Microsoft has been mailing free copies of its pricey Office productivity software to government employees, but CNET News.com has learned that at least two federal agencies are warning recipients to return the gifts or risk violating federal ethics policies.
Since the launch of Office 2003 last year, Microsoft has given out tens of thousands of free copies of its flagship software, which retails for about $500, to workers at its biggest customers. The giveaway was expanded to government workers this year, but ethics offices at the Department of the Interior and Department of Defense have said the offers constitute unauthorized gifts and must be returned.
The Department of the Army went a step further, calling on Microsoft Chairman Bill Gates to stop sending the software to Army personnel.
"We ask that you cease immediately the mailing of free software, and other types of gifts, to the Department of the Army personnel," Deputy General Counsel Matt Reres said in a Feb. 19 letter seen by CNET News.com. "Your offer of free software places our employees and soldiers in jeopardy of unknowingly committing a violation of the ethics rules and regulations to which they have taken an oath to uphold."
The issue comes up as many governments are looking at open-source alternatives for Office and the Windows operating system. The British government has been evaluating a switch to the Linux OS, while open-source software is also being eyed in Korea, China, India and even at some local agencies in the United States.
Microsoft's giveaway also comes as the company faces ongoing oversight by the Justice Department as part of its settlement of antitrust allegations.
A Microsoft representative said giving away the software is a way to let some customers experience new features. "The goal of the program was to give customers a taste of the software and allow them to learn how it might be of use to their organizations in a positive way," Microsoft spokesman Keith Hodson said.
Although Office has captured more than 90 percent of the market for productivity software, convincing customers to upgrade to the latest versions of Office has become a growing challenge for the company. And upgrades are essential to Microsoft: Office and Windows produce substantially all the company's profits.
To address ethical concerns, Microsoft includes a note with copies of the software letting government workers know that they can send the software back to Microsoft without charge if receiving such a gift violates their agency's rules.
"Government Entities: Microsoft intends that this product be used in accordance with applicable laws and regulations for the evaluation, use and benefit of your government agency only," Microsoft states in the note. "You may, at your discretion, return this product package to Microsoft at its expense."
Hodson said the company hoped such language would allow any agency that did not appreciate the offer to easily send back the software.
"Not every government organization, as we're learning, finds it to be a valuable program," Hodson said. "We would like to think that there will be a variety of government organizations that will find value in the program."
For now, Microsoft said it will continue the strategy but will stop sending software to any particular agency that requests the company do so. The software maker did not say how many copies of the program have been sent to government employees.
According to the Department of Defense, delivery of the software was preceded by a card explaining that Office would be arriving "in the coming weeks" and that the software was being sent "without obligation."
The Defense Department's Standards of Conduct Office was among the first to take action, warning its workers in a Feb. 13 advisory not to accept the software.
"These items have been determined to be gifts from a prohibited source, and may not be accepted by (Defense Department) employees," the agency said in its advisory. "If received, the items should be returned to Microsoft."
The ethics office of the Department of the Interior said it had not heard reports of its employees receiving the software, but decided last month to warn its 65,000 workers after hearing about the Department of Defense's reaction.
"We looked at it as a marketing gambit," said Arthur Gary, deputy director of the Interior Department's ethics office. "We just wanted to apply the gift rules to it."
The department, which oversees national parks and other federal lands, concluded last month that the software constituted an unacceptable gift--one valued at more than $20 and from a party with whom the department does business or whom it regulates. Since issuing the memo, Gary said, the agency has heard of at least one employee receiving the software.
"We just kind of wanted to spread the word," Gary said. "We want to head off any problems."
If the response of those two government agencies is any indication of how other departments will respond, Microsoft may back away from the program.
"Based on an overall response we receive from governments," Hodson said, "we may look at doing things differently the next time."