Written evidence submitted by the Open Cloud Coalition (OCC) (DCG0033)

Call for Evidence on the Digital Centre of Government

Introduction

The Open Cloud Coalition (OCC) welcomes the opportunity to contribute to the Science, Innovation and Technology Committee’s inquiry into the Digital Centre of Government.

The OCC represents a broad coalition of cloud providers and users committed to fostering an open, dynamic, and competitive cloud market in the public and private sectors. Our 18 members – including Adarga, Centerprise International, Civo, Clairo AI, ControlPlane, Dark Matter, DataVita, DTP Group, Gigas, Google Cloud, National Cloud, Nscale, Prolinx, Pulsant, Room 101, and Smart DCC – support thousands of jobs and contribute significantly to the UK’s digital economy.

We support the ambition of the Department for Science, Innovation and Technology (DSIT) to become the “digital centre of government” and recognise the potential benefits of consolidating digital services under a single entity. However, we believe that the effectiveness of this initiative will depend on ensuring a competitive cloud market, mitigating vendor lock-in risks, and driving better value for taxpayers through open procurement and technology neutrality. To this end, the UK Government's Cloud Strategy should have an explicit aim of extending diversity of supply beyond the current duopoly.

1. What benefits will a digital centre offer citizens and the UK economy?

A well-structured Digital Centre of Government has the potential to enhance the efficiency, accessibility, and security of public services. However, to truly deliver benefits to citizens and the economy, DSIT must prioritise an open, competitive digital market that avoids excessive consolidation among a few dominant providers, particularly for the cloud services that will underpin government’s digital services:

●        Unlocking productivity and innovation through AI: Generative AI presents a once-in-a-generation opportunity to improve productivity, streamline operations, and drive innovation across the UK public sector. Public First research[1] estimates that AI adoption could generate up to £38 billion in annual savings by 2030, significantly easing public sector budget constraints and workforce shortages. The study found that generative AI could enable 3.7 million additional GP appointments, improve student-teacher ratios by 16%, and free up the equivalent of over 160,000 police officers' time.

●        The Digital Centre can act as a central enabler of this transformation. However, realising these benefits requires a competitive cloud environment where AI technologies can be deployed flexibly, rather than being concentrated in the hands of two dominant providers.

●        Promoting competition & innovation: The current market structure for cloud is inflating costs and distorting competition. Recent estimates[2] suggest distortions in cloud software licensing alone could cost UK taxpayers over £300 million by the end of the current Parliament if not addressed, while another study[3] showed that public sector organisations are paying an additional ‘tax’ of billions every year, just to be able to run the software they own in the cloud infrastructure of their choice.

●        The Competition and Markets Authority (CMA) has highlighted significant concerns[4] over the concentration of cloud services, noting evidence that reliance on the two dominant cloud providers within the public sector is even higher than in the overall market[5]. This lack of competition risks stifling innovation, increasing costs, and limiting choice for public sector organisations. 

●        DSIT must take bold and immediate action to foster competition within the public sector cloud market. This requires a deliberate rebalancing effort, ensuring that government spending is not only prevented from disproportionately funneling toward dominant providers but actively redirected to create a more competitive landscape. Given the entrenched market concentration, DSIT should consider a period of over-correction, including mandatory re-competition of high-risk or large-scale contracts, to break cycles of vendor lock-in and ensure fair market access. The National Audit Office (NAO) has already highlighted[6] the need for better oversight of government technology suppliers, reinforcing the urgency of this issue.

●        A more competitive cloud market will reduce costs, enhance government leverage with major providers, and expand choices for cloud users. In turn, this will spur innovation, improve service quality for citizens, strengthen national resilience, and minimise long-term technical debt in next-generation public sector infrastructure.

●        Better value for taxpayers: A competitive cloud market will drive down costs and prevent excessive dependence on too few suppliers. By introducing procurement mechanisms that emphasise competition, diversity, choice, interoperability, and transparency, rather than relying on the non-competitive “direct award” procedure, DSIT can achieve – and demonstrate – better value for taxpayers and the exchequer, while mitigating the risks associated with vendor lock-in. According to the NAO, in 2021-22, approximately one-third of public sector procurements were awarded without any form of competition[7].

●        Accessibility for challenger cloud providers & SMEs: While the Western cloud industry is largely dominated by two major providers, they do not represent the entirety of the ecosystem. A diverse range of alternative providers – many offering unique capabilities – play a crucial role in the industry. Their contributions should be recognised and valued as essential to building a secure, resilient national digital infrastructure. Ensuring these firms have fair and equal access to public sector cloud contracts will foster domestic innovation, drive job creation, and strengthen economic growth. Recent investment announcements underscore the importance of fostering a competitive ecosystem. Last year, three challenger providers - Vantage Data Centres, Nscale, and Kyndryl - committed £14 billion to AI infrastructure in the UK, creating 13,250 jobs across the country[8].

2. What should be the priorities for the Digital Centre of Government?

To maximise the impact of this initiative, DSIT should focus on the following key priorities:

●        Prioritise the proposed Digital Commercial Centre of Excellence: Within its six-point plan, DSIT proposes to maximise the value and potential of public procurement and OCC commends this ambition. But in proposing to streamline procurement, care must be taken to ensure that “streamlining” does not come at the cost of competition.  DSIT must ensure that public sector cloud procurement is transparent, competitive, and based on a multi-cloud strategy. A shift away from over-reliance on a few dominant providers will enhance national resilience, reduce costs and result in better outcomes for citizens and taxpayers. To achieve this, the UK Government’s Cloud Strategy should include an explicit commitment to increasing diversity of supply and reducing dependence on the current cloud duopoly. This should be supported by a clear competition mandate, ensuring that public sector cloud procurement actively promotes a broader range of providers. The OCC strongly recommends that DSIT mirrors this approach as it develops it framework for sourcing AI.

●        Legacy IT modernisation: The UK government still relies on outdated IT systems that are expensive to maintain, inefficient and increasingly insecure. While DSIT clearly acknowledges the challenges of legacy IT, it is very unclear from its six-point plan how these challenges would be addressed. The OCC recommends that remediating legacy IT is prioritised. Opening up the public sector cloud market to competition would mitigate some of the issues, given that challenger cloud providers often offer specialised solutions for migrating legacy workloads efficiently and cost-effectively.

●        Interoperability & avoiding lock-in: Any digital transformation strategy must prioritise interoperability and open standards to avoid lock-in with a single vendor. DSIT should mandate that government systems use cloud-agnostic architectures that allow seamless workload portability.

●        Ensuring AI adoption is competitive & secure: AI presents a transformative opportunity for the UK public sector, with the potential to generate up to £38 billion in annual savings by 2030 - equivalent to 8% of total public sector expenditure[9]. The OCC urges DSIT to ensure that AI-powered public services are developed within an open, competitive market. The government must avoid a repeat of past cloud procurement mistakes, where public sector contracts became overly concentrated among a few large providers giving the government little, if any, leverage over these vendors. Restrictive software licensing policies have already been cited as a major obstacle to AI innovation. The Social Market Foundation (SMF) has warned that unfair licensing terms could significantly limit the UK’s ability to develop a thriving domestic AI ecosystem[10]. If DSIT is to achieve its ambitions for digital transformation, it must ensure AI procurement policies support a diverse and competitive supplier landscape and prevent the entrenchment of monopolistic practices that stifle innovation and economic growth.

3. Lessons from previous digital initiatives

DSIT should draw lessons from previous digital transformation efforts, particularly the risks associated with one-size-fits-all cloud strategies:

●        Avoiding the pitfalls of ‘Cloud First’: The UK’s “Cloud First” policy – reinterpreted as “Public Cloud First” in 2017 and reaffirmed as recently as 2023[11] – was widely understood as a directive to migrate workloads to a small number of dominant hyperscale providers[12] (despite the NIST definition of “public cloud” having a wide and inclusive intent[13]). This approach contributed to excessive reliance on just two cloud providers. To prevent further entrenchment of dominant providers, the OCC urges DSIT to embed an explicit competition requirement within the Cloud First policy. Government cloud procurement should actively promote a diverse and competitive supplier landscape, ensuring that no single vendor - or small group of vendors - becomes an unavoidable default.

●        Learning from international best practices: The U.S. Cloud Smart strategy replaced Cloud First to ensure cloud adoption is security-driven, cost-effective, and workload-appropriate rather than defaulting to dominant providers. It emphasises flexibility, multi-cloud strategies, and agency autonomy in selecting the best solutions for their needs. As part of this, a Cloud Information Center was established to provide agencies with procurement guidance, best practices, and resources to navigate cloud adoption more transparently and competitively. DSIT should take a similar approach, ensuring that UK public sector cloud procurement prioritises competition, interoperability, and long-term resilience over defaulting to a small group of dominant providers.

4. Barriers to successfully establishing the Digital Centre of Government

There are several structural barriers that DSIT must address to ensure the success of the Digital Centre:

●        Excessive cloud concentration: The CMA’s investigation into cloud competition highlights that dominant providers leverage restrictive licensing terms and a lack of technical interoperability to limit customer choice. DSIT must ensure that government procurement avoids similar entrenchment and in particular does not get itself in a position of a costly future technical debt by entering into arrangements with the two dominant cloud vendors where it knowingly accepts vendor lock-in as the price to be paid for immediate convenience and in some cases modest discounts against the cloud vendor’s list prices, which has been the former Government Digital Service’s position[14].

●        Lack of transparent public procurement practices: Government cloud contracts are usually awarded through direct awards or opaque procurement frameworks that foreclose the market to challenger cloud providers. The Digital Commercial Centre of Excellence must ensure procurement processes are transparent, fair, and open to competition in line with the opportunities now afforded by the Procurement Act 2023 and the National Procurement Policy Statement priority to kick-start economic growth.

●        Security & resilience risks: Over-reliance on a limited number of cloud providers significantly heightens systemic risks, creating single points of failure and expanding potential attack surfaces. This concentration threatens the nation’s digital resilience, as evidenced by multiple significant outages in recent years:

• Microsoft Azure has suffered numerous outages[15], including a notable incident in 2024 that severely impacted the financial services industry[16]. ​Moreover, the U.S. Cyber Safety Review Board's 2024 report[17] criticised Microsoft’s security practices, highlighting a “cascade of … avoidable errors” that allowed Chinese hackers to breach Microsoft’s network and access senior U.S. officials’ email accounts. U.S. Senator Ron Wyden further emphasised that the government’s dependence on Microsoft poses a serious threat to national security, citing multiple breaches[18]. ​Recognising these vulnerabilities, the U.S. government has acknowledged the systemic nature of cyber risks associated with such dependencies.
• Outages from Amazon Web Services (AWS) in December 2021 reinforce the risks associated with over-reliance one a single provider and underpin the serious commercial consequences which can emerge from a single point of failure. December 2021 saw a series of outages affecting the US-EAST-1 and US-WEST-2 regions, resulting in a range of issues from network device impairments, to network congestion and power outages.[19] The widespread disruptions to major online services, including Netflix, Disney+, Spotify, Venmo, and Roku, were compounded with the serious commercial risk to business of all sizes across the US.[20]

●        As a result, and in order to safeguard the UK’s public services and critical national infrastructure from similar disruptions or cyber-attacks, DSIT must cultivate a diverse and resilient cloud ecosystem, thereby mitigating the risks inherent in cloud concentration.

5. Recommendations for measuring success

The success of the Digital Centre should be evaluated against clear, measurable outcomes:

●        Reduction in cloud market concentration: DSIT should track and report on the share of public cloud spending distributed across providers, ensuring a competitive landscape and making interventions where the actions of buying authorities are likely to increase cloud concentration risk and decrease government’s leverage over the cloud vendors.

●        Boosting challenger provider & SME participation: A key metric should be the proportion of cloud contracts awarded to UK-based challenger providers and SMEs. This metric must, by definition, not have its wider intent deflected by focus on the “eco-systems” that orbit the dominant cloud providers.

●        Ensuring interoperability & avoiding vendor lock-in: Government cloud services should adhere to open standards, ensuring portability and flexibility across multiple providers. Avoiding proprietary dependencies will reduce switching costs, improve resilience, and enhance government’s strategic autonomy.

●        Reforming the Cloud First policy to prioritise competition: The UK Government’s Cloud First strategy should include an explicit commitment to increasing diversity of supply beyond the current duopoly. DSIT must embed a competition mandate within Cloud First, ensuring that public sector cloud procurement actively promotes a diverse and dynamic marketplace rather than reinforcing existing concentration.

Conclusion

The OCC welcomes DSIT’s ambition to create a Digital Centre of Government but emphasises the need for a strategic, competitive, and transparent approach to cloud adoption. By learning from past policy missteps, ensuring fair procurement practices, and prioritising interoperability, DSIT can create a digital government framework that will create immense opportunities for economic growth,  national security and resilience, innovation, and better value for the taxpayer.

We look forward to continued engagement with the Committee and DSIT to ensure that the UK’s digital transformation is built on open, competitive, and sustainable principles.

28 February 2025