Since its launch in March 2012, the G-Cloud procurement framework has discovered itself lauded by the UK authorities as a significant pressure to be reckoned with in its austerity-focused efforts to make public sector IT procurement extra aggressive and open.
One solely has to have a look at how former Cupboard Workplace Minister, Francis Maude, talked up its potential to place a cease to “the oligopoly of huge suppliers” dominating the general public sector, in a speech shortly after its launch for proof of that.
It could obtain this by giving the general public sector better visibility of the cloud companies on supply from the UK’s bustling SME tech provider neighborhood by its on-line market, the place each provider – no matter dimension – should publish their pricing to make sure consumers get worth for cash.
As the quantity of offers being awarded to SMEs by the framework steadily started to creep up, it appeared Maude’s ambitions for G-Cloud to turn out to be an oligopoly-busting device for good in public sector IT have been quick on their strategy to turning into realised.
Between Might 2012 and November 2016, the quantity of G-Cloud offers awarded to SMEs elevated from 38.eight% to 64%. This proportion has continued to creep up additional nonetheless (to 70%, in truth), based on the newest G-Cloud spend information. Nonetheless, whereas the quantity of offers has steadily elevated, the worth of the offers being awarded to SMEs by G-Cloud has declined by eight proportion factors to 48% between January 2017 and March 2018.
A deeper dive into the information by Lindsay Smith, principal analyst at market watcher GCloudSales.UK, reveals an excellent starker change within the public sector’s IT sourcing habits of late. “Whenever you take a look at the 12 months to March 2018 and examine that to the 12 months to March 2017, you see a decline within the quantity of enterprise to SMEs, nevertheless it does seem that G-Cloud 9 is especially SME unfriendly,” he says.
For instance, through the first 10 months of G-Cloud eight, his evaluation reveals that round 68% of gross sales by the Internet hosting Lot went to SMEs, however within the 10 months from when G-Cloud 9 went stay in Might 2017, this determine had dropped to 20%. “That may be a huge shift, and really worrying,” he tells Pc Weekly.
The downturn in SME deal values
Whereas G-Cloud nonetheless comfortably exceeds the government’s pledge that 33% of all procurement money will go to SMEs, the downturn has not gone unnoticed by members of the G-Cloud provider ecosystem, together with Nicky Stewart, industrial director of G-Cloud-listed Infrastructure as a Service (IaaS) supplier UKCloud.
The corporate is a bone fide G-Cloud success story, having secured £75.9m of public sector spending by the framework to-date, which is greater than another supplier throughout the cloud internet hosting lot, which encompasses IaaS and Platform as a Service (PaaS) choices.
As Stewart sees it, the drop is symptomatic of the federal government’s consideration being diverted elsewhere, thanks in no small half to Brexit.
“There are a variety of competing coverage distractions, not least of which is Brexit, which implies that the tempo of [public sector] digital transformation is slowing,” she tells Pc Weekly.
“There was much less give attention to a few of authorities’s different insurance policies, notably its SME agenda, and fewer policing of coverage compliance as spend controls have weakened.”
The hyperscale problem
The downturn in SME deal values has coincided with a significant growth of among the tech world’s greatest cloud suppliers within the UK, with Amazon Internet Companies (AWS), Microsoft and IBM all both opening UK datacentres – or not less than declaring their intentions too.
Microsoft opened its first UK datacentre in September 2016, with the Ministry of Defence as an anchor tenant, and Amazon Web Services’ (AWS) cut the ribbon on its London region in December 2016. IBM, in the meantime, went public with its plans to attract on the colocation capability of public sector-focused datacentre agency Ark Data Centres to expand its server farm footprint in November 2016.
On the time of the AWS datacentre opening in December 2016, the cloud companies big had secured a modest £2.93m in spend by the framework because it started. This determine has risen considerably since to £31.5m.
On the again of this, the agency has additionally risen up the rankings to turn out to be one of many high three performing infrastructure as a service (IaaS) suppliers listed on the framework, and is now snapping on the heels of UKCloud.
Amazon is much from being the one member of the hyperscale cloud pack whose G-Cloud gross sales figures seem to have been buoyed by its investments in UK datacentres, says Rob Anderson, principal analyst for central authorities at market watcher GlobalData.
“AWS have actually finished very nicely over the past couple of years [through G-Cloud], and a good few others have gone from nearly nothing too,” he says.
Certainly, from the beginning of the framework to August 2016 (the month earlier than its UK datacentre opened), Microsoft secured £8m in G-Cloud spend throughout that 52 month interval.
Within the 18 months from September 2016 to March 2018, banked gross sales of £23.3m by the framework, the Cupboard Workplace’s Digital Market spend figures point out.
These information factors have prompted some G-Cloud stakeholders to as far as to counsel the framework, removed from encouraging SMEs to flourish, could also be inadvertently supporting a shift in the direction of massive IT firms ruling the general public sector IT roost as soon as extra.
“There’s a actual danger the federal government will repeat the errors of the previous, and get locked right into a duopoly of suppliers,” warns UKCloud’s Stewart.
“This received’t be good for the UK in the long term, it’s not good for the nation’s total resilience, and in 10 or 15 years’ instances a brand new technology of civil servants will probably be scratching their heads, and hiring costly consultants to work out how the duopoly will be exited.”
And the actual fact the uptick in G-Cloud spend for AWS, Microsoft and others seems to be coming on the expense of the framework’s SME suppliers shouldn’t be serving to to allay such fears.
“The most important one which appears to have misplaced out is UKCloud,” says Anderson, “as a result of the [amount] of G-Cloud spend put their method between 2016/2017 went down by about £5m,” he says. “You possibly can in all probability assume a few of [the public sector business] they anticipated to go to them has gone to AWS, however there are different giant suppliers (against SMEs) which have gained as nicely.”
Market skewed by misconceptions
In Stewart’s view the shift in spend in the direction of AWS and the like is being fuelled by misconceptions throughout the public sector IT shopping for neighborhood that solely hyperscalers are able to delivering public cloud companies.
“This perception is [being] perpetuated by the Government Digital Service (GDS) guidance to public cloud, which refers to ‘bigger’ suppliers,” she continues.
“An actual danger [here] is that authorities will get locked into homogenous ‘one dimension suits all’ companies which are designed to satisfy the wants of neither authorities, or the general public it serves.”
The steering alluded to by Stewart additionally serves to offer the international tech giants an excellent greater benefit over their SME counterparts on G-Cloud, says John Glover, gross sales and advertising director at G-Cloud-listed collaboration software program supplier Kahootz.
“The US tech/cloud distributors have a a lot bigger addressable single market to construct a enterprise from that they’ll use to create a launch-pad to go abroad,” he says.
“With Microsoft, Google, Oracle, Amazon, and IBM all being American, their footprint is complete and sometimes tough for a UK vendor to compete with as they are typically a lot smaller in each dimension and income.
“Within the cloud, dimension and quantity can matter because the shared price economies are higher for these US suppliers that have already got a big shopper footprint and income base,” says Glover.
There are commerce obstacles to bear in mind, provides Glover, that make it more durable for UK-based cloud companies to market their wares to the US public sector, whereas the hyperscalers encounter no such challenges when promoting their companies within the UK.
“If a profitable UK tech suppliers decides to promote within the US the alternatives throughout the US public sector are way more restricted as a consequence of restrictive procurement laws such because the Buy American Act and Trump’s protectionist America First Coverage shouldn’t be going to assist both,” says Glover.
“After I spoke to an American Federal Company, I bought the response that they might not be capable to purchase from us, a UK tech firm, until we have been not less than 51% American owned. Does that appear truthful?”
The entire public sector story
It’s value allowing for, counsels World Information’s Anderson, that solely a couple of third of public sector cloud procurement happens by G-Cloud, and its development has begun to sluggish of late.
“That doesn’t essentially imply the [public sector’s] transfer to the cloud has began to drop off, simply that organisations are utilizing completely different strategies of procurement,” he provides.
There are additionally some interdependencies between the massive and smaller suppliers throughout the G-Cloud provider ecosystem the figures don’t present, which can paint a barely completely different image of what’s going on.
“It’s tough to get a definitive reply about simply how a lot enterprise is coming the [hyperscalers’] method as a result of Microsoft, IBM and Google promote [their services] by intermediaries to numerous extents, as does UKCloud,” says Smith.
“For instance, when a SaaS firm hosted on UKCloud makes a SaaS sale to authorities that pulls by some UKCloud spend that we don’t see within the G-Cloud figures.”
Supporting enterprise with the general public sector
In that kind of situation, the hyperscalers are supporting – slightly than thwarting – the flexibility of SMEs to do enterprise with the general public sector, as a result of the use their infrastructure to host their very own companies.
This can be a development AWS may be very a lot concerned in, says Chris Hayman, who heads up the cloud big’s public sector enterprise within the UK and Eire. The corporate companions with 1000’s of SME-sized, impartial software program distributors (ISVs) who construct merchandise utilizing its infrastructure which are bought into the general public sector too.
The corporate additionally did quite a lot of work, within the run up its UK datacentre area going stay to assist educate the general public sector customers on cloud safety points, and get them extra snug with utilizing cloud, which has wide-reaching advantages for the provider neighborhood as an entire, he provides.
So, as an alternative of taking a “us verses them” view of the cloud market, there is a component of a “rising tide lifts all boats”, the place the success of AWS within the public sector is worried, continues Hayman.
“It’s an ideal success story all spherical, and we’re bringing the [rising] tide with us to all these conversations. And G-Cloud has been very profitable in that,” he says.
The hyperscale hyperlink to SME success
There’s some credence to what AWS is saying right here, says Anderson, as they’ve performed a component in serving to normalise using cloud throughout the historically danger averse public sector.
“Public sector customers have typically discovered obstacles to cloud computing in safety and information sovereignty, and the actual fact the large gamers have – and proceed to carry – datacentres to the UK has inspired them to utilize the cloud for infrastructure and platform greater than they’ve earlier than,” he says.
“They’ve inspired the market typically, and it’s actually all the way down to how the opposite suppliers [including SMEs] have responded to that.”
Some SMEs have had the rug pulled out from below them fully, says Anderson, citing the high-profile demise of Salford-based colocation and cloud provider,Datacentred for instance, however that’s an distinctive case.
The corporate, which had accrued £1.8m in gross sales by G-Cloud, entered administration in August 2017, after its essential buyer – HMRC – exited its cloud internet hosting contract with the agency, in preparation for a transfer over to the AWS platform.
“They have been caught out, [because] they constructed their enterprise round one buyer, and with cloud the concept is which you can transfer between suppliers pretty simply, so it’s a really harmful factor to do,” says Anderson.
Diversifying buyer combine
G-Cloud SMEs can stop themselves struggling the same destiny by diversifying their buyer combine and courting public sector consumers at native authorities stage, seeing as AWS and the like appear to be focusing on central authorities organisations.
Native councils and NHS trusts, for instance, might have industry- and location-specific cloud wants that the hyperscalers’ companies and help choices are simply too broad to satisfy that SMEs could be higher positioned to fill, says Stewart.
That is an method UKCloud has taken, having previously launched standalone business divisions centered on serving the wants of well being and defence sector, for instance.
“SMEs can differentiate themselves in a method that the hyperscalers can’t, [and] that may be by discrete market sectors, companies tailor-made to satisfy the wants of the sector, by excessive ranges of customer support, regulatory and financial compliance and any variety of different issues,” she says.
“The actual problem for SMEs is competing with the hype and really deep pockets of the hyperscalers, [while] making themselves and their companies seen and recognized to consumers.”