Bank of Ireland signed a deal with Microsoft yesterday worth up to €20 million for supply of a range of software to run all its information technology systems.

The deal is the largest single annuity contract won by Microsoft Ireland following the introduction of its controversial licensing programme in 2001.

Under Microsoft's new annuity scheme, customers pay for software over a set number of years rather than as a once-off expense.

This enables customers to access the latest version of Microsoft software when they are released and follows Microsoft's move towards providing software as a service rather than a product.

Microsoft's annuity scheme was heavily criticised by existing customers last year because it abolished a system of discounts that were previously available to them under its old licensing plan.

But Bank of Ireland, which was an existing Microsoft customer, welcomed the new deal yesterday.

Mr Cyril Dunne, chief information officer, said Microsoft had proven to be a committed and flexible partner.

"We are pleased that we have reached an agreement," he said in a statement.

Under the contract, Microsoft will supply a range of desktop and server software, including Windows XP, Microsoft Office XP and Windows 2000 Server.

This will enable Bank of Ireland to standardise almost all its information technology infrastructure on Microsoft software.

The contract awarded to Microsoft follows months of negotiation with Bank of Ireland, which has been evaluating its information technology requirements in the wake of its failed technology link up with fellow Irish bank AIB.

Bank of Ireland is currently seeking an outsourcing partner to manage its IT infrastructure.

Mr Harry Largey of Microsoft said the company was committed to working with Bank Of Ireland's chosen outsourcing partner when that contract was awarded.

He said the Bank of Ireland deal was the largest single enterprise contract ever won by Microsoft Ireland in the corporate sector.