Here are another 51 million reasons why the cloud is winning

Faced with a £52m bill from a large IT vendor for hosting "a major programme" the UK government decided to turn to commodity cloud services.

The result? It picked up a comparable service from a smaller player for £942,000.

"In the world of the cloud the services I get from a major systems integrator and from a minor systems integrator are relatively comparable, given the security and ability to host is often specced out anyway," UK government CTO Liam Maxwell told The Economist's CIO Forum in London yesterday.

The UK government plans to use commodity cloud services to help free itself from the stranglehold of a small number of systems integrators that traditionally carried out about 80 percent of government IT work, and charged huge sums of money for doing so.

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

The idea of the CloudStore is to provide a platform where it is as easy for small and medium sized businesses to sell to government as the large vendors. The government has simplified the accreditation process to become a supplier to government and the vendors selling through the store range from multi-national corporates to start-ups.

While more than 60 percent of the spend through the CloudStore has been with SMEs since it launched last year, larger deals through the store are still going to big companies, with IBM picking up a £1.2m deal with the Home Office in May.

Spend on G-Cloud services is growing rapidly, passing £25m in May, but is still tiny compared to an estimated annual public sector IT spend of £16bn. However this could pick up even more sharply as long-term contracts with large systems integrators expire.

"The majority of the large contracts finish by 2014-15, so there's an enormous amount of change underway at the moment," said Maxwell.

"We're not going to replace, we're going to base our services around user need, and in many cases that means not doing the same thing again."

The UK's Office of Fair Trading today called for suppliers and purchasers in the UK public sector to contact them with their experiences on how easy it is for smaller vendors to supply to government and barriers put in place by larger players to prevent government switching to competitors.

Earlier this year the government's director of the G-Cloud programme Denise McDonagh said systems integrators are slashing what they charge Whitehall departments in an effort to stop them from switching to cloud services.

Maxwell has plenty of government IT horror stories of his own, telling the conference it historically cost government £723 to process each payment claim made by farmers to the Rural Payments Agency.

"It would be cheaper to rent a taxi put the cash in the taxi, drive the taxi to the farm and keep a manual record than it would have been the way the outsource contract worked," he said.