The £9 billion question: To Microsoft or not to Microsoft?

Register debate series The UK government’s five-year Strategic Partnership Agreement (SPA24) with Microsoft is set to see public sector bodies spend around £1.9 billion each year—nearly £9 billion in total over half a decade. It’s a vast sum for software and services, and one that deserves close scrutiny.

The key question is whether this represents genuine value for taxpayers — or whether it’s simply the continuation of the status quo under a new label.

Discounts or revenue boost?

SPA24 is marketed as delivering “enhanced value,” bundling Microsoft 365, Azure, Business Applications, and, for the first time, Microsoft Copilot. Consolidating procurement can simplify operations, particularly for departments managing complex legacy systems. But Microsoft’s recent earnings show a 17 percent year-on-year revenue increase, with Azure revenue up 39 percent. Meanwhile, profit remains sky-high: net margins are about 36 percent and have not dipped under 30 percent in more than five years.

Revenue growth and margins together are propelling the company’s staggering valuation of more than $3.5 trillion.

Against that backdrop, it’s fair to ask: are UK public sector negotiators achieving substantial discounts, or is this multi-billion-pound spend helping fuel an already surging profit line? If the savings are minimal or opaque, the deal risks reinforcing rather than challenging entrenched market power – leaving the government with limited choice and little leverage.

The Copilot question

The inclusion of Copilot, Microsoft’s AI productivity tool, adds another dimension. There is no doubt AI-driven features could boost efficiency, but without transparent comparative pricing, it’s impossible to tell whether this is an affordable enhancement or a costly lock-in.

By adopting Copilot as the default AI engine through SPA24, departments could be committing themselves more deeply to Microsoft’s ecosystem —potentially at the expense of open-source or cloud-agnostic alternatives.

This “default by convenience” approach risks stifling innovation, reducing future negotiating power, and embedding proprietary systems that are expensive to replace. A government-wide policy on AI adoption, focused on interoperability, data sovereignty, and long-term value, would be a prudent step.

CCS: Enabler or status quo guardian?

The Crown Commercial Service (CCS) operates SPA24 as part of its framework portfolio. Its role as a trading fund means it takes a small percentage from suppliers — on a £9 billion deal, about £30 million over the contract term. While CCS argues this model supports efficient procurement and risk management, the margin may also create an incentive to preserve vendor stability and the status quo rather than pursue aggressive cost-cutting.

What else could £9 billion deliver?

The SPA24 framework represents a major commitment of public funds and raises the question of whether the UK taxpayer is truly getting best value. If technology modernisation using other platforms was considered, even a modest 10 percent improvement in replacing Microsoft — around £900 million — could have a major impact elsewhere. It could pay for thousands of additional NHS staff or police officers, modernize critical government IT, or accelerate digital projects in health, transport, and education. Poorly negotiated terms don’t just mean lost savings — they represent missed opportunities to improve services and invest in innovation.

Is Microsoft the only practical path?

Microsoft offers scale, reliability, and familiarity – qualities vital for large organizations delivering essential public services. Migration to alternative platforms is neither simple nor risk-free, and transformation costs can be significant.

Yet relying solely on what’s familiar risks stagnation. Small-scale pilots, trials of open source software, or hybrid vendor strategies could create competition and generate savings while maintaining service continuity. International examples illustrate both potential and pitfalls: France’s Gendarmerie Nationale saved millions by migrating 70,000 desktops to Ubuntu Linux, while Munich’s LiMux project faltered due to political changes, interoperability challenges, and weak support.

In other words, moving away from Microsoft is possible — but it requires careful planning, skills investment, and strong governance to succeed.

Lessons learned or forgotten?

The UK has tried to rein in IT costs before. The 2004 Gershon Review aimed to cut back-office inefficiency, and in 2010, the Cabinet Office under Francis Maude imposed a moratorium on new IT spend to drive cost discipline and encourage competition.

As Deputy Government CIO and Director of IT Strategy & Policy during that period, I helped deliver the moratorium and saw first-hand how it could strengthen value-for-money oversight. It’s disappointing to see how many of those hard-won disciplines appear to have been eroded. Today, while the structures for efficient procurement remain, the drive for genuine competition and innovation seems to have been squandered.

Towards a more balanced approach

Securing real value from major technology deals like SPA24 requires far greater transparency about the discounts achieved, ideally via independent review. The government should run pilot programmes to test credible alternatives, with clear metrics and exit strategies to keep options open.

Shared accountability across HM Treasury, the Cabinet Office/DSIT, CCS, and the National Audit Office is essential, with regular testing of commercial arrangements for efficiency – not just compliance. Above all, procurement should focus on competition and open standards, ensuring the public sector retains bargaining power and avoids over-dependency on a single supplier.

Conclusion – pragmatic, complacency or scrutiny?

SPA24 brings tangible benefits in terms of scale and service integration, and Microsoft’s deep presence in government IT makes it a logical partner. But pragmatism must not become complacency. Without ongoing scrutiny of pricing, supplier choice, and transformation incentives, taxpayers may end up paying a “convenience premium” rather than securing the best possible deal.

Given the scale of expenditure, even a modest improvement in terms could unlock funding for vital public services. It is time for policymakers and watchdogs to revitalise genuine value-for-money oversight – ensuring the public purse is not just a revenue stream for global tech giants, but a catalyst for smarter, more sustainable digital transformation. ®

The Register presented an opposing view yesterday and readers can have their say on Friday.

Bill McCluggage is a seasoned technology advisor and senior executive with extensive experience across both public and private sectors. He served as the first Chief Information Officer for the Irish Government beginning in 2013, previously holding roles such as Deputy UK Government CIO, Executive Director for IT Policy & Strategy in the UK Cabinet Office, Director of eGovernment and CIO in Northern Ireland, and CTO for EMC (Dell EMC) Systems in the UK and Ireland.

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