Will ICT cartels always be with us, Cloud or no Cloud?

As governments move to the new Cloud Computing paradigm, is this the perfect opportunity finally to break free of the 'cartel' of traditional ICT providers to the public sector? Is there a new guard with a new approach waiting in the wings for the green light?

With the UK government's Cloud Computing strategy itself waiting in the wings and Salesforce.com next week set to announce a UK-based data centre that will allow it to compete for public sector business in this country, a debate in the US about the dominance of government sector ICT providers and their supposed 'cartel' like nature is suddenly becoming highly relevant.

The context: as the move to the Cloud takes place, government needs to ensure that new contracts are written in such a way as to ensure portability. One of the boasts of Cloud evangelists is that they need to focus remorselessly on customer satisfaction or those customers will simply replace their existing provider with a new one. 

Of course it's not that simple by a long way, especially among the larger private sector enterprises that are now embarking on serious mainstream Cloud investments. Cloud for them is not a case of 'suck it and see' - it demands as much due diligence as a traditional Oracle or SAP deployment would... though  there is certainly a greater ease of portability with a Cloud provider than there would be with unpicking, say, a major SAP implementation five years down the track.

But the public sector doesn't have a good track record when it comes to contract development and management. It's only necessary to look at the unholy mess that has grown around the NHS National Programme for IT to see that. In that landmark instance, the customer (the Department of Health) is literally scared to can its providers for fear that the contract terms mean that those providers will sue the life out of them  - and most likely win.

Having contracts that will allow for customers to swap Cloud services providers will increase competition as well as ensuring that a cap is kept on costs, argues former US federal chief information officer Vivek Kundra who suggests the current focus on Cloud across the ICT and services industries means that there is already a "very vibrant and healthy ecosystem" from which government can choose.

"We've got to make sure that as you construct these contracts, the way they're written and the way the agencies manage these contracts, you have the flexibility to pull away and move to the next platform," urges Kundra. "So it's not like you have a single player over any of these spaces."

But critical to this is having contracts that allow public sector organisations to port data from one vendor to another as simply as end users can shift contacts from one email system to another.

OPEC on the White House lawn

This in turn will help to break the 'cartel' of major ICT suppliers that Kundra alleges exists in the US government sector today and prevent it being replicated in the Cloud.  While there are more than 5000 official ICT providers to the US Federal government, ten providers account for a quarter of that business with IBM and Dell leading the pack.

In an opinion article for the New York Times this week, Kundra expanded on his argument with some strong allegations. He wrote: "As the global economy struggles through a slow and painful recovery, governments around the world are wasting billions of dollars on unnecessary information technology. This problem has worsened in recent years because of what I call the 'IT cartel'.  

"This powerful group of private contractors encourages reliance on inefficient software and hardware that is expensive to acquire and to maintain. In one particularly egregious example of waste, the Defence Department last year pulled the plug on a personnel system devised by Northrop Grumman after spending approximately $850m on it in 10 years."

This wasn't the first time Kundra has aired such strong views. Two weeks ago at Salesforce.com's Dreamforce conference in San Francisco he also complained: "One of the most frustrating issues was to actually see project after project fail because it was based on the old IT model. That model was essentially vendors would bid for government contracts and their expertise wasn't superior technology or innovation; it was the fact that they had a PhD in understanding how to navigate the complicated procurement process.

"Some of the most major innovation is not happening within the old model of what I call the 'IT cartel' where people continue to win this contract and their objective is essentially to put in as many people as possible and bill at exorbitant rates."

Inevitably Kundra's comments have caused a bit of a stir. Writing in the Washington Business Journal , Stan Soloway, CEO of the Professional Services Council,  hit back at what he called Kundra's "ill chosen rhetoric" which he had previously described in an interview as "offensive".

"Let's dispense with the term 'cartel'," he argues. "It may be good as a headline-grabber, but it is misused here. The term generally describes a group of "sellers" that seek to control and close markets to others, in generally illegal ways. Think drugs or even oil. But in federal contracting, it is the government buyer that controls access to its market.

"The government's often unique and complex procurement regimes and processes determine what companies can offer to meet government customer requirements and how much innovation is brought to bear. And the barriers to entry, erected by the government itself, can be very daunting."

Lock-in? Little old me? Surely not 

So it's not a vendor-led plot to lock government in; it's the government's own fault for making buying and selling in the public sector too damned difficult. Sound familiar? It's an argument we've heard a lot in the UK of late, particularly in relation to the difficulties SMEs have in pitching for business that the Coalition insists it wants them to have a chunk of.

Soloway goes on to criticise Kundra for taking a too simplistic view of Cloud adoption in the public sector. "As with any innovation, there are the early adopters and others who, for a variety of reasons, are not yet invested in or ready for the changes that the innovation will engender. In the best of companies, when facing similar challenges, they are typically addressed through a carefully crafted change management process," he claims.

"But such processes are almost always absent from or an afterthought in the government. Indeed, some of the most significant IT program failures, including the one Kundra specifically cited in his op-ed, arose in part because there was no change strategy on the government side. Thus, laying the problems associated with those programs or the adoption of Cloud technology at the feet of a few large companies ignores other, generally more influential factors."

 The politics of big IT - and the IT of big politics... 

Here Soloway undoubtedly makes a fair point. The reason that so many of the traditional services companies and providers to government - the IBMs, Accentures, HPs etc - are ramping up their Cloud practices is the growing recognition of the need for rock-solid, thought-through change management programmes to support mainstream introduction of 'big ticket' Cloud deployments.

Again, the public sector's track record of successful change management is open to question with too many politically-motivated ICT commissions taking place at a political pace. Remember, the NHS IT programme was commissioned after a ten minute pitch from civil servants and saw Tony Blair urging them to cut a couple of years off the delivery date so as to get it done before the next election. With that in mind, the slow pace towards what we used to call G-Cloud might be no bad thing.

For his part, Soloway concludes: "If or when the government firmly commits to Cloud Computing in the way Kundra advocates, fundamental changes will indeed take place across the government information technology industry. The companies know the competitive landscape is already changing and that customer requirements are evolving. And they are already planning for how best to respond to a changing market. After all, they also know that this is not a market controlled by a cartel. It is ultimately controlled by the customer. And if the customer wants change and is prepared for it, the customer can make change happen."

Now this is all a bit too 'buyer beware' for many tastes and leaves the 'blame door' conveniently ajar for the first big Cloud deployment failure to be conveniently placed at the feet of the customer who didn't do the right due diligence. The idea that Cloud will be a market controlled by the customer is a nice one, but it's also a line that ICT providers have been parroting since the heady days of Harold Wilson's 'white heat of technology' - which never really reached a rolling boil.

Cloud doesn't always equal 'revolution' 

What happens in the UK remains to be seen, and we do hope to have some movement one way or another - soon. But in the US, there is some evidence that complacency may yet come to rule the day. In a keynote speech to Cloud Computing & Virtualization Conference and Expo in Washington this week.  Mary Davie, assistant commissioner with the General Services Administration's Office of Integrated Technology Services, told delegates that existing procurement contracts already cover most of what government agencies need to move to the Cloud.

She said existing processes and practices would cover 90% of the products and services needed to make the leap to the Cloud. "The answer isn't always you need another contract or Blanket Purchase Agreement," she insisted.

"It may be that agencies can work together and talk about what common terms and conditions should look like, what is the best way to buy and what should service level agreements look like and how do we implement." 

Whether this mindset shifts as Cloud adoption increases in the public sector remains to be seen.  It can surely be strongly argued that existing procurement and contract practices have not always served the public sector ICT cause well. 

Why? Because simply porting those over into the new Cloud world may risk undermining the 'last best  hope' for making a genuine difference to ICT-enabled service delivery in the public sector.