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UK Politics

Microsoft and Hewlett Packard: The IT giants who fear losing the Government’s favour

Microsoft and Hewlett Packard are worried Treasury plans to give more contracts to small suppliers

They are two of the largest technology companies in the world with a combined market value of £180bn and annual profits of £14bn.

But in a striking case of Goliath accusing David of bullying, the American giants Microsoft and Hewlett Packard have complained that they are being unfairly picked on by the Cabinet Office minister Francis Maude.

The Independent understands the Government’s largest IT supplier Hewlett Packard has written to the Treasury to express its concern at plans by Mr Maude to award more Government contracts to smaller suppliers. At the same time Microsoft is fighting a rearguard action against the Cabinet Office to protect the million pounds it gets each year from Whitehall by selling popular Office programmes such as Word and Excel.

Both companies are concerned that they are being singled out by ministers as unpopular and easy targets in their rhetoric about cutting public sector waste.

HP, which earns around £1bn a year providing computer support to the Department for Work and Pensions and the Ministry of Justice is understood to be alarmed at proposals by the Cabinet Office minister Francis Maude to end all IT contracts worth more than £100m.

In its letter, which will be seen as a tacit threat, the company questions whether it is worthwhile competing for contracts if the Government is no longer interested in doing business with multinationals.

At the same time, Microsoft is attempting to prevent the Government from migrating its own computer systems from those that rely on the multinational to open-source documents that are free to use. Some £200m has been spent by the public sector on the computer giant’s Office suite since 2010. But Mr Maude want to cut that by switching to software which can produce open-source files in the “open document format”.

But both companies look set to be disappointed – at least unless there is a change in Government. Mr Maude is understood to be looking to next year – when a significant number of big IT contracts are up for renewal – to push ahead with the new policy that could significantly denude the profits of IT multinationals.

Last night, a Cabinet Office spokesman said they were unaware of HP’s letter to the Treasury but added: “We value the contribution companies of all sizes make to the UK economy, driving innovation, growth and jobs.”

A spokeswoman for HP said “HP is a proud and long-standing supplier of IT products and services to Her Majesty’s Government and provides vital public services to UK citizens.  We maintain an ongoing dialogue with government about our programme of work.”