@CaptainBarnacles - to help you understand my background, I have...

@CaptainBarnacles - to help you understand my background, I have been 30+ years in IT Sales to medium to Enterprise customers. During this time, I worked for IBM systems group and Data#3 was one of the top 3 Business Partners I worked with, so I know Laurence and few others in DTL.

Within the product group, there will be revenues coming from the number of their key suppliers:

Licencing - very low margin (<1 - 3%), high revenue - this will be the largest contributor in revenue
Cloud based - low margin (2-5%), growing revenue
CISCO Network and Server - low margin (5-10%), medium revenue but shrinking
EMC Storage - high margin (15-20%), low revenue but shrinking
Desktop and laptops - low margin (3-8%), high revenue

So it is feasible that their overall product margin is 7%, as licencing is a very predictable business (renew every 12 months), sometimes the Enterprise deals for Storage and Server make all the difference. Between FY 16 and FY 17, DTL grew product revenue by 12.4% but only grew product gross margin by 2.8%, suggesting they are selling/winning low margin business.

As you mention, incumbency is an important aspect when it comes to tenders and for DTL to win this one clearly they are meeting the requirements of key federal departments. I continue to question how profitable the Microsoft licencing will be as they need at least $7,000,000 in licencing to hire a strong licencing administrator - how much licencing business they could handle I do not know but DTL will.

Lastly there will be some weighting in the analysis for "value add" items, but trust me. pricing will have the heaviest weighting. These are expensive tenders to respond to and challenging to win. Hats off to the team at DTL as they will now be Microsoft's largest licencing partner and hopefully many new opportunities will open up with this win within Federal departments that were previously licencing with other Microsoft licencing partners.