4-page Case Study
Posted: 12/2/2010
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City of Reykjavik City Estimates 27 Percent Cost Savings for Microsoft vs. Mixed Environment

Thirty percent of Iceland’s population lives in the capital city of Reykjavik. The recent global economic crisis hit Iceland particularly hard. To avoid layoffs or raising taxes for Reykjavik citizens, the city began to look for opportunities to significantly lower costs. IT leadership designed a cost-saving strategy to consolidate multiple environments and applications into a simpler infrastructure that would satisfy the diverse operations of the city. It also considered open source alternatives, such as Linux Enterprise Desktop and OpenOffice.org to lower license costs. After comparing costs, the city selected Microsoft technologies, including Microsoft Office 2010 and Windows 7 Enterprise, as its unified infrastructure and desktop solution. By selecting the lower-cost solution, IT leadership has aligned its strategy with the broader vision of Reykjavik’s economic recovery.

Reykjavik is the northernmost capital city in the world. The capital area has approximately 110,000 inhabitants, which is about 30 percent of the total population of Iceland. The city of Reykjavik has approximately 8,000 employees as well as a compulsory school system made up of 14,000 students. An IT staff of 45 people provides centralized services for all city divisions and public schools.

In the wake of the global financial crisis in 2008, Iceland’s economy was severely weakened. As a result, the city of Reykjavik cut budgets and spending at all levels. Hjörtur Grétarsson, Chief Information Officer at Reykjavik, explains, “The mayor made it very clear that even in these tough times, the city would not lay off any people, would not increase rates for services, and would not increase taxes for citizens. However, he did expect the city’s operational divisions to find new ways to significantly cut costs.”

* Lower total cost of ownership, improved user experience from Windows 7 and Office 2010, and integration of Office 2010 with Microsoft servers applications were key factors in our decision making. *

Sigthór Örn Gudmundsson
Vice Chief Information Officer, City of Reykjavik

The city’s operational divisions and school systems ran applications in separate environments. This included multiple desktop and email applications, such as Microsoft Office 2003, Windows XP, Lotus Notes 8.5, and GroupWise 8.0. IT leadership focused its cost-saving strategy on consolidating these decentralized environments and applications into a simpler infrastructure. “This mix of technologies had become too expensive and complex to operate,” explains Grétarsson.

As a way to save costs, the IT team also evaluated switching to open source software, including the SUSE Linux Enterprise Desktop and OpenOffice.org 3.2 Novell edition. “At first, our primary concern was reducing our total licensing costs. Open source technology appeared to be a less expensive option,” states Sigthór Örn Gudmundsson, Vice Chief Information Officer at Reykjavik and Architect for the city’s technology infrastructure. “However, we quickly realized that the majority of our 400-plus software applications would not run on Linux without some work. Applications, such as those in our finance and human resources systems, also had built-in interoperability with Microsoft Office, which was lacking in OpenOffice.org. Also, at least a third of our users would still require Microsoft Office software to manage their daily responsibilities. For example, 800 finance workers and administrators were not willing to replace Microsoft Excel [spreadsheet software].”

To add to their concerns, IT personnel were not as familiar with the maintenance and support of Linux and OpenOffice.org. Grétarsson adds, “To obtain partner services for open source applications, we would have to look for help in countries like Denmark. With an unfavorable exchange rate from the economic crisis, our costs for partners outside of Iceland have significantly increased.”

Before making a decision on a solution, the city decided to revisit the open source cost justification and compare it to a full solution by Microsoft.

In early 2010, IT leadership narrowed their evaluation down to two solutions: one based on a single infrastructure and desktop solution from Microsoft, and another one based on a mixed environment of both Microsoft and open source network and desktop technologies. “The economic crisis actually presented us with an opportunity to start over and look for a simpler infrastructure that could lower IT costs and support all the requirements of our diverse user base,” says Sigthór Örn Gudmundsson.

Cost Rationalization
IT leadership conducted a platform cost rationalization to compare costs. Sigthór Örn Gudmundsson says, “We knew there would be cost savings with considering a single solution from Microsoft, but we were unsure of cost differences when compared to lower license costs from open source alternatives.”

IT staff evaluated the costs in the first year of support and specifically considered the comparative costs of the desktop productivity suites—Microsoft Office versus OpenOffice.org. The city concluded the total costs per year to be 27 percent less for a single infrastructure from Microsoft including Microsoft Office 2010, compared to a mixed environment including OpenOffice.org (see Figure 1).

Table with Cost Comparison Summary
Figure 1. Cost Comparison Summary
1. All figures have been converted to U.S. dollars.
2. Column reflects costs associated with supporting OpenOffice.org as part of a mixed environment with both open source and Microsoft technologies.
3. Column reflects costs of Microsoft Office 2010 in a single, unified infrastructure from Microsoft.

IT leadership broke down the cost categories in the following way:

Software Licenses and Maintenance Costs. Reykjavik wanted enterprise support for its organization so it considered a low-cost supported version of OpenOffice.org from Novell. Reykjavik believed that OpenOffice would not fulfill the needs of at least 33 percent of employees, so the OpenOffice alternative includes Microsoft Office licenses for them. An Enterprise and Academic agreement from Microsoft provided a significant discount for all employees and students to use Microsoft Office Professional Plus 2010.

Deployment Costs. IT staff estimated double the cost for deploying a mixed environment since IT resources would be required to double the amount of work. Costs include IT time spent on the installation of OpenOffice and Microsoft Office, including preparation of image, backup, and upgrade. IT did not calculate other deployment costs, such as file conversion, application migration, training, and user downtime. However, IT staff did consider the application migration costs of the 400-plus software applications (other than Microsoft Office or OpenOffice) to be higher on a Linux operating system—an estimated one-time cost of U.S.$160,333. “Most of our applications were not compatible with Linux, but were compatible with Window 7. We assume the costs for migrating to Linux would be significantly higher,” says Sigthór Örn Gudmundsson.

Ongoing Support Costs. IT staff estimated double the cost for yearly IT support of a mixed environment with OpenOffice.org and Microsoft Office. Costs include IT time (post-deployment) associated with administration and management of the productivity suites, including deploying updates and help-desk support.

Ongoing End-User Costs. IT staff calculated a productivity loss to account for end users working in a mixed environment. Contributing factors to productivity loss include document fidelity issues, performance issues, integration issues, and downtime associated with updates. Sigthór Örn Gudmundsson says, “The city expects to gain time savings for all employees with Office 2010 and its built-in integration with Microsoft 2010 server applications and system management tools.”

Other Costs (Third-Party Software). With a mixed environment, license costs from certain vendor software applications would still be required. Sigthór Örn Gudmundsson explains, “With the tools and resources gained from a single Microsoft infrastructure, vendor license costs for applications such as virus protection and email can be eliminated.” The estimate did not take into consideration the added cost for IT staff to maintain these additional vendor applications.

Based on the cost rationalization, IT leadership recommended a unified infrastructure and desktop solution from Microsoft. In April 2010, the budget for this new solution was quickly approved by city officials. Grétarsson explains, “Economic conditions accelerated our decision making. To achieve lower costs, a simpler environment to support, and better productivity tools for our end users, the organization understood why we needed to quickly make this change.”

The primary applications that the city selected to enhance its employees’ desktop experience included Microsoft Office 2010, Windows 7 Enterprise, and Microsoft server applications, such as Microsoft Exchange Server 2010, Microsoft SharePoint Server 2010, and Microsoft Lync Server 2010. To obtain this interoperable solution, the city licensed through a new Microsoft enterprise and academic school agreement. “This is the first time the city will be able to deliver the capabilities of Microsoft Office and Microsoft server applications to everyone—from all city employees to all students,” says Sigthór Örn Gudmundsson.

Figure 2. Cost Comparison Chart
Figure 2. Cost Comparison Chart
Deployment and System Management
By using Microsoft System Center Configuration Manager 2007 R2, IT staff deployed Windows 7 and Office 2010 to 14,000 faculty and students for the beginning of the September 2010 school year. IT staff also deployed Exchange Server 2010, replacing the GroupWise email application in the schools. Next, the city will introduce the added communication capabilities of Lync Server 2010 to its employees and students who are using Office 2010. Once that is accomplished, IT staff will deploy the full Microsoft solution to the remaining city employees. This includes replacing the city’s email system, Lotus Notes, with Exchange Server 2010 and the Outlook 2010 messaging and collaboration client. Importantly, this will be the first time that email management for all employees and students is maintained in a single environment. In 2011, the city anticipates enhancing its processes with the document management and collaboration capabilities of SharePoint Server 2010 and Office 2010.

IT staff is also taking advantage of the enhanced data and security management tools in Windows Server 2008 R2, Active Directory Domain Services, and Microsoft Forefront Identity Manager 2010. “With thousands of new students entering and leaving our education system each year, data management used to be more of a burden on our IT team,” explains Tomas Gudmundsson, Chief Technology Officer for Reykjavik. “With Active Directory and Forefront Identity Manager, we have now automated the process. Group Policy requests and controls are now managed by the users, instead of IT staff.”

Enhanced Desktop Experience
The city is very excited about its enhanced desktop experience with Microsoft Office 2010, and cites the following:

“Microsoft Excel is a tool we cannot live without,” says Anna Borgþórsdóttir, Project Leader of Human Resources Systems at the city of Reykjavik. Employees will continue to analyze data from other business applications in Excel 2010.

“Users enjoy the enhanced experience in Outlook 2010 and Exchange Server 2010, especially the faculty and students who previously used GroupWise for email management,” says Sigthór Örn Gudmundsson.

Employees will soon be sharing professional and social network information through the new social connectors in Outlook 2010. “Our employees and students are already using LinkedIn and Facebook, and this simple-to-use feature brings it all together in Outlook,” says Sigthór Örn Gudmundsson.

With the instant messaging, and the voice and conferencing capabilities in Lync Server 2010, employees and students will have an alternative to traditional face-to-face meetings.

By lowering the costs for the city, IT leadership has brought its strategy and technology in line with Reykjavik’s vision for economic recovery. “Our unified infrastructure enables us to reduce our IT costs while satisfying the daily requirements and vision of our diverse user base. Lower total cost of ownership, improved user experience from Windows 7 and Office 2010, and integration of Office 2010 with Microsoft servers applications were key factors in our decision making,” says Sigthór Örn Gudmundsson.

Lower IT and Partner Costs
Based on its cost comparison analysis, the city predicts a 27 percent cost savings for maintaining a Microsoft environment including Microsoft Office, compared to maintaining a mixed environment including OpenOffice.org. Sigthór Örn Gudmundsson explains, “When we evaluated additional costs, such as maintenance and support, plus the added value our employees would gain from using Microsoft as a productivity platform, the city realized that Microsoft Office was lower in total cost of ownership.”

* To achieve lower costs, a simpler environment to support, and better productivity tools for our end users, the organization understood why we needed to quickly make this change. *

Hjörtur Grétarsson
Chief Information Officer, City of Reykjavik

Sigthór Örn Gudmundsson adds, “Had we decided to deploy OpenOffice and Linux, we likely would have been forced to use partners outside of Iceland for additional support. With the decline in the Kronur currency value, this would have potentially doubled our consulting costs. By going with Microsoft, we are confident that when our internal IT team needs additional help, we can reach out to Microsoft Iceland or local partners in Iceland for support.”

Improved Productivity
“Due to the economic crisis, the city is not hiring. So as employees retire or leave the organization, the workload for our existing employees will increase. With the help of our Microsoft infrastructure and desktop solution, we are confident that the Microsoft solutions will provide the extra productivity gain to help lessen the impact of the situation” says Sigthór Örn Gudmundsson.

Productivity is predicted to improve as all employees start working together on a single infrastructure with familiar Microsoft Office applications, such as Outlook 2010, Outlook Web App, and the additional capabilities from Office 2010 and Microsoft 2010 server applications. In the schools, teachers expect to better prepare students for their futures in the workforce with Microsoft Office in the classroom. Across all city divisions, for the first time, all employees will have full access to Microsoft Office and its server-based applications (Exchange Server, Lync Server, and SharePoint Server), due to the flexibility to license all users with a Microsoft enterprise agreement.

IT productivity is also expected to improve as the result of simplified maintenance and support on a single environment for both city divisions and schools. “With our new academic and enterprise agreement, IT staff matched all the Microsoft products and functionality together for all our users. This helps us maintain and control access, security, and upgrades on a single set of core applications,” adds Sigthór Örn Gudmundsson.

Improved Communication
The city also anticipates that virtual meetings and instant messenger chats will soon provide a real alternative to traditional meetings. Sigthór Örn Gudmundsson explains, “The city of Reykjavik has around 300 work locations. Historically, employees have relied on face-to-face meetings, which can add up to a significant amount of time lost traveling back and forth. With the integration between Office 2010 and Lync 2010, we can offer an alternative and move towards virtual online meetings with the click of a button. This solution will not only improve productivity but also help improve communication.”

Extended Life of Existing Hardware
With improved performance and compatibility in Windows 7 and Office 2010, IT staff was able to deploy to the majority of its existing hardware. “Windows 7 runs much better than Windows XP, even on our older hardware. This will allow us to extend the life of hardware we already invested in,” says Gudmundsson.

Compliance with National Regulations and Policies
The Ministry of Education in Iceland declared that all Icelandic organizations must offer software in its native language by 2012. IT staff has already deployed the Icelandic language pack for Windows 7. The city will also make available the Office 2010 language pack.

Also, the Ministry of Education declared that open source applications must have an equal opportunity for use by its students. To comply and keep costs to a minimum, IT staff deploys these applications through its Microsoft infrastructure.

“Our employees and IT staff are comfortable with Microsoft Office because they have been working with it for years. And the user experience in Office 2010 and Windows 7 is even better. This makes their jobs easier and helps teams work better together—all with little-to-no training required,” Sigthór Örn Gudmundsson concludes.

Microsoft Office 2010
Microsoft Office 2010 gives your people powerful, timesaving tools to do their best work from more places. With new capabilities and insightful updates to Excel, PowerPoint, Word, and Outlook, Office 2010 offers the complete package—with familiar, intuitive tools. Now you can express ideas, solve problems, connect with people, and create amazing results—in the office, at home, or on the go.

For more information about Microsoft Office, go to:


For More Information
For more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers in the United States and Canada who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to:

For more information about City of Reykjavik products and services, visit the website at:

Solution Overview

Organization Size: 8000 employees

Organization Profile

The capital city of Reykjavik has 110,000 inhabitants, or 30 percent of the total population of Iceland. The city has 8,000 employees as well as a compulsory school system made up of 14,000 students.

Business Situation

The recent economic crisis hit Iceland and the city of Reykjavik very hard. All government operations had to respond to budget cuts by lowering costs.


To lower costs and improve productivity, the city selected Microsoft technologies as the foundation for a unified infrastructure and desktop solution.


  • Lower IT and partner costs
  • Improved productivity
  • Improved communication
  • Extended life of existing hardware
  • Compliance with national language

Software and Services
  • Microsoft Excel 2010
  • Microsoft Outlook 2010
  • Microsoft Exchange Server 2010
  • Microsoft Forefront Identity Manager 2010
  • Microsoft Lync Server 2010
  • Microsoft SharePoint Server 2010
  • Microsoft System Center Configuration Manager 2007 R2
  • Microsoft Active Directory Domain Services

Vertical Industries
Local Government Agencies


Business Need
Cloud & Server Platform