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UK General Election - will the next Government take on concerns around cloud licensing practices? I'll vote for that!

Stuart Lauchlan Profile picture for user slauchlan July 3, 2024
Summary:
On the eve of the UK General Election, a timely report from the thinktank on ongoing cost issues around cloud technologies.

election

As Britain prepares to go to the polls, the various political parties in play have issued the usual blandishments around a hi-tech future under their rule, largely this time inevitably focusing on proclaimed AI global leadership that will power up the economy, create millions of jobs, yada yada yada.

It’s all very worthy and aspirational, but as with so much of any government’s - or putative government’s - messaging, it’s all about the sexy, front end, bleeding edge complete with photo opp with Elon Musk end of the spectrum. The most notorious example of this sort of thing in the UK public sector was the NHS National Programme for IT, commissioned reportedly in an hour by then Prime Minister Tony Blair, who never saw a dalliance with proclaimed modernity that he didn’t like. In the event, it cost taxpayers billions of pounds for very little before being culled many years later. In the meantime, the NHS continued to waste millions on broken back end processes. But a photo opportunity with Bill Gates was always going to be much more front page worthy than standardizing purchasing of toilet rolls.

Plus ça change etc. I’m all for the UK staking its claim to a slice of the AI sector. Nothing wrong with that. But there’s so much that’s broken in the public sector that it would be refreshing to see some acknowledgement and commitment to fixing things that should have been addressed long before the current 14 years of Conservative-led government kicked in. Heaven help me if I ever have a good word to say about Matt Hancock, formerly in charge of digital and then the disgraced Secretary of State for Health, but even he could see that having hospital comms running on fax machines in the 21st century was ludicrous.

Clear the air

That said, a new report from the Social Market Foundation (SMF) thinktank is nicely timed. Called Clearing the air, it warns that the UK public sector is missing out on millions of pounds of savings due to restrictive cloud licensing. That might sound like a familiar claim. The UK’s Competition and Markets Authority (CMA) is currently investigating competition/anti-competitive rules in the cloud sector, with a particular eye on Amazon Web Services and Microsoft.  The outcome of that investigation - and what action, if any, will follow in the event of negative conclusions - remains to be seen.

For its part, the SMF, based on “in-depth interviews” with public sector IT professionals, predicates that the economic harm caused by unfair licensing practices amounts to around £60 million per annum. That’s £300 million over the course of the next Parliament. And in practice, those figures could be a lot worse - the SMF notes that it has only accounted for the cost of restrictions to users’ ability to freely use Office 365 and overcharge of using SQL Server on third-party infrastructure. It warns that the actual additional costs incurred by all software licensing practices are likely to be much higher. As it is, the report observes:

The UK is considered a global leader in the use of Microsoft software, holding 9% of all customers for Office 365 and 7% for SQL Server.

It goes on to cite quotes from public sector professionals:

“Microsoft Office is a major requirement for any office, right? So they’ve got a monopoly.” – Naveen, IT architect consultant, central government.

“We don’t have an alternative. The big players monopolise the industry.” – Kerry, IT project manager, government agency.

“Microsoft is the global supplier for desktop software, and they can leverage that relationship.” – Robert, delivery leader, IT consultancy.

“By default, when you go to cloud, Azure is the option… We could pick and choose, but it all needs to be integrated. Microsoft is aware of this.” – Raymond, senior technology leader, higher education.

On a wider scale, there are concerns that restrictive licensing practices by vendors distort competition, with the report citing a number examples, including: 

  • The potential accumulation of costs when transitioning to new cloud providers, particularly from legacy on-premises solutions, which can lead to overspending.

  • Concerns around anti-competitive practices in Europe, with legacy software vendors allegedly imposing restrictive terms on users.

  • Cloud providers leveraging shares in legacy software to entrench their positions in the cloud sector.

  • Software licensing practices  involving tie-in practices, limited integration options, and proprietary features.

  • Hiked-up renewal fees.

Again, the voices from the public sector poll base concur:

“Lock-in is much more of a problem for the public sector. It is disjointed and runs smaller budgets, so they have very little leverage... The public sector element has fantastically bad value.” – Robert, delivery leader, IT consultancy

“You don’t always have freedom of choice in the public sector.” – Kyle, digital strategy director, academy school.

“Licensing agreements tie you in. Once you get into it, it’s difficult to get out. It would be good if they had more flexible arrangements.” – Kerry, IT project manager, government agency.

And with an eye to the adoption of AI in the public sector, one interviewee pointed to a project involving OpenAI and Azure. The two integrate seamlessly, she noted, but OpenAI is more difficult to integrate into other workflows. She is quoted as asking:

Because we were on Microsoft Azure, the most straightforward thing to use was OpenAI, because it was all Microsoft-linked. What effect has that had on our choices?

Impact

Harmful costs can quickly accumulate, warns the SMF, and these lead to difficult decisions – such as streamlining staff or software. It notes:

Other consequences include squandered resources and poorer services, as well as the opportunity costs that may arise from lock-in effects, such as slower service modernization.

So what does the SMF suggest needs to be done by the incoming government? The report pitches three specific “interventions”  that might mitigate the impact of restrictive licensing practices. These are:

  • Bring your own license models could be (re)introduced.

  • Centralized public sector procurement could help to improve licensing agreements.

  • Transparent reporting to raise awareness of licensing practices and drive positive competition.

  • Improved communication and clearly-defined licenses would bring clarity for users.

  • Standardizing services would help with interoperability problems.

My take

What’s particularly frustrating about all this is the UK Government really did have a bold stab at addressing the decades-old public sector IT malaise through the G-Cloud program and the glory days of the Government Digital Service (GDS), the latter becoming a model for other governments around the world, but undermined by bureaucratic land grabs as the political will ran once again into the administrative won’t.

This is a very useful report that emphasizes how important the ongoing CMA investigation is. Whoever’s sitting around the table in Downing Street next would do well to have a copy to look over. Come Friday morning, the polls suggest that there will be a new government with a massive majority to do, well, pretty much whatever it wants if the latest numbers are correct. It's sometimes suggested that the Tony Blair administration, which came into power with a huge swing from the Conservatives, wasted its first full term and wasn't radical enough. If Keir Starmer does indeed command the kind of majority that is being suggested on the eve of polling, then now is the time for sweeping changes to policies and practices around public sector tech. 

I'd vote for that. 

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