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By | John Oates 15th July 2010 10:49

NHS loses massive Microsoft licensing rebate

World's largest licensing deal ditched

Software licensing in the National Health Service is about to get a lot more complicated, and a lot more expensive.

Back in 2004 the Office of Government Commerce signed a massive deal with Microsoft to provide all desktop software within the NHS. This followed some very high-level lobbying from both Bill Gates and Steve Ballmer when it looked like the health service might ditch Microsoft from desktop PCs.

But the NHS enterprise agreement has now been scrapped. A message on the relevant page of the Microsoft website says: "We are currently updating these pages to reflect new licensing information as of May 2010. Please check back shortly."

The nine year deal was signed by Richard Granger back in 2004 and was worth £500m. It had break points every three years. It was meant to provide major savings for the health service - £300m over the full nine years.

Microsoft also promised "a health specific user interface for clinical systems" and to spend £40m in R&D.

Granger got such a good deal in part by publicly threatening to move the NHS to Sun's Java desktop software. Shortly after that Bill Gates arrived to negotiate directly with Granger, visit the Department of Health and pick up a knighthood. We reported the shenanigans at the time here.

One source at a PCT who asked for anonymity said documents they had seen estimated the extra cost for a medium-sized trust at between £100,000 and £150,000 for software licensing alone.

There are 151 PCTs in England with Wales and Scotland run separately. There are also mental health trusts, care trusts, GP surgeries and other organisations - the NHS employs over a million people in total.

Apart from extra licensing costs there will also be a massive management problem. The previous agreement allowed some leeway in counting individual machines for licenses.

Without a new agreement every NHS organisations will be looking at expensive hardware audits of all their various offices, labs and surgeries. The original deal was good for up to 900,000 desktop machines, at the time the NHS had approximately 500,000 machines.

Our source said the only alternative - a move to open source software - was unlikely to overcome reluctance from staff to move to less familiar systems.

A Microsoft spokeswoman said:

Microsoft and the NHS have had an Enterprise Wide Agreement (EWA) for the last 12 years; during this time we have jointly addressed a number of the major challenges faced by the NHS.

Microsoft and the NHS have been negotiating a replacement to the current agreement for 6 months. The basis of much of the Microsoft investment into health R&D and the NHS is as result of the NHS agreements in place over the last 12 years. The current negotiations have not resulted in an agreement and, as a result, the NHS’ EWA will not be renewed.

The bottom line is that the NHS uses £270m of Microsoft software and pays less than £65m per year for it. For the next three years the cost would have risen to £85m as the NHS deploys more and more technology while the National Programme rolls out.

A spokesman for the Department of Health said: "The Department of Health has already invested so that NHS Trusts are able to have access to the latest versions of Microsoft desktop software. Future investment decisions will be taken at a local level in line with the proposals set out in the White Paper published this week." ®

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