The basic premise of the session was that just as the establishment on premise enterprise software firms have had to adapt to a new operating and revenue model in the cloud, so too will the big ticket services houses.
In the public sector, those firms have become labelled in the UK as ‘the oligopoly’, a somewhat derisive term to which one of our panelists, Dr Katy Ring of 451 Research, took some exception, suggesting that such labels are increasingly unhelpful in attempting to broker a reality in which the new cloud providers can compete and complement the ‘old guard’. She said:
“I do think we need to get more of a balanced approach – the companies that we work with beyond the public sector that are using cloud to deliver business outcomes use a rich ecosystem of traditional players, new players, large players, small players. I think there is a bit of a danger that the way that we are approaching the use of cloud technology is to typify some vendors as bad, and some vendors as brilliant and new. The world is just not that black and white.”
It was a point that fell on deaf ears when it came to UK government CTO Liam Maxwell to whom the suggestion was put. He replied:
I have some sympathy with Ring’s argument here. There was a need for a bit of big stick waving in the early days of reform by the current UK government when it came to big SIs, who’ve seen all this before and probably not unreasonably assumed it would be the usual story of a short period of headline-grabbing pronouncements followed by a comfortable settling back down to business as usual.
“Oligopoly is about the only collective noun that describes their behaviour. It’s true. Why do you refer to a small group of large companies doing large amounts of locked in business with you as an oligopoly? That’s what they are.
“We aren’t having a big conflict with the suppliers, because that’s not worth doing, we are just buying something different. A lot of people are getting upset because business has gone somewhere else, but that’s because business has gone somewhere else. We will continue to refer to it as the oligopoly, because that’s what it is.”
As it’s turned out that hasn’t entirely been the case with the likes of the G-Cloud program opening up government markets to new entrants and putting several of the - if we must - oligopoly on the back foot.
That said, there have been some SIs which have accepted the new reality and positioned themselves to work with it.
Today we’ve seen what on the face of it looks to be a good example of how old and new realities can indeed co-exist with the news that that UK foreign ministry, the Foreign & Commonwealth Office (FCO), has awarded a £6.3 million, two-year, contract to Capgemini to support the upgrade of its Oracle ERP system.The key thing here is that the deal is being pitched as a G-Cloud success story, the biggest of its kind to date.
Tim Gardner, the FCO's corporate services centre director, states:
"With the change in approach to service delivery, this new deal with Capgemini will allow us to make significant cost savings, while ensuring systems continue to support a large number of government departments that reside on the overseas platform provided by the FCO.”
But while it’s a good poster child story for the G-Cloud initiative, there are one or two questions left hanging uneasily in its wake.
The UK Cabinet Office has previously highlighted substantial savings that could be made from the whole of Whitehall moving to a single Oracle instance or hosting ERP in the cloud. The first option would save 40% on the current average cost per employee of £160 for a multiple installation set up, adding that:
this level of saving does not include the savings which would be expected from a competitive procurement or the possibility of hosting ERP in the Cloud.
But this deal announced today is neither part of a single instance of Oracle across government nor a hosted cloud ERP alternative as far as I can see. Chris Gravestock, account director of FCO at Capgemini, is quoted in the announcement as stating that the deal will give the FCO:
“a seamless upgrade to the latest software versions”.
It might just be me, that doesn't that all sound a bit on-premise?
In fact, other than the G-Cloud labelling, I can’t see very much that’s cloudy about this at all. It’s effectively a two year extension of an existing contract wherein both Capgemini and Oracle are incumbent providers.
A clue may lie in an official auditor’s report from November last year which looked at the status of various procurements across central government and gave the FCO’s ERP upgrade programme a ‘facing difficulties’ amber alert.
Back in January, veteran public sector reform campaigner Tony Collins described the pre-tender notice issued by the FCO as:
an old-style centralised framework that, says Chris Chant, former Executive Director at the Cabinet Office who was its head of G-Cloud, will have Oracle popping champagne corks.
So is this a sort of ‘better the devil you know’ least worst option to buy some time with hopes for a bolder move come 2015 when this contract runs out?
Or is it really a sound example of how the oligopoly - damn it’s hard to break the habit! - can adapt and succeed in a cloud-enabled government market?
The real interest in this may in fact be the use of the G-Cloud as the procurement mechanism.
Certainly the two year limit imposed by being part of the G-Cloud framework leaves room for more flexibility than the originally mooted three-years-minimum-with-option-for-extension-to-four-years contract.
Some providers have grumbled about the two year limit on G-Cloud contracts, but as former G-Cloud program director Denise McDonagh, now CTO at the Home Office, noted last week:
“What it gives me, which I never had before, is choice. The choice to move, the choice to get to rid of someone that is providing absolutely appalling performance. It’s far more positive and beneficial than sitting with a supplier arguing about agility and the need to get things done, and not having the leverage.”
Whether the FCO ultimately chooses to exercise that leverage remains to be seen.
Disclosure: at time of writing, Oracle is a premium partner of diginomica.