Microsoft, SAP cut public sector bill by £70m

Microsoft and SAP are the latest to feel the government's belt being tightened, after Whitehall negotiated around £70m of savings from the pair.

After renegotiating its arrangements with the two software companies, the public sector is to cut £65m from its spend on Microsoft and at least £3m from its spend on SAP by 2012-13.

The Microsoft savings will come from reduced licence fees, while the SAP cut is derived from cheaper licences and a 22 percent in reduction in software maintenance costs.

The reductions will cover licence and maintenance in local and central government, as well as health and emergency services. Education is in the process of negotiating its own arrangements with Microsoft, according to the Cabinet Office.

The deals will also allow for mean more flexibility for the public sector, with licences able to be reused or transferred between public-sector bodies. The issue of software reuse has proved a thorny one for Whitehall: at last count, there were over six million software licences lying idle among some of the larger government departments.

The new deal follows a similar period of contract renegotiation with Oracle, concluded this year, which the Cabinet Office believes will yield £75m in savings by 2015.

The public sector also signed a memorandum of understanding with some of its biggest IT suppliers — HP and Capgemini among them — in late 2010, to enable different parts of the public sector to come together and act as a single buyer to achieve economies of scale.

According to Bill Crothers, executive director for commercial relationship at the Cabinet Office, the public sector will be looking for more of the same this year.

"The suppliers we talked to two years ago, we'll be having the same conversations again in the summer and in the autumn," he said.

Some suppliers have been more willing to treat the government as a single customer than others, Crothers said.

"If you [suppliers] are resisting this because you think it's going to go away, stop resisting. This is how we do business now."