Dive Brief:

• The Israeli government is opting to let a Microsoft contract expire because of a change in licensing that would double the price, according to a Reuters' report Tuesday. The government's current contract includes Office desktop software, server software and Microsoft Windows for more than $27 million a year. 
• The Finance Ministry told Reuters that it is trying to move from a licensing system to a subscription system more akin to renting. After a year of negotiations with Microsoft about moving data to the cloud, which is part of the licensing change, the parties have not reached an agreement. The government will halt the current licensing structure, though offices can continue to use already installed software for no extra payment. This should push government ministries to examine what they use Microsoft products for and potential alternatives. 
• Critics have hit the government's use of Microsoft for many years, citing an unfair dominance by one company and too high price tag, according to Haaretz, an Israeli paper. The government recently committed to moving to more open source solutions, which would allow smaller ministries to benefit from tools developed by larger ministries and more freedom to developers to test code security. 

Dive Insight:

The government could still change its mind before the contract runs out — or try to use the pressure to leverage a better deal with Microsoft. If it carries through with the announcement, however, the ministries will have a lot of work ahead moving to an open-source or low-cost alternative like Linux. 

Moving away from proprietary products, the government does benefit from being situated in one of the world's strongest technology and innovation hubs, renowned for its cybersecurity and enterprise software players. Tel Aviv startups benefit from the most international investment relative to other tech hubs, and the city solidified a place in the group of "heavyweight" hub leaders including Silicon Valley, Boston, London and New York, according to CB Insights. 

Israel isn't the only customer being affected by changes to Microsoft's pricing structure. Beginning October 1, Microsoft is rolling out price changes to enterprise on-premise and cloud products as part of its portfolio restructuring. 

The goal is to improve transparency and consistency in purchasing channels, though it could hit customers who still purchase licenses on a device basis, who will have to license the entire enterprise software going forward in order to get a discount.