U.K. government could drop Microsoft over license fees

The U.K. government may stop using Microsoft Corp. as its main software supplier due to a rise in licensing fees that could raise costs by as much as 200 percent.

"Depending on the system, Microsoft is asking for a rise in licence fees of between 50 percent and 200 percent on government contracts," said Martin Day, spokesman for the Office of Government Commerce (OGC) on Monday.

The OGC is in talks with Microsoft over a single contract to supply its Office and Windows software to the country's 497,600 public servants, Day confirmed. The U.K. government currently spends approximately 120 million pounds (US$169 million) a year on the direct purchase of Microsoft products, and believes the increased licensing fees would add up to 60 million pounds a year to the bill, Day said.

Though Day could not comment on progress in talks between the government and Microsoft, he said one of the possible steps the government could take is to look elsewhere for its software needs.

The OGC was established in April 2000 by the U.K. government as a Treasury agency to modernize its IT procurement procedure, assuring that the government gets value for the money it spends on IT.

A Microsoft spokeswoman confirmed that talks were taking place, but would give no details of the company's initial proposals.

"Neil Holloway, Microsoft's U.K. chief, is involved with ongoing talks over license fees with the U.K. government," she said.

Microsoft has come under heavy criticism for its revamped licensing schemes for both corporate and home use of Windows and Office.

For example, when Microsoft launched Office XP in May, it also announced it would eliminate certain upgrades from previous versions. Users would have a deadline for upgrading their licensing rights after which they would have to buy new licenses for Office XP -- at a cost of to US$300 more per user -- if they wanted to have upgrade protection. Due to complaints from corporate users, Microsoft has twice pushed back the deadline for upgrading licenses. During the London release of Windows XP last month, Microsoft Chief Executive Officer Steve Ballmer addressed the controversial theme of the new licensing agreements for corporate customers, saying that the company had received a lot of feedback from customers, especially in the U.K. and France, but that he felt Microsoft had now addressed the problem by extending the deadlines. According to a report in The Times newspaper Saturday quoting "government insiders," the U.K. government has already begun examining switching to alternative software suppliers.

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