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Is the Public Sector ready for Pay-as-you-go Utility Computing?

The introduction of the UK G-Cloud CloudStore is challenging the status quo with regard to public sector ICT procurement and is stimulating debate internationally. Early adopters have found it refreshingly easy and cost-effective to purchase cloud-based services. The biggest challenge remaining is that there needs to be a significant change in government procurement culture and processes before the cost savings promised by utility computing are fully realised.

“Utility computing is the packaging of computing resources, such as computation, storage and services, as a metered service. This model has the advantage of a low or no initial cost to acquire computer resources; instead, computational resources are essentially rented.” Wikipedia

When you consider how you pay for other utilities, such as electricity, typically you pay for what units you actually use, perhaps drawing down from a credit top-up facility. You don’t send your supplier a large cheque for the months or years ahead with a best guess of what you will use on the understanding there will be no rebate for the unused units, so why pay for computing this way?

At the recent Business Cloud Summit in London, Denise McDonagh, the G-Cloud Programme Director, summed up the public sector efficiency challenge by saying “Look for what can we improve, not cut?”. Given adequate resources and political support, the G-Cloud programme is ideally placed to deliver savings by changing the public sector to a subscription economy.


Deal making – a matter of convenience?

One established practice the G-Cloud programme actively aims to end is the negotiated deal. In fact, to protect fair competition, the Framework Agreement specifically forbids them.  However, referring to the cultural challenge ahead, a senior government official acknowledged at the Cloud Summit that “The Bean Counters like fixed cost and certainty”. It is sometimes more convenient to budget around a longer term Enterprise-wide agreement, as this circumvents issues around detailed capacity planning and repeated requests for additional funds. Such pre-set contracts, however, frequently result in the kind of wastage from underutilised services that the G-Cloud programme aspires to avoid.

In my previous blog post, The Cloud – Ideal for Innovators, I outlined how pay-as-you-go contracts reflect more realistically how organisations might look to adopt cloud technologies. Everett Rogers’ Diffusion of Innovation theory presents a cumulative view of technology adoption over time and assumes that most organisations have people that are Early Adopters and Laggards and that new technology is impossible to deploy Enterprise-wide overnight. This S-Curve is coincidentally represented in the UK Government’s recent Digital Strategy publication.

Technology Adoption S-Curve

Even if the customer factors in a 10% under-utilisation and the vendor concedes a further 5% it is clear that some Enterprise (A) or medium-term (B) contracts will inevitably lead to waste. Getting closer to the curve (C) is the goal as this will naturally result in better value for money. Although it is relatively easy for vendors to provide facilities to meter cloud-based services, current public sector payment processes are not well suited to the administration of flexible micro-payments that will be required to avoid unnecessary waste.


What can we do to overcome the barriers?

With 10 years of providing pay-per-use online collaboration software to the public sector we know from experience how difficult and time-consuming it is for our clients to raise new purchase orders as service utilisation grows. This approach is less than ideal and is not well suited to providing, and paying for, utility computing.

To further improve our price transparency via the G-Cloud, we will soon add a license cost calculator into Kahootz enabling site owners and prospective buyers to determine and plan ahead for the ‘Price of Success’. To remove some administration overhead this new quotation facility will eventually link to a cloud e-payment facility that accepts credit cards, PayPal etc.  Although e-payment services such as Barclaycard’s Government Procurement Card offer some facilities for high volume low transaction payments we understand these types of resources are not widely accessible to public sector staff.

In support of G-Cloud utility computing we would suggest procurement teams consider raising anticipatory purchase orders against which cloud services can be called-off as required. Budgeting beyond initial needs will require a new mind set, especially when consolidating and coordinating payments across multiple business areas. Going forward, to reduce the burden and cost of administration, we would to like to integrate Kahootz with a centralised e-invoicing and e-payment system that supports automatic G-Cloud sales reporting. Only then will the public sector be able to maximise the real benefits of pay-as-you-go utility computing via the G-Cloud.

If after reading this you still prefer to make six or seven figure down payments for our cloud collaboration service please feel free to get in touch – you won’t be turned away!


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