(BLOOMBERG) Moscow city will replace Microsoft programs with domestic software on thousands of computers in answer to President Vladimir Putin's call for Russia's authorities to reduce dependence on foreign technology amid tensions with the US and Europe.

The city will initially replace Microsoft's Exchange Server and Outlook on 6,000 computers with an e-mail system installed by state-run carrier Rostelecom PJSC, Artem Yermolaev, head of information technology for Moscow, told reporters on Tuesday (Sept 27).

Moscow may expand deployment of the new software, developed by Russia's New Cloud Technologies, to as many as 600,000 computers and servers, and may also consider replacing Windows and Office, Yermolaev said.

Putin is urging state entities and local companies to go domestic amid concerns over security and reliability after US firms shut down paid services in Crimea following Russia's 2014 annexation.

The plan poses a challenge to the likes of Microsoft, SAP and Oracle in the country's US$3 billion (S$4 billion) software market.

Adding to pressure, Putin's Internet czar German Klimenko wants to raise taxes on US technology companies to help Russian competitors such as Yandex and Mail.ru Group.

"We want the money of taxpayers and state-run firms to be primarily spent on local software," Communications Minister Nikolay Nikiforov told reporters.

From 2017, government entities including the Federal Anti-Monopoly Service, General Prosecutor's Office and Audit Chamber "will be tightening their grip" on state institutions that are not switching to domestic alternatives, he said.

Microsoft declined to comment.

Government entities spend about US$295 million a year on foreign software, according Nikiforov. His ministry has produced a list of nearly 2,000 Russian software products that state-run companies should use instead of products from global vendors.

Moscow's government has already switched Cisco Systems technology for city surveillance cameras to local software, Yermolaev said.

State media company Rossiya Segodnya and Moscow's regional government switched from Oracle database systems to open-code PostgreSQL software supported by local programmers, according to Digital Russia.