How the collapse of local cloud provider caused biz continuity issues in UK government

And that was on top of a £17.5M underwriting bill for insolvent UKCloud

The collapse of a relatively small "local" cloud hosting service caused "real business continuity issues" in the UK's central government, according to one commercial lead.

Speaking to MPs last week at a Public Accounts Committee hearing to investigate the government's relationship with digital technology suppliers, Andrew Forzani, chief commercial officer in the Cabinet Office, alluded to a "local provider who went bust".

In October 2022, UKCloud and its parent Virtual Infrastructure Group were forced into liquidation, bringing an end to the ailing business. As a British public-sector IT provider, UKCloud listed central and local governments, the police, the Ministry of Defence, the NHS, Genomics England, the University of Manchester, and more as clients.

Forzani has recently performed roles as general director of commercial and chief commercial officer at the MoD. UKCloud signed a deal with the MoD in 2014, and 2016 and is understood to have renewed it in October 2022 shortly before going into liquidation.

Addressing questions about the health of the cloud market in the UK, Forzani told the PAC he would not characterize the government's relationship with the cloud market as "unhealthy" but that the dominance of the leading vendors, such as AWS, Microsoft Azure and Google meant that there was limited choice.

He also said that the effort to introduce UK-based competition had caused some disruption.

"Hosting is an interesting one, because part of government used a strategy to try and move away [from the dominant providers], and we did have contracts with a local provider who then actually financially went bust. So we had some real challenges [and] some real business continuity issues. We did look at the market and try to kind of look at alternatives, but the dominance [of the leading vendors] now is such that we've got limited choice," he said.

In October 2022, a notice from the UK government's Insolvency Service said that "winding up orders were made against" both UKCloud and its parent, and that a court had appointed the Official Receiver as liquidator.

UKCloud, incorporated in 2011, was one of the first SMEs to benefit from Britain's efforts to get its public sector into the cloud. However, it withered in recent years as the biggest hyperscalers – most notably Amazon and Microsoft – hoovered up government contracts.

In April last year, Cabinet Office confirmed it was £17.5 million ($22 million) out of pocket after underwriting the official receiver of UKCloud. In a response to the Parliament's public administration watchdog, Catherine Little, permanent secretary of the Cabinet Office, said the liquidation of the Brit-based provider was expected to conclude in the second half of 2024.

"The original cost estimation was up to £40 million. The official receiver repayments and current level of Cabinet Office funding for the UKCloud liquidations is £17.5 million (£20 million day 1 funding less £2.5 million repayment to the Cabinet Office)," she said in a letter to the Public Administration and Constitutional Affairs Committee.

The Competition and Markets Authority is currently examining the health of the UK cloud market, and has so far found "competition is not working as well as it could". It estimates AWS and Microsoft account for up to 90 percent market share of the £9 billion customer spent on cloud computing in 2023. Google, IBM and Oracle accounted the next biggest portions. ®