The government has struck a deal with Microsoft which it claims will save it £100m on software over three years.
The Office of Government Commerce (OGC) and Microsoft have finally thrashed out a new deal to use Microsoft products across government.
If adopted widely across government, it will be the biggest single deal in Microsoft's history. The OGC has also struck deals with IBM and Sun for desktop software.
The negotiations were the result of Microsoft's changes to its licensing terms, which the OGC was concerned would cost government an extra £60m a year - the same as the construction of a new hospital - but with no added benefit.
The OGC had been ready to consider alternatives to Microsoft technologies if the deal had fallen through.
But now a 'memorandum of understanding' has been negotiated as a licensing framework for public sector organisations that wish to use Microsoft software.
In a statement, Microsoft said the deal will allow the public sector to "rationalise its Microsoft software licence procurement costs and processes, offering cost savings on licence expenditure and reducing distributed administration and support overheads."
Peter Gershon, chief executive at OGC, said: "Today's announcement has been secured by aggregating the software needs of all the public sector. It offers excellent value for money for public sector bodies and the taxpayer.
"At the same time it will provide more choice in the marketplace and improve value for money for public sector customers from Microsoft, IBM/Lotus and Sun Microsystems."
The deal covers organisations including central government departments and agencies, devolved administrations in Scotland, Wales and Northern Ireland, local government, the NHS, the Ministry of Defence (MoD), the Police, the Prison Service and education.
The deal is not compulsory or an exclusive supplier contract, and does not preclude the use of alternative products.
The NHS and MoD, which have already signed separate deals with Microsoft, will be allowed to transfer to the new licensing framework.
Microsoft UK managing director Neil Holloway said: "This licensing framework delivers a simpler, more cost effective way for public sector organisations to continue taking advantage of Microsoft's products. It will give them immediate access to new, more feature-rich software updates as they become available."
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