microsoft
Windows 98 on their desktops, because electronic software distribution (ESD) lets them
download it immediately.

So successful was DOD’s first large-scale foray into ESD a year ago that it is
preparing to award a larger ESD contract within the next few weeks.

“I believe ESD is going to be the only way we buy software in the future,”
said Jim Swizewski, contracting officer for the Navy’s Fleet and Industrial Supply
Center in Philadelphia.

He said Congress liked the idea enough that it included a House report on the earlier,
five-year ESD contract in the 1998 emergency appropriations bill.

The June 1997 award from the Defense Logistics Agency lets DOD employees download from
software.net a variety of Microsoft and non-Microsoft software products and upgrades
directly to desktops. Contract holder software.net Corp. of San Jose, Calif. is an online

DLA’s pending contract could dwarf the earlier $50 million contract, which covered
as many as 70,000 federal employees. The new agreement, Swizewski said, will deliver
software to 400,000 users with the option of raising the total to 2.4 million DOD and
civilian employees.

“There’s been a lot of interest since that first DLA contract, which was the
first time we tried out the concept of distributing software electronically,”
Swizewski said.

The Fleet and Industrial Supply Center’s expertise at enterprise licensing helped
in developing DLA’s software.net contract and also helped the Defense Mapping Agency
set up a small-scale ESD contract about two years ago, he said.

DLA’s arrangement with software.net works slightly differently than typical
Internet ESD downloads.

Many publishers that sell directly and online resellers such as software.net use ESD
containers from Portland Software of Portland, Ore.

Portland Software’s container compresses and encrypts a software program into
something called a bag of bits (BOB).

When a buyer selects the program and supplies a credit card number and other
information, the reseller downloads the BOB to the buyer’s computer along with a key
that decrypts and installs the program.

Software.net and other online resellers also use try-before-you-buy ESD from Preview
Software Inc., a Cupertino, Calif., company that is merging with Portland Software, the
granddaddy of ESD technology.

About one-third of Microsoft’s stock-keeping units—the original software
packages, not new versions or upgrades—are ESD-ready. Microsoft itself plans to start
an online ESD store later this year.

Some estimates put ESD sales as high as several billion dollars per year by 2000. A
survey of 310 PC software companies by Softletter, an industry newsletter, showed that 89
percent expected ESD sales to account for one-third of their revenues by 2000.

Online stores typically use ESD for lightweight software such browsers, patches and
utilities, not entire suites and operating systems as DOD does.

Stores use ESD for less-bulky programs because large packages tend to take too long to
download over a dial-up connection, and interruptions cause download failure.

The DLA agreement, in contrast, gives federal employees the choice of such heavyweight
programs as Windows NT, Microsoft Office and Internet Information Server. DLA has a
dedicated Internet connection and caches the software locally on servers developed by

About two dozen caching servers check software.net’s master server for new
programs and present the master server with a certificate as proof that they are licensed
to download. When DLA administrators are ready for their users to get the new software,
they send an e-mail with an attached client program. The users click on the client to
download the software.

“You don’t see any disks or CDs flying around,” Swizewski said.

The DLA contract gives the government almost instantaneous delivery from the moment
software.net receives software from the publisher.

DOD officials estimate that ESD will save the federal government more than $30 million
in packaging, shipping, installation and maintenance over the life of the five-year

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