Microsoft launch UK contract war against Linux rivals

A renewed IT contract to supply the government with software is being hotly contested by Microsoft and Linux in a three-year deal worth £750m.

Last week, international press revealed the US computer giant had successfully secured the contract but no decision on the end contractor is due until next month.

The win for Microsoft would follow a recent victory over open-source Linux-based software, after the company was awarded a small but significant contract by the London Borough of Newham.

A pilot of a Linux alternative, already existing under Netproject, failed to persuade the Council to opt for open-source.

For both the government and local council projects, Microsoft is understood to have undercut Linux by reducing its fee or offering additional services free of charge.

Competitors close to the Seattle-based giant say it is now extra determined to fight Linux on every available UK contract.

Eddie Bleasdale, director at Netproject, said: "Any pilot Linux desktop system is a red rag to a bull for Microsoft at the moment."

"If Microsoft sees anyone shifting to Linux it comes in the form of a deal they can't refuse in the form of cut-price software or free consulting. Newham took the Microsoft shilling."

Commenting on the government deal, Microsoft said: "We are continuing to have discussions with the Office of Government Commerce about delivering best value. We have a current memorandum of understanding and we are working towards extending that deal."

The government has said they are looking for the best "value for money" and will not sign the agreement until September, as the existing contract has until nearly 2005 to run.

A spokesman for the Office of Government Commerce stated: "We encourage all public sector bodies to look for alternatives that offer 'total cost of ownership' value for money."

"The details of the Memorandum of Understanding [agreement] between Microsoft and the Office of Government Commerce are commercial and in confidence. However, this agreement has enabled departments to make savings in the area of IT procurement."

Microsoft's memorandum agreement runs until early next year and a three-year extension would be worth £250m a year.

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