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Microsoft has won a £500m contract to provide desktop software to the National Health Service. The deal followed personal negotiations between Microsoft CEO Steve Ballmer and NHS IT chief Richard Granger.

The contract runs for nine years, with break points every three years, and covers up to 900,000 licences for Microsoft's Windows operating system and desktop software. It should help the Health Service cut £112m from its licensing costs in the next three years and £330m if the contract runs its full term.

Richard Granger, Director General NHS IT said: "The NHS is in a uniquely strong position as an IT customer, currently the largest procurer of IT services in the world. This agreement illustrates Microsoft's commitment to supporting the needs and demands of one of its most important customers."

"It represents not only substantial savings over both previous NHS pricing but also that of other public sector purchasers. Extremely favourable terms and conditions for the NHS have been secured."

Last month the Office of Government Commerce, which guards the government's purse strings, published a report saying Open Source software now provides a viable alternative for governments. But the OGC said they were quite happy with the Microsoft deal.

A spokesman for the OGC told The Register: "We look at best value for government. We have a Memorandum Of Understanding with Microsoft which formed the basis of negotiations between Richard Granger and Steve Ballmer so we start from a lower price. Additionally those units count towards the targets in the MOU so smaller departments with less buying power will see further savings in future from lower prices."

Microsoft is also promising a £40m investment in creating a dedicated health service user interface which could further benefit the NHS if it is licensed to other health services.

Press release on the Microsoft site here ®

Related stories

BMA calls warning on NHS IT
Open Source ready for prime time in UK.gov, says OGC
NHS OSS white paper is 'disappeared'

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