Sun Microsystems Inc. began sinking its teeth into the "new" European Union this week, saying that it has signed a no-charge education licensing program with the Hungarian government that will make its StarOffice 7 productivity suite available to 5,500 schools and 67 higher educational institutions in the country.

The deal, announced Monday, comes as the latest government contract lined up by Sun to put its open source software on the desktop, and one of the first wins announced in the new E.U. countries, which joined the organization Saturday. The Santa Clara, California, company has also recently lined up contracts with the city of Munich, the Israeli Ministry of Commerce and the French Ministry of Interior as part of its international open source desktop push.

"Sun is positioning itself to make a StarOffice play in new Europe," said James Governor, an analyst with RedMonk LLC. "It's looking for a disruptive market force."

Although Eastern Europe only compromises about eight percent of the IT market, according to Gartner Inc., the region offers both new customers, and the potential of becoming a significant "nearshoring" location for Western European companies that want to take advantage of its lower costs and close proximity.

"(Eastern Europe) is a small market now but when you join the dots there's the possibility that it could have big implications," said Governor.

Under the new agreement, Hungary's Ministry of Education will act as the central distribution point for StarOffice 7 and OpenOffice.org -- an open source application and project to develop a multi-platform productivity suite -- to the schools, which are independently run. The institutions will be able to download the software from a Ministry of Education Web site or receive it via CD, Sun said.

Sun and Hungarian Ministry of Education representatives were unable to comment on the details of the agreement Tuesday, or on how many students they expect to actually use the software.

Sun has taken particular aim at educational institutions, offering them a special no-charge licensing deal for StarOffice. To date, the company claims that 165,000 school districts in 24 countries have access to its software through the program, potentially touching over 50 million students.

Although giving away software to students might not garner the support of financial analysts, to market analysts it's a smart move, said Governor, because it gets "them hooked at a young age." This is a strategy Microsoft Corp. has used for some time, Governor pointed out, which often pays dividends in terms of user loyalty.

Government contracts are also attractive to vendors because they often entail numerous users while offering a sort of unofficial endorsement for their products. These qualities offer particular advantages to open source software vendors that are looking to fight Microsoft for the desktop.

"Microsoft is battling open source in the public sector and it sees Europe as the heart of the battle," said Governor.

And Sun isn't the only open source competitor eyeing Microsoft's desktop dominance, as Red Hat Inc. announced its intention to get into the game Tuesday with the launch of a new Linux-based offering aimed at corporate desktops.

With competition heating up, it remains to been seen how other potentially "disruptive" markets like Hungary swing.