The Cabinet Office and Oracle have a signed a new deal that will help save the government more than £75m by 2015, according to Cabinet Office Minister Francis Maude.
"This deal ensures better IT for government and savings for the taxpayer," said Maude.
Oracle has offered a single discount that will allow different parts of the government to act as a single entity to buy software using the same discount rate.
In the past, different government departments bought software from Oracle on different terms and at different discounted rates.
"The days of the government paying different prices for the same goods or services are over – we will no longer sign inflexible contracts that tie the taxpayer into unfavourable terms.
"We are pleased to have made these savings with Oracle and expect more deals with other suppliers to follow," said Maude.
Oracle will also establish a "centre of excellence" in which the government will be able access Oracle expertise.
The plans to save costs come from government's ICT strategy which was announced in March last year. The strategy looks at reducing costs, reducing project failure and building a common infrastructure within government.
It says that the programme has delivered savings of £3.75bn in 2010/11 and is on target to deliver a further £5bn of savings in 2011/12.