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The Enterprise Agreement covers software licences for 120,000 desktops within the MoD as well as server software.
Officials confirm that a single annual payment will replace thousands of separate transactions that previously took place between the ministry and Microsoft.
Unlike the subscription-based deal struck in October between the NHS and Microsoft, the MoD will own the software at the end of the three-year contract. There is also an option to extend the deal for a fourth year.
The MoD would not confirm either the cost of the deal or how much it currently spends on Microsoft products.
MoD Defence Communications Services Agency spokeswoman lieutenant commander Susie Thomson said, "The main driver for this agreement was our recognition that we could seriously reduce the administrative effort of IT procurement and reduce costs."
The MoD has effectively streamlined its procurement system with the deal, she added.
The agreement is not an exclusive contract between Microsoft and the MoD, which means that individual users retain the right to choose their software solutions.
However, experts warn that this could present a massive challenge to the MoD as it attempts to woo users to sign up for the deal.
Danny Jones, program director of sourcing consultancy Morgan Chambers, said, "It makes sense to have the common procurement environment but there is a risk that departments within the MoD will go their own way."
The ministry really needs to go out and show users the benefits of the deal, he said.
Microsoft products covered by the agreement include Office Professional XP, Word 2002 and Excel 2002. The contract is the first time that users within the MoD will be licensed to use the same version of software, with officials claiming that this will help to reduce management overheads.
The agreement has also been identified as enabling faster progression towards "joined-up defence", as outlined in the Government's Modernising Government strategy.
Whitehall officials have confirmed that similar deals are likely to be announced with other suppliers in the future.
Last month the Department of Health unveiled a three-year NHS-wide software subscription deal with Microsoft. NHS officials claimed that the deal would save it more than £50m over the life of the contract.