UK government's cloud strategy: Pay more, get less, blame vendor lock-in?

Home Office's £450M deal with AWS raises questions over competition and aligning department requirements

UK central government departments need to better align their requirements in cloud computing to get better deals out of the big providers, MPs heard this week.

Speaking to the Public Accounts Committee (PAC), Andrew Forzani, chief commercial officer in the Cabinet Office, said that if the government wanted to use its spending power to strike better deals with the top cloud providers, individual departments needed to align their requirements.

In December 2023, the Home Office awarded market leader AWS a £450 million contract for cloud services over three years. The deal replaced an earlier £120 million deal awarded in December 2020.

PAC member Lloyd Hatton, a Labour MP, pointed out to a panel of civil servants from the government's procurement and technology functions that inflation in the price of the AWS/Home Office deal raises some serious questions. "Why did it jump so much? Was the Home Office getting good value for money? Does the Home Office actually know what it needs?" he asked.

Forzani said the government needed to acknowledge that there are a small number of "very dominant suppliers" in the cloud market.

"There is limited choice. If you want to leverage government purchasing power for hosting, you need to get a number of departments aligned around requirements. That is very challenging to do."

In January, the government launched a Digital Commercial Centre of Excellence (DCCE) – along with a set of AI tools called Humphrey – designed to spot opportunities to reform government tech buying and support growth.

Forzani told MPs it would be part of the DCCE's role to align departments' cloud requirements and get better deals.

"We absolutely have an ambition to do that more," he said, "and that's going to be one of the key parts of the new center of excellence agenda. One of the founding principles of public procurement is competition. So, departments go out with their requirements, and these contracts are competed in a very limited market space. So I think we accept that in some of these markets, we don't actually have the leverage as much as we think we might, because there is very limited choice."

In April last year, The Register revealed that the government had admitted its negotiating power over billions of pounds of cloud infrastructure spending had been inhibited by vendor lock-in.

A document from the Cabinet Office's Central Digital & Data Office – which has since been rolled into the Government Digital Service in the Department for Science, Innovation & Technology – said the "UK government's current approach to cloud adoption and management across its departments faces several challenges," which together "risk concentration and vendor lock-in that inhibit UK government's negotiating power over the cloud vendors."

Speaking to the PAC, Cat Little, Permanent Secretary at the Cabinet Office and chief operating officer of the civil service, said: "Because we've all had experiences of failed or difficult technological procurement, it's very difficult to have a one-size-fits-all approach to this. But if we look at some of the things that go wrong in some of our big procurements with technology companies, it's where we have had weak, 'intelligent client functions' within government, we weren't clear about the specification and what we actually wanted.

"I won't talk specifically about the Home Office case, but I think what we need to do in the center is to make sure that when we look at those lessons learned, we are doing everything we can to share those lessons, to work with our professional functions, to make sure that they have thought it through before we go signing contracts, and that we've got processes to check and test how those lessons learned have been applied."

The PAC hearing was in response to a report from the National Audit Office (NAO), which said there was limited technical evaluation of government contracts, while technical risks were downplayed. "Complexities which emerge after contracts are signed can be too fundamental to be dealt with through a change control process," it said.

The NAO also pointed to the lack of digital skills across the government in managing the £14 billion annual procurement of digital services.

Responding to the report at the time, PAC chairman Geoffrey Clifton-Brown said the government's woeful handling of major digital programs had led to delays and costs to the taxpayer.

"Government has managed digital suppliers poorly, and the center of government has not provided direction to help departments become intelligent clients," he said. ®