Munich city council today officially announced it has decided to deploy Linux as the standard desktop operating system across its 14,000 PCs, dropping Windows NT.

The deal is a huge blow to Microsoft, which had gone to great lengths to retain the contract including a visit by CEO Steve Ballmer two months ago and the offer of special licence rates.

The decision is thought to be the largest ever European move away from the licensed Windows product to the open source operating system.

The council had looked at retaining its Windows NT/Microsoft Office infrastructure or alternatively moving to either Windows XP or Linux with its Open Office software. But in a statement, it said there was a "clear strategic-qualitative projection/lead for the open source solution".

Head of the council, Mayor Christian Ude said of the deal: "With this trend-setting decision Munich secures itself as the first major city to have a more producer-independent IT infrastructure. It also gives a clear indication of greater competition in the software market."

The contract for implementing the system is up for tender, with IBM, backed by Suse, as the front-runner. IBM's German general manager Walter Raizner warmly greeted the decision and said it was a revolutionary step. "With this decision, one thing is clear," he said, "it's open season for open computing. Linux represents freedom and flexibility. Flexibility to serve constituencies better and faster, and freedom of choice to do it at less cost to the public. Munich is leading the way."

The decision by the German council comes on the same day a German Linux lobbying association Linuxtag threatened to sue US software company SCO Group if it didn't supplied details of an alleged patent infringement in the open source software. SCO Group had warned 1,500 Linux supporters that Linux contained an element of its proprietary software. The threat of length legal action was "massively unsettling our members and the companies that are potential exhibitors at the fair," said a Linuxtag spokesman and so it has challenged SCO to supply proof by the end of the month or it would sue them.

Linux has become increasingly popular in recent years by offering a stable product with widespread support services but which does not tie in an organisation to one company, as with Microsoft's Windows products. While consumers still remain largely unaware of the OS, companies and increasingly governments have seen Linux's potential and threaten to undermine Microsoft's hold on the market.