G-Cloud: Take a lead UK government told

That's the advice from Richard Sykes, the highly respected independent business and technology advisor and board member of ICT group Intellect. "This is the arrival of big factories in IT for the manufacturing of technology-enabled services," he says of Cloud Computing. "There is an opportunity and a challenge for government in this, the potential for an impressive transition in sourcing technology from the Cloud. You have a simple model: the Cloud is the market place with competitive and discretely sourcable consumer and enterprise business service that are available on demand and paid for as used."

 

But this is a very different commerce model, he notes. "Amazon offers computing services but doesn't determine contracts. Amazon doesn't give a damn," argues Sykes. "The UK government would be undertaking a massive transformation in how it procures and uses services. The reason for this transformation is that the IT industry in its broadest sense has grown up with a 'putting bums on seats' model.  If you use that model then your unit costs go up with layers of management, need for HR and so on. But if you can flip that you end up with a downward curve and a different cost base."

 

Sykes cites the example of construction firm Bechtel to illustrate his point. The CIO there in 2006 did an evaluation and discovered that Bechtel was paying $500/MB for network traffic, while YouTube was paying $10-15/MB; Bechtel had one sys admin per 100 servers whereas Google had one per 17,000; Bechtel paid $3.75/GB/month for storage compared to Amazon which paid $0.10 for the same; and Bechtel ran 230 apps/multiple versions while Salesforce.com ran one version of one app for one million users and upgraded it four times a year with minimal downtime. 

 

The answer for Bechtel was to create a Private Cloud with three data centres with server utilisation of above 70%, their own fibre optic connectivity and to revise its 50 most heavily used applications into single instance Software as a Service applications. Essentially it chose to move to the Cloud internally rather than taking the outsourcing route that it might otherwise have done in pursuit of cost savings.  "It dramatises the big difference in cost structures," says Sykes.

 

Sykes makes a distinction in the Cloud Computing market between businesses who are about computing – the Platform as a Service and Infrastructure as a Service providers – and those who are about consuming – the Process as a Service and Software as a Service firms. He notes that the leading players in the computing market are major US firms, such as Salesforce.com, Amazon, Google and Microsoft. "They have taken themselves a long way down the track," he observes. "Their productivity and capability on the whole outrun the more class runners of data centres which run government services in this country."

 

 

So what does the government need to do if it is to tap into a Bechtel-type transformation of its cost base? "It needs to use its negotiating power to meet its objectives and it needs to bring new players into the government purview as suppliers to government," advises Sykes. "It also needs to rationalise internally and standardise processes. A payroll system is a payroll system is a payroll system. Why can't you have a uniform payroll capability across all government departments? Do we need a standard government desktop when the market already has several? Absolutely not – go and use one of them."

 

"It needs to renegotiate existing deals, not on the basis of extension, but on the basis of demanding existing suppliers move to the new model of work. The established vendors are under pressure and if they are under pressure they will move fast to the new business model," he adds. "Existing suppliers need to decide if they're going to be future suppliers. EDS is biting the bullet that it's now going to be a manufacturer of cost-effective infrastructure as part of HP and will abandon any idea of doing anything fancy on top of that.  And it will be bloody good at it."

 

But it's important that the government creates the right sort of environment for the new breed of Cloud providers to want to work in. "Government needs to open up the box or who will take the initial risk?" says Sykes. "Do you say that you will be pragmatic about this? Do we need to have data centres only based in the UK or are we pragmatic and say they can be located anywhere in Northern Europe? Only an open-box approach will motivate suppliers to come into this seriously. If you pursue another model, you end up with a restricted bunch of suppliers."

 

There is, argues Sykes a chance to redefine how government operates and that could mean greater collaboration with the private sector. "The private sector is as concerned about security as the public sector. A constructive approach would be to say that the two sectors can work together," he suggests. "Then we can move forward with a government message of seeking out private sector collaboration."

 

"The UK government could have a very strong position if it wants to go forward as a market maker," he concludes. "Politically we have a government in the UK that shows some signs of longevity. If we have some confidence that it will be here for four or five years then it should be taking a lead in Brussels to get the existing procurement laws changed. Every other government in Europe is facing the same issues. This is a good time to tackle an overhaul the processes."