Which IT suppliers will win as government departments embark on cloud computing journey?

It seems government departments are about to start buying cloud based services. Could this be the moment that changes the fortunes of IT suppliers in the public sector?

It promises to give lots of new suppliers an opportunity and with the government expecting a significant cost savings there will undoubtedly be incumbents that lose out to new players.

Speaking at the Government ICT 2012 conference, Chris Chant who heads up the G-Cloud programme, said some like-for-like services on the Cabinet Office’s soon-to-be-announced G-Cloud framework were coming in at 10% of what departments were previously paying.

He said he expected departments to be buying and using cloud services from mid to late February. “My expectation is that from Easter the second iteration of the framework will be out. This time it will enable us to add new suppliers on a monthly basis,” he said. “That really for me sets the scene for things: we’ll have a living  framework and dynamic procurement,” he added.

Chant, who heads up the G-Cloud, wrote in a blog post in January that he was amazed at the pricing levels. “For instance, even the best departments that I’ve looked at seem to pay around £700-£1,000 per month per server in an IL3 environment, with the average around £1,500; G-Cloud prices are coming in 25-50% of that price depending on the capabilities needed.”

In the blog post, which you can see here, Chant described how it is unacceptable that some large government departments spend 80% of their IT budgets with half a dozen suppliers.

He said: “CIOs across government today generally buy their IT from a single supplier.  Even those who seemingly have a choice, with two suppliers or more contracted to them, can, in reality, only buy certain things from each supplier rather than everything from any of them.  This uncompetitive and, in today’s world, absurd situation is a legacy of the 1990s when government first began to outsource its technology and chose from a small list of suppliers who could afford to both bid and finance the deals. Ten years ago, the Inland Revenue’s annual IT spend was over £250m; with HM Customs included, today’s spend at HMRC is over £700m. Almost by accident, this strategy resulted in a few suppliers having almost all of the market – at one point, one supplier alone had perhaps 40% of the total government IT spend; now, some 80% is concentrated in a half dozen suppliers. That is now unacceptable.”

What will the big systems integrators do?

We are already seeing this shift in the private sector. For example Capgemini’s deal with the post office is a good example. Through Capgemini’s Infostructure Transformation Services (ITS) the Post Office will have a single point of contact for all cloud services. See this story I wrote about it.

What do you think? Will be bad for the SI’s who are all over government contracts? Which suppliers will benefit? Tell me what you think?

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