Civil servants are trying to negotiate a software licensing deal with Microsoft that will provide the same value for money as its current expenditure or better, Whitehall sources revealed.
The Office of Government Commerce (OGC) said Microsoft's proposed licensing changes could cost the Government an extra £60m a year - enough to fund a fully equipped, medium-sized hospital, said OGC chief executive Peter Gershon.
The Government will look at alternative solutions if Microsoft is not prepared to negotiate. "The Government is considering fall-back options in the event that the negotiations do not achieve their objective," a source said. However, it has welcomed the software giant's decision to defer its licensing proposals until next year, the source added.
OGC officials are negotiating with Microsoft to roll out a single contract to support Office and Windows software to nearly 500,000 civil servants.
Microsoft's UK licensing manager Duncan Reid confirmed that the company had already received a response to its initial licensing proposal from the OGC.
He said, "We expect to present an amended proposal to the OGC very soon."
The NHS and the Ministry of Defence have signed software deals with Microsoft and the local authority IT managers' organisation Socitm is seeking a single deal for UK councils.
Reid said, "We have a great relationship with public sector customers in the UK."
Microsoft hopes to provide similar benefits to the OGC's customers, he added.