This news from TheRegister about the National Health Service in UK losing its rebate to Microsoft software looks to me like a showdown. Frankly, I can see Steve Ballmer repeating what Bill Gates did the last time this happened: Paying the NHS IT chief a visit to resolve the problem.
Both sides has to lose from discontinuation of the Microsoft’s NHS contract. For Microsoft, in the short run, it will be a extremely negative signal to its other customers that a big UK outfit finds alternatives to Microsoft palatable. In the long run, it is going to lose the incumbent advantage.
For NHS, the cost of retraining staff to use alternative software, the lost of productivity and the need to audit all computers for compliance is going to cost them more than the GBP 20 millions payment to Microsoft, i.e., Microsoft’s incumbent advantage above.
How does the present purse tightening in UK affects the position of both sides? I don’t know. NHS is going to use this as a stick to get Microsoft to reduce the price. Microsoft is going to press home the financial cost to switch away from it, using fantastic figure like “GBP 85 milllion for GBP270 million worth of software” which has to be taken with an extremely large pinch of salt. I mean, quite frankly, why would one of the best business mind in the business give someone a massive 70% discount?
The PR is also going to be spin by both sides to their advantage. If they did the deal, they will be singing on the same page: Both are going to tout that the NHS saved <insert large amount here> by sticking with Microsoft. In the unlikely event they did not, expects both sides to sling mud at each other. Microsoft is likely to launch a PR blitz, using Freedom Of Information Act if necessary, to portray the NHS as wasting money on conversion to alternative software, while NHS will trumpet the “saving” in licensing cost and claim that even if it spent more initially, it is projecting even bigger saving in the long run.