The middle ground is a dangerous place to be – unable to compete with the generalists on scale and price, or with the specialists on differentiated service.
In the car market players like Volkswagen and Toyota are the generalist high-volume players – volume is high and quality is maintained, but the models can be a little bland. Whereas for real style or speed you turn to a specialist like Ferrari, or for style with off road ability you might look to a specialist like Land Rover. Meanwhile Saab, Fiat and others that occupy the middle ground are struggling for survival. In fashion it is the same with Matalan at one end and Ralf Lauren at the other. Or with supermarkets such as Lidl and Aldi at one end and Waitrose and M&S at the other.
The realities of competition mean that the generalists still need to deliver a quality product – if your Volkswagen and Toyota fell apart, you’d never buy another. And the specialists still need to offer value – Land Rover or Waitrose need to understand their niches well enough to offer real differentiation, without pricing themselves out of the market.
In one market, however it has been argued that these rules do not apply and that it is simply a scale game. The public cloud market is dominated by Amazon Web Services (AWS) and Microsoft Azure. Competitors like HP, Rackspace and Cisco have tried to offer differentiated public cloud services and have failed to make it work. But is this market really unique?
The simple answer is NO. These giants simply failed to offer a truly focused and differentiated counter-position to the generalists. We know there is demand for public sector specific IaaS services. This is true for a number of reasons, which include:
- Buyers in this market behave differently and have different needs: the government procurement framework G-Cloud does provide a level playing field for all players, but, to be frank, UKCloud’s 38% market share shows that there is appetite for providers that solely focus on understanding the UK’s unique market dynamics and challenges.
- There are specialist requirements that are not catered for by the generalists: Having a cloud platform that has been accredited to offer connectivity across government approved networks and that uses UK data centres that offer data sovereignty not offered by AWS or Azure (they have leased facilities in the UK, but these are not UK-sovereign), has proven to be valuable. These factors all matter (to varying degrees) for UK public sector buyers.
- It is a large market segment: whilst becoming a specialist requires adding value through differentiation, it’s also important that government-specific providers do not price themselves out of the market against the likes of AWS and Microsoft Azure. It’s important to note that the UK public sector is big enough to achieve economies of scale that ensure that this does not happen for local providers.
- There are emerging incumbent advantages: as more government workloads move to the cloud (only 10% of central government ones have so far done so and penetration elsewhere such as in local government and the NHS is as low as 1- 2%) and as shared services start to enable inter-departmental collaboration, organisations will increasingly need to share data sets, making data gravity a key factor – as new workloads cluster with existing ones.
Our experience that the public sector demands services that reflect its unique needs has led us to the conclusion that even greater specialisation is key. That idea is behind our own recently announced expansion to serve the UK’s heath and care, research and life sciences and pharmaceutical sector. This is not a case of losing focus – don’t worry we’re not about to become a generalist ourselves! Rather, it is an adjacent market that shares many of the same characteristics of the market that we already understand so well. And there is a gap to be filled.
This is important because digital enablement in the NHS is urgently needed and collaboration across the wider sector has the potential to be to be as transformative as it has been in central government. Since the UK government adopted a cloud-first policy, pooling central government resources and moving them to the cloud has not only resulted in £600 million in savings in central government, but it has been truly transformative. From online tax returns with HMRC to integrated vehicle and driver records at the Driver and Vehicle Licensing Agency, the UK has been recognized by the United Nations as the most digitally advanced government in the world.
Here’s why we believe the UK health market needs a specialist cloud provider, rather than US-based generalists, such as was demanded for the public sector market.
- Shared characteristics: Buyers in this market also behave differently and have different needs, but due to the UK’s public health provision via the NHS, they have more in common with central government than any other market. There are again specialist requirements that are not catered for by the generalists. And it is a large market segment.
- Experience is key: With a number of existing public sector clients across heath and care as well as research and life sciences, we understand the needs, challenges and demands of healthcare organisations, something that isn’t necessarily true of a generalist.
- Data Gravity: One of UKCloud’s largest clients is Genomics England and its 100,000 Genomes Project, which holds petabytes of data on millions of genomics records. It not only performs analytics on this key data set itself, it also allows associated research organisations to perform anonymised analytics on its data to help accelerate their research. As this kind of collaboration increases between research and life sciences organisations, along with heath and care organisations like the NHS and BUPA, and also the pharmaceutical sector, access to shared key data sets and data gravity will become a major issue. The size of these data sets makes them hard to move and difficult to access remotely.
With cloud adoption in the NHS still low and collaboration across heath and care, research and life sciences and pharmaceutical sector still in its infancy, the business potential for the sector is immense. The potential value to all of us though, through improved efficiency in research, as well as in advances in service provision and in innovation in personalised care, makes it something every citizen should be interested in.