The council of Germany's third-largest city said Wednesday that it will spend about 30 million euros, or $35 million, on the transition. In addition to switching operating systems, the city plans to move from Microsoft's Office productivity software to the open-source OpenOffice.
Microsoft had fought hard to retain the business, offering deals and discounts, with CEO Steve Ballmer interrupting a ski vacation in Switzerland to pay a personal visit to Munich's mayor about the issue, the city said.
Munich, faced with the end of support for its Windows NT computers, pitted Linux and OpenOffice against Microsoft products, the council said in a statement. That competition helped lower prices, it said.
With Linux, the city has more freedom from reliance on products from a single company, it said. Boris Schwartz, one of Munich's councilors, said in a statement that Munich's move breaches Microsoft's "monopoly-like position."
The deal also is notable because it involves desktop computers. Until now, Linux has been popular chiefly on more-powerful networked server computers, where Microsoft doesn't have as strong a presence in the market.
Though Munich doesn't intend to select open-source technology providers until the first quarter of 2004, computer maker IBM and Linux seller SuSE helped Munich evaluate the move and are candidates, the companies said.
"I consider our position as quite good, because we (have been) heavily involved from the beginning," said SuSE Chief Executive Richard Seibt in an interview Wednesday. SuSE and IBM also have sold Linux products to the governments of Schwaebisch Hall and Dortmund in Germany.
Microsoft isn't throwing in the towel, however. "With respect to the Munich administration, we will continue to work closely with them to explore additional programs and offerings that best meet the needs of Munich's citizens and businesses," the company said in a statement.
The software giant pointed to a new agreement it had signed with Frankfurt, under which the German city joined a Microsoft program that offered products to German local governments under "inexpensive and flexible terms." Frankfurt Mayor Petra Roth said in a statement that the city will save money as a result of the deal.
Some governments enjoy the fact that they can see all the source code underlying Linux, as it reassures them that, among other things, there is no secret code that could compromise their systems. Microsoft has countered this with a carefully controlled code-sharing process of its own.
Germany, the country in which SuSE has its headquarters, has been more eager than most countries to embrace Linux. The federal government there is funding some improvements to the KDE desktop and user interface software for Linux, for example, and almost a year ago, it signed a contract that made it easier for smaller German governments to buy Linux products.