Buy British (if you must) - the government’s troubling obsession with Amazon and Microsoft

Profile picture for user ddpreez By Derek du Preez October 25, 2017
The British government is swaying from its promise to foster UK-based technology SMEs, with Ministers’ seemingly more intent on fetishising US tech giants. 

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The British government appears to have a growing obsession with US-based technology vendors, with reports that departments are switching away from UK cloud SMEs towards the likes of AWS and Microsoft, and senior Ministers publicly PR-ing product announcements from the vendors on Twitter.

The government isn’t alone in picking highly scaled, cost effective and reputable technology solutions from the likes of Amazon and Microsoft, but questions do need to be asked about whether or not these US companies provide the overall value and social good that the British government supposedly looks to foster. And how this fits with stated ambitions to (a) foster a UK tech sector and (b) support SME engagement in the public sector.

This article was prompted by a story broken by The Register, which explains how a British open source cloud SME, DataCentred, has been put out of business because it’s contract with HMRC has been handed over to AWS.

The Register claims that it knows of two other companies that have lost out on business because of the policy shift at HMRC. Equally, a number of other departments - including the DVLA, the MoJ, TfL and the Home Office - have signed cloud deals with AWS and Microsoft in recent months.

As stated above, AWS and Azure are obvious potential choices for many organisations out there. However, the government in recent years has publicly stated its willingness to opt for British-based cloud providers because of the additional benefits that can be gained - including social good outcomes, supporting local business, data protection advantages and cost savings.

I’m not saying that AWS and Microsoft should not be used in government. Not at all. But I do think that questions need to be asked about whether the policy around adoption is being thought through, when considering the long term advantages and disadvantages - beyond immediate scale benefits.

Combine this situation with the Minister of State for Digital Matt Hancock’s willingness to publicly promote US tech giants’ product announcements and PR on Twitter, and you can see why many are becoming uneasy. For example:

And this:

On the above tweet, someone said to me: “We are outsourcing training to US tech vendors. Saves the government having to do it”.

And here’s one more for good measure:

The concerns

The primary concern I’m hearing voiced is that the British government has worked hard over recent years to remove itself from what it has historically called the ‘Oligopoly’ - a select few big ticket technology vendors that have traditionally dominated Whitehall, which have failed to deliver on many levels, and yet have managed to generate significant profits at the expense of the taxpayer. That’s not to say that the Oligopoly is dead, those companies are still very much embedded.

However, is the government now replacing the Oligopoly with a a Duopoly in the form of Microsoft and Amazon, without learning from its previous mistakes? It’s worth noting here that I recognise that buying IaaS from a cloud vendor isn’t the same as signing multi-year technology deals with the likes of HP or IBM. But there are still lessons that could be learned.

For one thing, many of the British SMEs that initially did so well out of the G-Cloud framework run using open-source software. Whereas the likes of Microsoft and Amazon use proprietary software that could make it hard for the government to move away from their platforms in the future. Sound familiar?

This is important within the context of the huge amount of technology change that we have seen in recent years, which we can only expect to accelerate over the coming decade. Flexibility isn’t an unrealistic expectation. GDS itself has worked hard to promote open standards, understanding the benefits will be essential to government going forward, and yet many departments appear to be ignoring this - in favour of what is currently commercially successful in the market.

The benefits of opting for British SMEs

There is an argument to be made that if the government was to opt for British SME cloud providers - which have also proven to reduce costs and adhere to stringent security requirements - that it would be fostering digital businesses in a more significant way, than if it selected Amazon or Microsoft.

Yes, Amazon and Microsoft do also employ people in the UK, but we should think about the types of people it employees. The Government’s Industrial Strategy aims to: “use strategic government procurement to drive innovation and enable the development of UK supply chains”, whilst the Digital Strategy aims “to help more British digital and technology suppliers benefit from government’s own spending”.

The G-Cloud framework certainly helped to boost growth amongst British companies, with some cloud providers significantly growing their footprint as a result of business coming from government. Those companies will be employing engineers and technical people to support their growth. Whereas, the likes of Amazon and Microsoft tend to keep their technical talent in their home country, whilst employing sales and marketing people in the UK to drive growth.

Jobs are jobs, but we need to think about the type of economy we want to build going forward - particularly in the wake of the Brexit vote.

British cloud providers, as a result of the growth through G-Cloud, have also created ecosystems of partners and have undertaken training programmes to ensure they’ve got the skills they need. Are Amazon and Microsoft contributing to Britain’s digital economy in the same way? Equally, there is a risk that the digital skills in the UK, if focused largely on the US technology giants, could then be tied to the proprietary software in question.

There should also be a requirement when purchasing digital and cloud technology to think about the overall social good being created as a result of that purchase. The latest G-Cloud framework doesn’t appear to refer to social good as a requirement, whilst other more traditional technology frameworks in government list it as it’s number one priority.

Again, I’m not saying Amazon and Microsoft don’t create any social value in Britain, but we should be considering if the alternatives have a greater amplifying effect for the digital economy.

The tax issue

Finally, we cannot ignore the fact that the likes of Amazon have been heavily criticised for their tax affairs in the UK. According to its Companies House filing, Amazon’s corporation tax halved in 2016 to just £7.4 million, on sales of £1.4 billion.

Amazon isn’t the only one to take advantage of outdated EU tax laws. In recent years many  US-based technology companies – including the likes of Google and Facebook – have come under increasing pressure from citizens and governments to stop routing their revenues through low-tax EU member states, in order to avoid paying higher tax bills in each territory.

Amazon’s recent low tax bill reignited the debate around what is legal and what is right when it comes to tax, with former chair of the Parliamentary Accountants Committee, Margaret Hodge MP, calling for a boycott of the company. She said:

It remains outrageous that Amazon are so blasé that they can ignore all the anger that their failure to pay fair tax in this country.

It is a scandal they are deliberately manipulating the way they do their business for no other purpose than to avoid tax.”

I hope people take a leaf out of my book and stop using Amazon.

The question needs to be asked about the value of taxpayers money being spent with companies that then go out of their way to pay as little tax as possible within the countries they operate in. It’s fair to ask - would the money be better spent with British companies that not only drive more investment in the digital economy, but also have less means to reduce their tax bill?

My take

Again, I’m absolutely not saying that I don’t think the British government should use Amazon or Microsoft at all. They provide an valid technology option and many private sector enterprises are seeing great results from using these vendors.

However, the government has a unique opportunity to help foster a digital economy in the UK through its spending choices. That’s not to say that it should make choices that are less secure, or more expensive, or less effective, or less competitive - but I’m not entirely convinced that some of the great British SME cloud providers are any of those things. What I’m calling for is simply a more thoughtful approach to technology buying, one that takes into consideration all of the outcomes made from that choice.

If that is happening, then this whole piece can be ignored. However, I’m just not convinced it is.

Oh, and regardless of all of that, can Ministers at least stop pimping product announcements from US technology companies on Twitter? There’s just no excuse for that.