Costly Cloud Licensing & Public Sector Skills

In this insight, we look at how recent reports have revealed how the UK’s public sector is facing the dual challenges of potentially losing £300 million through restrictive cloud licensing and the limitations of an open-source software skills gap. 

Restrictive Cloud Licensing Costs 

A report from the cross-party think tank, The Social Market Foundation (SMF), has shown that due to restrictive rules on cloud software licensing, the public sector looks set to waste more than £300 million over the next 5 years (£60 million per year over the next five years). According to the report, this is because current software licensing rules are making it harder to switch between providers, thus keeping public sector organisations locked into pricey deals.  

The SMF says its report has only accounted for the costs of restrictions to users’ ability to freely use Office 365 and the overcharge of using SQL Server on third-party infrastructure, yet the actual additional costs incurred by all software licensing practices may be much higher. 

The Benefits Of One Provider Wiped Out By Costs 

The UK government mandates that central departments adopt cloud services and, therefore, encourages public sector organisations to improve technological efficiency and to find savings within public services. One method of achieving savings in the public sector has been to choose one central (cloud) provider that delivers the full range of services required. However, as one IT professional (quoted by the SMF) recently pointed out, there’s “positives to having one provider with a suite of things that work together very well, but the challenge of that is you’re tied in”. 

Effect Worse On Public Sector 

The SMF says that while licensing costs and complications also affect the private sector, the overall detriment is likely to be worse in the public sector. For example, excess costs are financed by the taxpayer and may mean diverting resources from other government objectives or budgets, thereby resulting not just in direct financial costs but also in preventing the UK from achieving its technological, economic, and security goals. 

An Economic, Technical, and Social Issue 

Jake Shepherd, Senior Researcher at SMF, said of the report’s findings: “Our research shows that restrictive software licensing practices squander millions of pounds – taxpayers’ money that could fund vital public services and boost national productivity – while interviews with public sector IT professionals reveal the ‘real’ day-to-day operational costs. Software licensing isn’t just a technical issue – there’s an economic and social imperative to ensure it works smoothly and prevents needless wastage of public resources in the future.” 

The Open Source Challenge 

Open source is integral to the UK’s digital economy, contributing significantly to business growth and competitiveness and the public sector is encouraged to increase its participation in open source projects to leverage these benefits further. 

However, the recent ‘State of open report’ from OpenUK, a UK-based organisation promoting open source software, hardware, and data, has also highlighted how there is a gap in the skills and understanding of open source in the public sector. 

Substantial Public Engagement With Open Source 

OpenUK’s report, which uses a collection of data from NHS Digital, Government Digital Service, and the Department of Business, Energy and Industrial Strategy has revealed the existence of 1780 GitHub repositories with 14,910 stars and 745,000 commits. OpenUK says this is evidence of “substantial public sector engagement with open source software in the UK” and highlights how the public sector embracing open source “aligns with government digital transformation goals, driving better public services and fostering a culture of continuous improvement”. Also, OpenUK says by leveraging open source, the UK public sector can address “complex challenges more effectively, ensuring robust, scalable, and secure digital infrastructure that supports economic resilience and growth”. 

Not Enough 

Despite these levels of engagement in open source by the public sector, OpenUK’s ‘Phase Two: The Open Manifesto Report’ highlights the need for policymakers to build skills in open source software to help the UK (public sector) make better use of open source and to improve AI openness. Some of the challenges to achieving this, identified in the report, include: 

– A skills shortage / a significant lack of expertise in open source technologies within the public sector. This skills gap hinders the effective implementation and management of open-source projects. Training and upskilling initiatives could help address this issue. For example, OpenUK’s CEO, Amanda Brock, has said that working with people who learn to code in open source and contribute to open source code repositories is one way to help tackle the UK skills gap. 

– A lack of coherent policies and governance frameworks for managing open-source contributions within many public sector organisations. This results in inconsistent practices and potential compliance issues and highlights the need for comprehensive policies and standardisation. 

– Security concerns. For example, security is a significant concern with open-source adoption and public sector organisations often struggle with balancing cost and security, leading to vulnerabilities. Security in the development and deployment of open-source solutions is, therefore, crucial. 

– Resistance to the cultural shift required for adopting open source technologies. Traditional public sector environments find it challenging to move towards more collaborative and transparent working practices. 

– Resource Allocation. Financial constraints and competing priorities make it difficult for public sector organisations to allocate the necessary resources for open-source initiatives. Strategic investment and prioritisation are needed to overcome these barriers. 

OpenUK has, therefore, called on the public sector to develop skills to curate open source well, and on policymakers to gain a greater understanding of open technologies to avoid a continued reliance upon multi-year contracts from “legacy IT providers and consultancies”. 

AI Too 

In the report, Jennifer Barth, chief research officer at OpenUK, also points to the growth of the UK’s AI repositories as evidence of “the dynamism and innovation within the UK’s AI community, bolstered by open source principles”. 

What Does This Mean For Your Business? 

For UK businesses, the insights from these reports show a pressing need to address both the challenges of restrictive cloud licensing and the open-source skills gap within the public sector. The repercussions of these issues are multifaceted, affecting financial efficiency, technological advancement, and overall competitiveness. 

The substantial costs associated with restrictive cloud licensing (estimated at £300+ million over the next five years) highlight the importance of flexibility in software procurement. Businesses can learn from this by advocating for more open and competitive licensing agreements. This approach not only reduces costs but also fosters innovation by avoiding vendor lock-in. By negotiating contracts that allow easier transitions between providers, businesses can ensure they are not overpaying for services and can quickly adapt to better solutions as they emerge. 

The public sector’s struggle with open-source software adoption due to a skills shortage could be seen as an opportunity for businesses to invest in training and upskilling their workforce. Open-source technologies can offer significant benefits, including cost savings, enhanced security, and the ability to drive innovation through collaboration. By developing in-house expertise in open source, the public sector and the private sector, businesses can improve their technological resilience and reduce dependency on proprietary solutions. This, in turn, can lead to more agile and responsive IT strategies, essential in today’s fast-paced digital landscape. 

The identified lack of coherent policies and governance frameworks for open source usage in the public sector could also be seen as a cautionary tale for private enterprises. The challenges faced by the public sector in allocating resources to open-source initiatives show a need for strategic investment in technology. Businesses should, therefore, look at investment in open-source projects and technologies to remain competitive.

These findings from the SMF and OpenUK reports appear to offer valuable lessons not just for the public sector, but for all UK businesses. Embracing flexible licensing agreements, investing in open-source skills, establishing robust governance, fostering a collaborative culture, and strategically allocating resources can improve flexibility, scalability, security, and cost-efficiency.