IT vendors scuppering Whitehall's cloud adoption with price-cut promises

IT vendors scuppering Whitehall's cloud adoption with price-cut promises

Summary: The UK government's director of G-Cloud says she is furious that systems integrators are dropping their prices to dissuade government department's from switching to G-Cloud services.

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Systems integrators are slashing what they charge Whitehall departments in an effort to stop them from switching to cloud services, the UK government's cloud chief said on Wednesday.

UK central government is attempting to drive down the estimated £16bn it spends on IT each year by replacing bespoke IT systems with commodity cloud services. This year, it's expected to implement a policy that will make public cloud services the default choice for new government IT projects.

Government particularly wants to free itself from the stranglehold of a small number of systems integrators that traditionally carried out about 80 percent of government IT work; the market dominance of these SIs was attacked in a 2011 parliamentary report into government IT failings, A Recipe For Rip-Offs: Time For A New Approach.

Departments are being encouraged to buy cloud services the government-run CloudStore — an online catalogue of more than 3,000 SaaS, PaaS and IaaS and specialist cloud services available to public sector bodies — which are sourced by Whitehall through its G-Cloud procurement framework.

However suppliers, when faced with losing business to G-Cloud services, are matching the prices of such offerings in order to hold onto government departments as customers.

"I find people going to their current suppliers and saying 'I can get this from the G-Cloud for this amount of money' and the incumbent supplier says 'We will do it for the same amount'," said director of the G-Cloud Programme Denise McDonagh at a roundtable organised by Salesforce.com yesterday.

"That makes me furious for two reasons. One, you should be moving to a different way of buying and reducing your dependency on the big SIs. But it makes me more furious that an SI can either deliver that service a lot cheaper than they previously said or they are taking a loss.

"It's very bad behaviour. One of the conversations we're having with suppliers is that they have to behave as well."

A total of £7.4m has been spent on G-Cloud services to date — a fraction of overall government IT spend — although McDonagh said there is far more spending in the pipeline.

Spending on G-Cloud services by central government is being blocked by departments being tied into multi-year contracts with large systems integrators, McDonagh said. A sizeable number of these contracts will expire in 2014/15, according to McDonagh, freeing up more departments to buy through the G-Cloud.

Another aspect that could be holding back cloud adoption is data transparency. Vivek Kundra, former US government CIO and EVP for emerging markets at Salesforce.com, said what drove uptake of cloud services in the administration was creating an IT dashboard that displayed a photo of each government CIO next to a list of IT projects they were responsible for, and how many were on schedule and on budget.

The visibility into where money was being used effectively led to one agency halting 45 projects he said, adding "officials should be held accountable".

UK government, however, still appears to be unclear on some of the metrics it is measuring G-Cloud's success against.

The government has a target of half of new IT spending being on public cloud services by 2015 but yesterday McDonagh was unable to give a definition of what proportion of new IT spending is on G-Cloud services because she said "it's difficult to determine what new spend is", adding "we need to improve on our own management information".

One of the priorities in the Cabinet Office's strategic business plan is to "improve the quality of data underpinning operational decisions across government".

Topics: Cloud, Government UK, United Kingdom

About

Nick Heath is chief reporter for TechRepublic UK. He writes about the technology that IT-decision makers need to know about, and the latest happenings in the European tech scene.

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  • Is the G-Cloud programme working?

    Cheers Nick, this is a really good insight into the commercial practices of the SI community that have obviously had it comfortable for far too long. Given their overheads I think they will find it difficult to match SME pricing, even they have a volume advantage. It is interesting to see that by their heavy discounting action they are admitting to over-pricing.

    I was at a GovCamp this weekend, kindly hosted by IBM UK, in which the success of the G-Cloud was discussed. It is clear that in all the press around the G-Cloud the focus is around "how much" is spent rather than "how little". The latter is actually the true measure of the success of the increased competition the G-Cloud CloudStore brings.

    One example given was the 95% saving the DoH got by putting their Wordpress hosting with a SME. So instead of £800,000/year were talking about only £40,000/year! So could an SI meet this price? Unlikely!

    From our own experiences, we have 7 clients who collectively are saving over £345,000 per year (75% saving) over the cost of another content collaboration competitor on the CloudStore. Perhaps we should raise our prices to make G-Cloud revenues look better?

    The other issue the SI proposal above does not address, that the CloudStore does, is the issue of price transparency and consistent pricing of services across government. This obviously helps to drive competition. Is it fair therefore that CloudStore vendors have to disclose their pricing in the public domain and the SIs can sit back and say we'll price match on a case-by-case basis? Is this the true meaning of (MEAT) Most Economically Advantageous Tender?

    My advise to the public sector - stay away from any company that has a "Request a quote" approach to offering cloud-based services.
    Kahootz