Microsoft closes in on UK government mega-deal

Microsoft and the UK's National Health Service (NHS) are close to completing a new three-year software contract covering the organisation's 1.2 million desktops.

The software giant told vnunet.com that it was confident of signing a new licensing agreement shortly.

"We are pleased to say that discussions are drawing to a close and we expect to be making an announcement in the near future," said a Microsoft spokesman.

Richard Granger, director general of health service IT, told vnunet.com's sister title Computing in March that he wanted to sign national deals that will cut NHS desktop software costs by half.

The market has changed significantly since the NHS signed a similar deal with Microsoft in 2001 as public authorities in Europe evaluated lower-cost alternatives to Microsoft software, including the health authority.

The NHS National Project for IT (NPfIT) said last week that it had agreed a deal with Sun Microsystems for 5,000 Java Desktop Systems (JDS) for "tactical" deployment.

JDS, which uses Linux and open source components, is sold for an annual subscription which includes support, making it extremely competitive with Windows XP.

Simon Shoulten, Sun's UK desktop product manager, claimed that JDS pricing could work out at between a fifth and a tenth of XP, as JDS requires a smaller memory footprint that could avoid the need for a hardware upgrade.

Open source trials supported by the Office of Government Commerce (OGC) were also completed recently. A report is due late this month which will include information on the Sun trials.

In a further attempt to drive down prices, the NPfIT recently signed framework deals with Cisco, EMC, Hewlett Packard, SeeBeyond, Sun and Tata Consultancy following a similar deal with Oracle last January.

But despite the growing interest in alternatives, Microsoft looks to have held onto the contract.

The NPfIT confirmed that it had reached an agreement with Microsoft for the provision of desktop licences, subject to Treasury approval.

The NHS deal is quite separate from Microsoft's three-year memorandum of understanding with the OGC, which oversees government procurement, although it does contribute to the volume-based discounts established by the memorandum.

"We have always said that competition works. But the buying power of the NPfIT is so huge that it transcends anything the OGC can do," said an OGC spokesman.