Is G-Cloud changing the behaviour of the big IT suppliers?

The government’s G-Cloud has its critics, who like to cite the relatively few millions of pounds of spending put through the programme as being tiny compared to the annual £16bn government IT spend.

But – putting aside the obvious counter argument that such change takes time and plenty of Whitehall buyers remain locked into costly outsourcing deals – there are significant signs that G-Cloud is having an even more important impact.

The initiative was intended to open up the market to SME suppliers, to reduce lock-in to long-term contracts, and create transparency of pricing. It’s doing all those things. For example, one smaller supplier, Memset, says it has seen its G-Cloud revenue grow 38% in just six months.

To reiterate the importance of G-Cloud, the government now has a cloud-first buying policy.

However, when G-Cloud really makes its mark is when it makes the big suppliers change their behaviour.

At the start of this month, announced plans for its first UK-based datacentre – effectively a condition of being able to win business through G-Cloud due to data protection regulations around government data.

Now, Oracle has announced it is building a new UK datacentre specifically to deliver government IT services through G-Cloud. Oracle considered this so important that it brought its president, Mark Hurd, to the UK to make the announcement.

Do not underestimate how significant a move this is.

If suppliers of the size and influence of Oracle are seeing the writing on the wall saying they have to conform to the requirements of G-Cloud to continue their business with Whitehall, that is a major power shift in that relationship.

Oracle was identified as holding 70% of all government software licences, receiving more than £200m in revenue from Whitehall every year.

The Cabinet Office told Computer Weekly last year that Oracle was one of the worst culprits for price inconsistency – charging up to three times more to some departments for the same products.

And there was a furore earlier this year after the publication of an official notice for a £750m Oracle framework agreement – a deal that seemed entirely at odds with the Whitehall IT reforms of which G-Cloud is a central component.

I was told that agreement would be quietly shelved – a case of cock-up not conspiracy, said insiders – but it demonstrated the prevailing mood that Oracle for too long had the government over a barrel.

The fact that the software giant is now investing in a new datacentre, apparently as a direct response to the growth of G-Cloud, is a sign that the balance of power between government IT buyers and their suppliers may finally be shifting in the right direction.

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G-Cloud and the Government’s Public Cloud First Policy are certainly both transforming public sector IT procurement and the behaviour of the big IT suppliers in many significant ways. One of these is by opening up the market to to smaller, more innovative, agile suppliers many of whom are SMEs. This creates a win-win situation for the 30,000 UK public sector end-users, as G-Cloud is simultaneously driving innovation and competition by reducing the burden of rigid contracts and irregular pricing, creating transparency and enabling greater choice of services and suppliers. Put simply, incumbent and inflexible suppliers now have to dramatically up their game in order to maintain their presence in an increasingly vibrant market.

While the reported revenue achieved through G-Cloud of £18m may appear relatively small, this is expected to grow exponentially over the coming year through Giii – the third iteration of the Framework. This figure also represents equivalent spending amounting to five to ten times this amount via the previous procurement model – which when put into context, demonstrates significant cost savings for the public sector, and ultimately the UK tax payer.