As an aside, the raw data has been persistently poor and is not improving. Date formats are mixed up, fields are missing, the recent change to combine lots means that there are some mixed up numbers and, interestingly, the project field has been removed - I'd looked at this before and queried whether many projects were actually cloud related (along with the fact that something like 20% of projects were listed as "null" - I can understand that it's embarrassing having empty data, but removing the field doesn't make the data qualitatively better, it just makes me think something is being hidden).
Recall this, from June 2014, for instance:
Scanning through the sales by line item, there are far too many descriptions that say simply "project manager", "tester", "IT project manager" etc. There are even line items (not in Lot 4) that say "expenses - 4gb memory stick" - a whole new meaning to the phrase "cloud storage" perhaps.Here's the graph of spend over the 5 1/2 years that G-Cloud has been around:
The main conclusions I reach are much the same as before:
- 77% of spend continues to be in "Cloud Support" (previously known as "Specialist Services"). It's actually a little higher than that - now that PaaS and SaaS have been merged (to create a category of "Cloud Software", Lot 4 has become Lot 3 but both categories are reported in the data. It's early days for Cloud Software - it would be good if GDS cleaned up the data so that historic lots reflected current lots.
- 2017 spend looks like it will be slightly higher than 2016, but not by much. If the idea was to move work from "People As a Service", i.e. Cloud Support, to other frameworks, it's not obvious that it's happened in a meaningful way, but it may be damping spend a little.
- IaaS spend, now known as Cloud Hosting, has reached £205m. I seem to remember from the early days of the Crown Hosting Service business case that there were estimates that government spent some £400m annually on addressable hosting charges (i.e. systems that could be moved to the cloud). At the moment Cloud Hosting is a reasonably flat £6m/month, or £70m/year. It's very possible that there's a 1:10 saving in cloud versus legacy, but everything in me says that much of this cloud hosting is new spend, not reduced spend following migration to the cloud. That's good in that it avoids a much higher old-style asset rich infrastructure, but I don't think it shows much of a true migration to the cloud.
28% of spend by the top 5 customers.
In the past I've looked at the top spending customers and top earning suppliers, specifically in Lot 4 (now a combination of Lot 4 and the new Lot 3). There are a couple of changes here:
- Back then, for customers ... Home Office, MoJ, DVLA, DSA and HMRC were the highest spending departments with around £150m between them. Today ... Home Office, MoJ, HMRC, Cabinet Office and DSA (DVLA dropped to 7th place) have spent nearly £800m (total spend across all lots by the top 5 customers is only £100m higher at £925m which shows the true dominance of support services at the top end). £925m out of £2.5bn in just 5 customers. £1.25bn (51%) is from the top 10 customers.
- And for suppliers, Mastek, Deloitte, Cap Gemini, ValTech and Methods were the top 5 with a combined revenue (again in Lot 4) of £67m. Today it's Equal Experts, Deloitte, Cap Gemini, BJSS and PA Consulting with revenue of £335m (total spend across all lots for the top 5 suppliers is £348m - that makes sense given few of the top suppliers are active across multiple lots - maybe Cap Gemini is the odd one out, getting some revenue for hosting or SaaS). It takes the top 10 suppliers to make for 25% of the spend. I don't think that was the intention of G-Cloud - that it would be dominated by a small number of suppliers, though, at the same time, some of those companies - UKCloud (£64m) for instance - are still small companies and, without G-Cloud, might not exist or have reached such revenues if they did exist.
A couple of years ago I offered the observation that
"once a customer starts spending money with G-Cloud, they are more likely to continue than not. And one a supplier starts seeing revenue, they are more likely to continue to see it than not."That seems to be exactly the case, here's a picture showing the departments who have contracts that have run for more than 24 months (and up to 50 months - nearly as long as G-Cloud has been around):
If anything, this is busier than might be expected given the preponderance of Lot 4 - it might be reasonable to expect that support services would be short term and focused on a specific project, such as migrating locally hosted email to Office 365 or to Gmail, or setting up the capability to manage cloud infrastructure. What we see, instead, is many long term resource contracts.
What should we really conclude? And what can we do?
In 2012, with G-Cloud not even a year old, I asked whether it could ever be more than a hobby for government. I wondered about some interim targets (at the time the plan was for a "cloud first" approach with "50% of spend in the cloud" - that should all have happened by now). There is absence of strategy or overall plan for further cloud realisation - with GDS neutered and spend controls licking their wounds from the NAO's criticism that they spent far more time than they should have done looking at projects spending less than £1m, it's not clear who will grasp the mantle of driving the change away from long term contracts towards shorter, more cash intensive (as opposed to capital driven) contracts (be they with big or small suppliers). Perhaps it's time for Chris Chant and Denise Mcdonagh to come back?
- Should there be spend control review of "Cloud Support" contracts to determine what they're aiming to achieve and then assess whether there really has been a reduction in costs, a migration to the cloud, a change in the contracting model for the service? If we were to do a show of hands across departmental CIOs now and ask how many were running their email in the cloud (the true cloud, not one they've made up and badged as cloud that morning), what would the response be? If we were to make it harder and ask about directory services (such as Active Directory), what would the answer be? If we were to look at historic Lot 4 and test how much had been spent in pursuit of such migrations, what would the answer be?
- What incentives could we put in place to encourage departments to make the move to cloud? Departments have control over their budgets, of course, and lots of other things to spend the money on, but could we create a true central capability (key people drawn from departments and suppliers with a brief to build a cloud transition plan) that was architecture agnostic and delivery focused that would support departments in the transition - and that would be accountable (and quite literally held to account) for delivering on the promise of cloud transition? If that was in place, could departments focus on their legacy systems and how to move those to more flexible platforms, in readiness for future cloud moves (or future enhancements to cope with Brexit)?
- What more could we do to encourage UK based cloud companies (as opposed to overseas companies with UK bases) to excel? Plainly they have to compete in a global market - and I were a UK hosting company, I would be watching Amazon very closely and wondering whether I will have a business in a few months - but that doesn't mean to say we don't want to encourage a local capability across all lots? What would they need to know to encourage them to invest in the services that will be needed in the future? How could that information be made available so that a level playing field was maintained? Do we want to encourage such a capability in the UK, or should we publish the overall plans and transition maps and let the chips fall where they may?
- Are there changes that need to be made to the procurement model so that every supplier can see what every department is looking for rather than the somewhat peculiar approach now where suppliers may not even know a department is looking to make a purchase? What would that add to the timeline? Would it result in better competition? Would customers benefit as well as suppliers? Could we try it and see - you know that whole alpha, beta, A/B testing thing?
GDS have long since been quiet on grand, or indeed any, plans for transition to the cloud (and on many other things too). Instead of a cloud first strategy, it looks like we have contracts being extended and delays to existing projects. IR35 likely resulted in some unexpected cost saves as the headcount of contractors and interims reduced almost overnight, but that also meant that projects were suddenly understaffed and further delayed.
Energy and Vision
We need a re-injection of energy and vision in the government IT world. Not one where the centre dictates and micro-controls every action departments want to take, resulting in lengthy process, avoidance of spend that might be scrutinised and cancellation/delays to projects that could make a difference ... but one where the centre actively facilitates and helps drive the changes that departments want to make, measuring them for logical consistency against an overall architectural plan and transition map rather than getting theological about code standards or architectures.
A Strategy And A Plan
At the same time we need to recommit to a strategy and a plan for delivering that strategy. In terms of the cloud that means:
- Setting a cloud transition goal. In the same way that we have set a goal to give increased business to SMEs (which G-Cloud is underpinning), we should be setting the same goal to move government to commodity, i.e. cloud-based, IT where it makes sense. 10% of the total budget (including Capex and Opex, or CDEL and RDEL if you prefer) in the first year, increasing from there to 25% in 2 years and 50% in 5 years, say.
- Reviewing the long (36 month plus) contracts and testing them for value, current performance and overall delivery. Are they supporting migration to the cloud? Is the right framework being used (if it's not cloud but it is delivering, then use the right framework or other procurement option)? It doesn't matter, in my view, whether it was valid in the first place or how the process was or wasn't followed originally, it matters whether there is value today and whether there are better options that will support the overall plan. If it's not cloud, let's not call it cloud and let's get to the root of what is really going on with commodity technology in government.
- Overwhelmingly adopting an architecture founded on multiple shared and secure infrastructures. There's no need for a single architecture when the market provides so many commodity options - and spreading the business will foster innovation, increase the access points (and improve security through distributing data) and ensure that there is continued competitive tension. Some of that infrastructure will be pure public cloud, some of it will be a shared government cloud (in the US, cloud providers maintain clones of their public infrastructure for federal government use - that may be one answer for specific areas; importantly, what I am not suggesting is that a department set up their own infrastructure and call it a cloud, thought there may be specific instances, in the security services, say, where data classifications may mean that's the only option).
- Migrating all of government's commodity services to the cloud. Commodity means email, directories, collaboration, HR, finance, service support, asset management and so on. This doesn't have to be a wholesale "move now" approach, but one that looks at when it's sensible to close down existing applications and make the move. No new applications should be built or deployed without first assessing whether there is a cloud alternative - this is a perfect place for a spending team to look at who is doing what and act as a hub for sharing what is going on across central and local government.
- I've been on the record for a long time as saying government should recognise that it doesn't collaborate with itself - having collaboration services inside the department's own firewall isn't collaboration, it's talking to yourself. I believe that I even once suggested using a clone of Facebook for such collaboration. Government doesn't need lots of collaboration tools - it needs one or two where everyone, including suppliers and even customers, can get to with appropriate segregation and reviews to make sure people can only see what they're supposed to see. Whatever happened to Civil Pages I wonder?
- Putting in place a new test for Lot 3 (the old Lot 4) services to measure what is being purchased against its contribution to the department's cloud migration strategy. This is a "cloud first" test - are you really using this capability to help you move to the cloud? What is the objective, what are the milestones? A follow on test to see how delivery is progressing will then allow a regular state of the cloud nation report to be published to see what is and isn't moving.
- Working with local government, Devolved Administrations, the Health Service and others to see what they are doing in cloud. With 84% of G-Cloud spend in central government, maybe the other folks are doing something different - maybe it's good, maybe it's not so good, but there are likely lessons to be learned.