The handshake between IT Minister Austin Gatt and Microsoft chairman Bill Gates in January 2003 signalled the start of a very close business relationship between the Maltese government and the software giant. Six years down the line, this partnership does not look as solid and it seems it is all the fault of Open Source Software.

A year ago, the Ministry for Infrastructure, Transport and Communication (MITC) issued a document announcing that the government would actively consider the merits of Open Source Software, which is developed in public since its source code is made available for modifications before implementation. This translates into substantial cost savings when compared to vendor-specific software such as Microsoft's.

At the time a ministry spokesman told i-Tech "The Maltese government will seek to identify and implement the most advantageous solutions for its operations. OSS is increasingly becoming more stable and polished. This is why we are extending our ongoing research for the most cost-effective ICT solutions to include OSS options."

This was not good news for Microsoft. The Malta Information Technology Agency (MITA), which is responsible for the government's ICT infrastructure, confirmed with i-Tech that it has already "deployed a wide range of open source solutions across government and in its strategic plan for 2009-2012 it sets out clear ways forward in the further adoption of open standards and open source solutions where these make economic sense."

For every Microsoft software currently installed in government departments there exists an open source equivalent which some observers say is as good as Microsoft's. The OSS alternative to the Windows operating system is Linux in its various flavours or distributions. The alternative to Office is Open Office. Even at server level, Sun Microsystems has Ubuntu and Red Hat Linux.

When MITA began to review its options for commercial software versus Open Source software, government use of Microsoft software became an issue.

"The agency is currently reviewing most of its agreements including the one with Microsoft to align them to the recently approved strategic plan for the agency. MITA is in discussions with Microsoft on the matter and we do not believe it is appropriate to make public comments before concluding such discussions," a MITA spokesman told i-Tech.

MITA decided not to adopt Windows Vista but stick to Windows XP. In the meantime, Microsoft has created the next operating system, named Windows 7. With XP in use since 2001, MITA is bound to decide whether to upgrade to Windows 7 or to seek another operating system.

Following the hard bargaining by the Maltese government, a few days ago Microsoft brought over its top executive in Europe, Jan Muelfheit, for discussions with Maltese authorities.

i-Tech has learned that in- between public events highlighting Microsoft's commitment on innovation and education, Mr Muelfheit and his colleagues from Microsoft Malta met top Maltese officials to safeguard the future relationship with the Maltese government.

"We did not discuss details," Mr Muelfheit told i-Tech in an exclusive interview. "We just want governments to stick to the principle of neutrality in terms of technology pick-up."

This principle of neutrality means that Microsoft wants commercial software and OSS to be evaluated according to their own merits without prejudice for one or the other.

According to Mr Muelfheit, less than 3 per cent of the IT expenditure by the Maltese government is on Microsoft software.

"You need to look at the total cost of ownership of that solution. While Open Source Software is saying the software piece is for free then the customers are paying a lot in terms of services. What is good on the commercial software is that it creates jobs. We have over 120 partners in Malta. You simply need to look beyond the price of software. If you look at the total economic value and in terms of economic opportunities, Open Source Software is still missing big-time."

The government has been considering OSS for years: benchmark tests on OSS carried out even before the strategic alliance was signed with Microsoft in 2003 revealed that OSS was a reliable alternative.

Mr Muelfheit insists he does not just want Microsoft to keep supplying the Maltese government with its software, but wants to support the country as a whole.

"We want to upgrade the relationship with Malta. We are optimistic about cooperation. Malta is an important market for us. It is a win-win situation. To move on ... what it really takes is to broaden the discussion and ask 'where would Malta like to be five to 10 years from now'? We would like to facilitate a think-tank of politicians, academia and industry on how Malta would like to compete in the future."

Maltese computer users benefited directly from the strategic partnership between government and Microsoft. Popular software such as Windows XP, Vista and Microsoft Office were sold at a nominal price. The Maltese-language version of Windows was launched. Several initiatives towards spreading digital literacy were also taken and a Microsoft IT academy was opened at the University of Malta. Young Maltese software programmers started to take part in the international Imagine Cup.

Microsoft's investment in Malta as a result of the 2003 agreement was valued at €51 million for the first three years.

"We are very proud to be here and we are the biggest investment. The relationship will evolve. Definitely," Mr Muelfheit insisted.

Microsoft is expected to be one of the first companies to move into Smart City Malta. In the run-up to the 2008 general election, Minister Gatt indicated Microsoft would be the first tenant at Ricasoli.