The Ministry of Defence (MoD) is the latest area of government to sign a mega-licensing deal with Microsoft.
The three-year deal will allow the MoD to roll out the latest versions of Microsoft products across 120,000 desktops, replacing thousands of individual licences bought every year - a move which will result in significant savings in administration costs.
"The main driver for this agreement was our recognition that we could seriously reduce the administrative effort of IT procurement and reduce costs," said an MoD spokeswoman.
All MoD users will be licensed for the same version of software, which will alsocut support and management costs.
Products covered by the enterprise agreement include Office Professional XP, Upgrade to Windows 2000 Professional and Windows XP, and Back Office Client access licences for Windows 2000, Exchange 2000, SQL 2000 and Systems Management Server.
The deal between Microsoft and the MoD is not exclusive, and the MoD said similar agreements will be announced with other suppliers in the near future.
Reseller Software Box has been appointed the contract administrator.
The deal with the MoD is the latest in a series of contracts between Microsoft and the public sector. Last month the NHS signed a similar agreement with the software giant, which it says will save more than £50m over three years.
Microsoft has also put together a proposal for the Office of Government Commerce, local government user group Socitm and the Association of Chief Police Officers for a licensing agreement to cover most of the public sector.
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