Following a widely publicised move from Windows to Linux at Munich City Council last month, Microsoft this week lauded three new contracts in Frankfurt, Latvian capital Riga and Turku in Finland. So was Munich just a flash in the pan or is Microsoft seriously worried about Linux as a force in the desktop market?

It seems that the German public sector is the battleground, with Federal Minister of the Interior Otto Schily recently praising open source and over 500 public authorities officially asking to hear more. German analyst firm Soreon Research has estimated that the number of organisations using open source software will jump from 12 per cent today to 18 per cent in 2005 and 24 per cent by 2007.

Microsoft argues however that Linux's apparent success is one of perception not reality. "The common perception in the media today seems to be the growth of open source solutions, particularly with governments," reads a Microsoft press release. "This, however, is not the case and in fact many governments are evaluating Open Source solutions, realising the cost disadvantages and long-term costs, and selecting the higher-value, stable, easy to use Microsoft solutions."

The three recent contracts show this, it argues. Finland is a lover of open source yet still chose Microsoft after a lengthy evaluation in which people were given the chance to try both systems. In Riga, Latvia, a Microsoft spokeswoman told us, they chose Microsoft over Linux because of the range of applications with Microsoft were larger; there was a shortage of Linux technical staff; Microsoft was more secure; it behaved more as a finished product; it was easier to plug-and-play with servers.

Frankfurt's decision to go the MS route was less excitingly trailed. "Frankfurt's Mayor noted that the move helps reduce Frankfurt's overall administration expenditures and enhance overall IT efficiencies across the government," read the release.

However, Linux representatives aren't buying it. "Linux is now not only competing in the server area," SuSE German representative Chris Egle told us. "Munich has changed all that." Instead, he says, people now have to explain why if they decide to go the proprietary software route. Microsoft, he says, has realised it is now under pressure and is having to shout about its successes.

A Microsoft spokeswoman confirmed as much, saying that after Munich, it will have to work harder at pointing out all the contracts that it wins. The intimation is that it's business as usual for Microsoft. Winning contracts is what it does. In May, a recent memo, leaked to the International Herald Tribune, from Microsoft executive Orlando Ayala, confirmed the existence of a slush-fund to help Microsoft win against open souce.""Under NO circumstance lose against Linux," said Ayala in the memo.

But Microsoft will argue that there's no need for such a slush fund. Philippe Dumont, the general manager for Microsoft Europe, accepts that Linux is now higher on people's agenda but argues that when people do a proper evaluation, they find that Microsoft is still the better option. "Perception definitely played a role in the Munich outcome," he told us. "But more and more governments are doing thorough evaluations and it is less about perceptions."

He accepts there were failings in Munich. "We could probably have done a better job of engaging with them. We were probably not as present as we could have been." This was despite a visit by MS CEO Steve Ballmer and a special deal concocted by Microsoft to make Windows especially attractive to Munich. At the end of the day though, there was, says Dumont "definitely a lot of political context".

It is true enough to say that Microsoft is viewed with some suspicion in Europe. In the States it is a worldwide success story, in Europe it is an American company trying to tie people in with its software and licensing contracts.

Taken dispassionately though, says Dumont, Microsoft is the winner. "Maybe people see that because [with Linux] the license is free it is therefore cheaper, but a rational evaluation shows it is more complex than that, it is about the value of the overall platform." We are talking about the all-powerful total cost of ownership debate.

Software only accounts for five per cent of the total cost of ownership, an MS spokeswoman says, you have to look at the overall. And in this case, despite Microsoft's licensing, it offers better integration, security, more applications.

Which is odd because that is exactly the argument that Linux is putting forward for why it is better than Microsoft. Joe Eckert from SuSE in the US tells us he doesn't understand how Microsoft can make that case. "With Linux, you don't have to upgrade your hardware, you need far fewer administrators, it is much more secure and stable."

As for the battle over desktops though, he is realistic. "Oh, we're not even close to being neck-and-neck on the desktop, but on the servers I think Linux growth is greater than Microsoft, although you'll have to check on the exact numbers."

He agrees with Microsoft that desktops are not the be all and end all though. "Desktops are a small part of the market, what companies are seeing is a great deal of synergies - the Linux desktop is exactly the same code as the IBM mainframe, so an administrator can also drop down from a server to a desktop."

With a forced Microsoft upgrade, he says, you also need to upgrade your hardware. "But with Linux there is a smooth transition and you can use old hardware, the savings are incredible." Plus OpenOffice means died-in-the-wool Excel users can still use all their macros without worry. The barriers he says "are falling like crazy".

Munich was definitely a decisive moment in that it gave open source the kind of credibility it always seemed to be lacking. Microsoft only sees this is a glitch however, and that is why it wanted to put these three most recent contracts "under the limelight". This will show "a strengthening trend" of people going with MS, says Dumont, because "more and more people are thinking through the decision".

Chris Egle is not so sure. Told that Microsoft feels its success in winning remaining contracts across Europe is inevitable, he says, confidently, "We will see".