The UK’s G-Cloud: Who will gain, and who’ll be out in the rain?
In these times of politically imposed austerity across Europe, governments’ internal spending is attracting more scrutiny and criticism than ever. The UK is meeting this challenge with a raft of policies to overhaul public-sector procurement. Its G-Cloud initiative aims to stimulate open marketplaces for pay-as-you-go ICT, enabling buyers to select the best value for their needs from a catalog of accredited products offered by hundreds of vendors (browse the catalog here).
Services are available to some 30,000 public-sector organizations at the click of a button, which the government believes can stamp out expensive inefficiencies such as duplicated commissioning, underutilization of infrastructure, inflexible contracts and services, and tortuous commissioning processes.
As of October 2012, about 450 suppliers had joined the platform, 75% of which are SMEs offering more than 3,000 services between them. Since launch in February 2012, about 100 purchases have been made through CloudStore, generating £2.3 million in sales of which 70% went to SMEs. G-Cloud has some way to go, though, if it is to reach the £250 million spending target by 2015.
An end to ‘sclerotic’ SI contracts?
An explicit aim of the G-Cloud strategy is to break the dominance of the handful of suppliers estimated to receive some 80% of central- and local-government ICT spending. The minister responsible for procurement policy urges public-sector buyers to forgo “the big, sclerotic SI contracts” in favor of utility offerings from nimble and flexible SMEs.
High-profile setbacks in the UK such as the failed attempt to centralize patient health records have not helped the large suppliers’ cause. BT was among those burned by the political outcry when results failed to materialize. The National Programme for IT (NPfIT) has since been restructured, but in September this year the government was widely reported to have told Fujitsu, among others, that its services were no longer required. The IT-and-communications vendor was considered “too high risk” for public-sector projects, according to reports that neither party would confirm or deny.
G-Cloud is a good opportunity for telecom cloud and pure-cloud providers, though large brands find themselves in unusual company on the CloudStore. SMEs and barely known startups are pitching services that superficially, in the absence of agreed definitions, appear similar to the propositions of major ICT brands but at a fraction of the price. Over time the market will sort out these imperfections.
Of deeper concern is the increased level of risk that the large vendors are now expected to carry. The very public fracas over the NPfIT highlights vendors’ vulnerability to reputation damage, an intangible that is difficult to value until its loss hits the bottom line.
If big suppliers decide to take a cautious approach, public-sector organizations could be understandably nervous as existing long-term contracts begin to wind down with little prospect for the supplier of winning an extension. Complex systems integration is another area of risk that lacks clarity so far. Although government departments still feel they need to own integration projects, vendors will target this work as the biggest prize still on the table. Similarly, while the UK government is advising buyers to “dip their toes” in cloud, large vendors need scale.
One clear positive for suppliers large and small is that the commissioning process will be much shorter. A much-reduced role for lawyers is considered to be to everyone’s benefit.
G-Cloud is a bold attempt to get control of public-sector spending and puts government at the forefront of Cloud adoption. In the US, more than 300 public-sector organizations are already using Amazon Web Services, and many more are using Google Apps. The challenge for suppliers in the UK is to adjust to the new power structure and ensure politicians are able to report substantive cost savings for taxpayers.