Microsoft has changed its licensing policies in a deal which will put 100,000 City of New York staff on its cloud services platform.
Under the terms of the deal, the city will consolidate its 40-plus Microsoft licences into a single agreement, and will shift its workforce onto cloud services.
The five-year deal will save the city millions of dollars, according to mayor Michael Bloomberg.
"To deliver services efficiently and function at the highest level, City employees need the same technological resources that top private sector businesses provide to their employees," he said.
"Through our partnership with Microsoft, we've found ways to offer our employees Microsoft's newest, state-of-the-art computing tools while reducing costs to taxpayers.
"By capitalising on the City's buying power, consolidating dozens of separate agency licence agreements into one, and paying for software based on use, we'll save $50m [£31m] over the next five years."
Prior to the deal, 40 different New York City organisations had run their own application systems, and the move to consolidate is part of a citywide IT infrastructure services initiative to consolidate separate agency datacentres into a centrally managed facility.
The contract will be a major boost for Microsoft, which is facing stiff competition from Google in its government business.
"With Microsoft's latest cloud-based productivity and collaboration tools, New York City employees will benefit from better access to information, improved collaboration and information sharing among city agencies," said Microsoft chief executive Steve Ballmer.
"Additionally, this comprehensive partnership provides the latest in operating system, server and development tools, laying a foundation for greater innovation and infrastructure modernisation."
The news came the day after Microsoft announced the launch of its Office 365 cloud offering.
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