A Department of Health (DoH) spokesperson confirmed that it will not renew its contract with the software firm for 900,000 licences for Microsoft's PC software, which was due for renewal this year.
"The Department of Health has already invested so that NHS trusts are able to have access to the latest versions of Microsoft desktop software," the spokesperson told SmartHealthcare.com on Thursday.
"Future investment decisions will be taken at a local level, in line with the proposals set out in the white paper published this week."
The Liberating the NHS white paper promises that NHS organisations will increasingly be enabled to be "customers of a more plural system of IT and other suppliers".
The current agreement with Microsoft was signed in November 2004, when the number of licences was extended from 500,000 to 900,000.
Former health secretary John Hutton claimed at the time that the deal would result in savings of £330m on the department's existing arrangement, describing it as an "exceptionally good deal for the taxpayer".
Although the Department of Health said the value of the deal was "commercially confidential", reports in the Financial Times and other sources estimated the value at £500m.
The 2004 contract with Microsoft followed a trial of open source software the previous year. Then NHS IT director Richard Granger had ordered a trial of a Linux-based system from Sun Microsystems, saying that if it proved effective the NHS could save money and have use of "rich and innovative software technology".
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