UK.gov cuts deal with Microsoft to avoid £15m post-Brexit price hike

Pan-government deal applies to 200,000 licences

Exclusive The UK government has inked a deal with Microsoft to prevent Whitehall from paying an extra £15m in licence fees due to a post-Brexit price hike.

After the referendum, Microsoft said it would increase on-premise licensing by 13 per cent and cloud licensing and services by 22 per cent. It blamed "sustained currency changes" which led to a "price misalignment" of the pound.

As of last year, Microsoft is reported to have around £400m in public sector licences.

The government already had a pricing deal in place with Microsoft until June 2017, under a Memorandum of Understanding. However, sources say a deal has been agreed with the Cabinet Office's Common Technology Services to extend that agreement by another year.

The agreement will apply to nearly 200,000 central government customers, as part of a move to Microsoft's Office 365 cloud product. It also includes a freeze for departments at December 2016 prices.

By agreeing the deal, the government is estimated to have avoided forking out an extra £15m.

Back in 2015, the Ministry of Defence signed the single largest Microsoft Enterprise Agreement across the public sector, designed to gradually shift users to the cloud, specifically Office 365.

The department alone is thought to soak up around two-thirds of all government's Microsoft spend.

Last month Prime Minister Theresa May visited Microsoft's campus and paid lip service to the company's role in the UK economy.

She said: "We have a valued relationship with Microsoft and I'm sure we will continue to work with them for years to come." The outfit made no secret of its stance on Brexit in the run-up to the referendum, urging staff to vote remain.

A Cabinet Office spokeswoman said: "As part of our drive to improve efficiency, the government worked with Microsoft last year to continue the existing migration plans of a number of central government departments to Office 365." ®

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