Written evidence submitted by Crown Hosting Data Centres Ltd (DCG0011)

Who and Why –

I am Dr Jason Liggins, CEO of Crown Hosting Data Centres Ltd a government joint venture company. Please see appendix 1 for more information on my company. GDS and CDDO are the executive sponsor of the Crown Hosting contract (RM6262) to provide data centre services to public sector and has traditionally held a board position on the JV. We believe we have a good understanding of what DSIT intend and are able to provide the information requested in the call for evidence.

Responses -

Section 3 - What lessons are there for DSIT as it establishes the digital centre?

• Are there any case studies that the committee should consider as part of its inquiry?

The partnership between the Department for Work and Pensions (DWP) and Crown Hosting is recognised as one of the best examples of a departmental IT infrastructure upgrade. Our work with DWP (full details in Appendix B) resulted in moving data and applications to private cloud located within Crown Hosting within nine months and the overall project resulted in the department saving £150m per year, achieving a Return on Investment (ROI) within nine months.

• What lessons do previous and contemporary digital transformation initiatives offer for the digital centre?

The government’s ‘Cloud First’ policy mandated departments and public sector organisations to modernise their internal IT infrastructure, with the ultimate goal of delivering better public services.

Despite the ambition, the Public Accounts Committee (PAC) 2023 update on the progress of digital transformation said: ‘Improvements in government’s digital services over the last 25 years have focused on the citizen’s online experience without substantially modernising the ageing legacy systems that sit beneath departmental and government websites. There have been 11 government digital strategies during that time but examples of successful digital transformation of services at scale are rare.’ [1]

A recent State of Digital Government Review also found that while just over half of central government organisations reported that over 60% of their data was now in the cloud, ‘other areas of the public sector, such as local authorities, policing and the NHS, are less advanced in cloud adoption’[2].

Despite the progress in central government, there is still a long way to go before the Cloud First policy is fully in place and legacy IT systems are upgraded. As of March 2024[3], fewer than 3% of government servers and dependent networks use Crown Hosting. Many government departments have yet to achieve meaningful progress towards implementing Cloud First, or using Crown Hosting where more appropriate.

The lesson to be learned from the introduction of the Cloud First policy, as noted by the recent State of Digital Government review[4], is that successful centrally led initiatives have been achieved by allowing departments to independently readily adopt policy implementation, because they support wider government initiatives, rather than any centrally imposed mandate on departments. Central government must, in turn, provide the right incentives and support for these individual departments, rather than aiming to run the whole process on behalf of each department and public sector organisation. Leading by example is also imperative for schemes to succeed, adopting the same delivery-mindset as the departments aiming for change. Encouragement from Ministers leading departments would help to drive some of this work.

Section 4 - What assessment can be made of DSIT’s work on establishing the digital centre to date?

Establishing the Digital Centre for Government within DSIT is an improvement over the prior state where responsibility for policy was with Cabinet Office and data with DSIT. However, central control of spend remains with HMT. In our view DSIT having greater control of departmental digital spend would give it greater influence.

The retention of the Government Digital Service (GDS) as a brand for the Digital Centre for Government is understandable because it is so strong. However, it does not reset the expectations of departments or industry that GDS writes guidance, not policy; that it is not a delivery organisation and so will not provide the shared services to other organisations, necessary for pragmatic delivery of a digital centre.

The ambitions of DSIT for the Digital Centre for Government have so far been muted. Improvement of productivity and efficiency of services to the citizen are to be lauded, but that is an expectation of any service organisation. The enablement of the next generation of public services through digital technologies, including artificial intelligence, is an area where DSIT could lead the world.

• How should DSIT and other public bodies leverage reforms to public procurement to deliver and operate the digital centre?

Currently, even with the changes implemented in DSIT and the 2023 Procurement Act, each individual public sector organisation, and often individual projects, procures IT services independently and for their own purposes. This freedom is a reaction to bureaucracy and failed projects with a dependency on other parties with other imperatives, but it is extremely inefficient. No individual public sector organisation, including central government departments, is large enough to be a significant market force and command the economy of scale that a UK national company, or international company could do. Moreover, the fragmentation of people and skills into small groups right across public sector is a hindrance to the digital ambitions of Government. The result is duplication of effort and services, and it is often an inefficient use of public money for unremarkable results. If government could organise itself as industry does, procure centrally and in common cause, then it would be a significant market force in the UK and one of the best in the world.

We would recommend that government acts on behalf of the whole of the public sector, as if it were a single organisation. The Government should set-up a central service providing body that is responsible for procurement of products and services and, importantly, is responsible for providing them to public sector organisations. Examples of this approach exist in the public sector for supply of products and services with greater maturity than digital services, and so much experience could be transferred to digital colleagues.

We would recommend the set-up of the Digital Centre for Government as this central service providing body, in order to systematically solve the problem of legacy IT. An expert delivery department would therefore be established, which draws together skilled people and maximises their effect, buys consistently, and ensures that public funds are spent as effectively as possible.

Section 5 - What are the barriers to successfully establishing a digital centre of government?

Outdated and unsuitable digital IT infrastructure is the main barrier to delivering the Digital Centre of Government’s goals across the public sector. Departments that rely on IT equipment kept in unsuitable, costly, inefficient and insecure rooms and buildings face acute challenges, as explained below, that will hamper government efficiency and limit opportunities for the Digital Centre of Government. These challenges include:

• Concerns about cyber security for our government departments - A recent National Audit Office (NAO) report said the government’s cyber resilience levels are lower than previously estimated and warned: ‘departments have significant gaps in their system controls that are fundamental to their cyber resilience’[5]. Critical public sector data, such as NHS patient data, police records, passport information and classified data are being stored in small inefficient, costly, unreliable and insecure rooms and basements unfit for, or resistant to, modern cyber threats, human error or foreseeable but mundane threats. In 2024 a power outage in an IT room at Royal Sussex County and Princess Royal hospitals shut down all IT systems on both sites. Ambulances were forced to divert to other hospitals and patients were told only to go to A&E in the event of a ‘lifesaving’ emergency[6]. This example shows how outdated IT infrastructure can undermine key public services and lead to massive costs. The State of Digital Government Review said: ‘Over 2024, 25% of survey respondents suffered critical outages, 123 in NHS England alone. Many systems do not have adequate plans in place for how to manage incidents and even where they do they are not exercised frequently enough.’[7]
• Ineffective use of government funds - Operating small, siloed and retrofitted IT infrastructure is costly. Cooling alone, a core factor for maintaining IT equipment, is significantly more expensive in the ad hoc storage facilities used across government. For every £1 spent on electricity to power legacy computer infrastructure, the government spends a further £3 on cooling. A Cabinet Office report has estimated that the government spent nearly half of the £4.7 billion committed IT expenditure in 2019 to keep legacy systems running[8]. These vast sums could be better used investing in further modernisation of legacy IT, leading to far more cost-effective and secure infrastructure.
• Unsuitable infrastructure blocks benefits of AI – The adoption of AI technology requires modern infrastructure with the necessary energy and cooling requirements needed to run complex algorithms.

• How can DSIT address these barriers?

A successful upgrade from legacy IT across public sector depends on the ability of the sponsoring department (in this case DSIT) to provide the right resources, guidance and support for other departments and public sector organisations to upgrade.

Crown Hosting Data Centres provide government departments and public sector organisations with the basic requirements needed to set up the Digital Centre for Government, supporting wider government objectives and reducing costs. Further information can be found in the Crown Hosting Data Centres ‘implementation guide’, attached alongside this submission.

28 February 2025

APPENDIX

A)    Pre-submission foreword:

Crown Hosting Data Centres Ltd, a joint venture between the Cabinet Office and Ark Data Centres, welcomes the newly established Digital Centre of Government. Groundbreaking technologies, such as AI, present government with an opportunity to radically transform public services—and in doing so, transform the public service itself. DSIT has a key role in enabling this transformation by providing common digital infrastructure, ensuring interoperability, and supporting Departments in their missions.

Crown Hosting provides the infrastructure needed to modernise public sector IT and digital services. By supporting the modernisation of IT since the joint venture was launched in 2015, Crown Hosting has enabled £9bn of savings to the public purse, with an additional 25.1% profit-share returned to HM Treasury. Savings were achieved by more cost-effective operational costs. Instead of retrofitting outdated infrastructure with the air conditioning, plumbing, and electrical equipment required to run these servers, any transition to Crown Hosting eliminates the cost of building and maintaining in house data centres, instead housing data in a state-of-the-art centre utilising world-leading technology.

While Crown Hosting has been adopted in a small way by many public sector organisations, more than 95% of legacy IT infrastructure is still housed in unsuitable, costly, insecure and inefficient rooms and buildings across both the UK public sector estate and that of its managed service suppliers.

The Government’s ambition to modernise public sector IT and digital services is welcome. But while the Digital Centre of Government is a step in the right direction, this modernisation needs the appropriate foundations and infrastructure to be in place to protect critical and sensitive public sector data. With NHS patient data, police records, passport information and other critical archives still being housed in costly, poorly protected and unreliable locations, government must ensure that the appropriate infrastructure is in place to deliver these ambitious modernisation objectives.

B)    Crown Hosting’s partnership with DWP

Given the challenge posed by the DWP’s vast IT estate, the project of data migration to the cloud was complex. The Department’s IT applications, data and culture needed remediation ahead of the digital modernisation projects, which included migrating records to the public cloud. Rather than opt for the costly and time-consuming direct shift to the public cloud, DWP chose a ‘hybrid’ route through Crown Hosting. This was based on three key steps:

1. Auditing and understanding the complexity of DWP’s IT systems needing migration. By identifying redundancies, duplication and siloed data, DWP could begin to map how much needed to be moved to the cloud and how long this might take.

2. DWP then worked on training IT staff in the skills required, while modernising and replacing applications and duplicate data.
3. The final step was the actual migration of data and business processes to the public cloud.

The first step, moving data and applications to private cloud located within Crown Hosting was achieved within nine months. The second step has so far taken 7 years, but now seven out of ten DWP services are delivered from the cloud, with the remaining 30% stored in Crown Hosting. The department has always been in line with the government’s Cloud First policy, but differed in the application of the guidance and did not ‘default to Public Cloud first’. DWP used Crown Hosting to speed up the migration to public cloud and in the process reduce costs. The first step, into Crown Hosting, enabled the department to save £150m a year, achieving an ROI in just nine months; this money was then used to fund the second step.