Dominated by the presence of a few choice hyperscalers, the UK’s cloud market is suffering from a lack of competition and faces stagnation as a result. So says Nicky Stewart, a senior advisor with the Open Cloud Coalition (OCC), a collaborative advocacy group working to create a competitive and resilient cloud services market.
Previously the Head of ICT Strategy Delivery for the Cabinet Office, Stewart has seen firsthand how the cloud market has evolved – and how it’s been stifled by a few dominant players. With AI’s rising role reshaping digital requirements yet again, she warns of falling into the same mistakes of the past. Diversifying the cloud ecosystem is not just necessary for competition but, she argues, vital to ensure the market can support future technological developments.
During her time at the Cabinet Office, Stewart led the commercial workstream of the G-Cloud program, which led to the G-Cloud framework through which most of the UK’s public sector is still sourcing its cloud. While the initial concept was only expected to be a six-month trial, fast forward to 2025 and over £14bn has been transacted through the scheme.
Leaving the Cabinet Office in the 2010s, Stewart went on to co-found platform-as-a-service company Skyscape (later changed to UK Cloud) and, in October last year, the OCC. The launch of the latter came amid a shift in industry sentiment, Stewart told Tech Monitor in the following interview, edited for length and clarity. Finally, she says, “people are listening” to the argument for vendor diversity in the UK cloud market. “While I wouldn’t yet say it’s a fully open door,” she adds, “it doesn’t feel like it’s locked any more.”
Can you start by telling us about your career journey and how it led you to your current role at the OCC?
When I was in the Cabinet Office in the early 2010s, it was felt that the UK public sector – and central government in particular – were mired in very long-term, very expensive contracts that were very difficult to leave. Within this, the cloud was seen as part of the silver bullet to freeing us from the grips of this oligopoly.
While cloud is usually marketed as something easy to use and easy to leave, it’s not without its risks. For one thing, the cloud and procurement regulations are uneasy bedfellows at the best of times, and the prevailing market conditions made it more and more difficult to compete and more and more difficult to get inward investment.
I’ve always advocated for a more open and competitive market – at the Cabinet Office, I did this through the G-Cloud program. Now I do it through the OCC. The reason I was able to help launch the latter is because we’ve recently seen all the key lines coming together. In the UK, we have the Competition and Markets Authority (CMA) investigation underway, which is empowering smaller cloud companies in ways that I’ve never seen before.
While we hadn’t had the general election, the writing was on the wall that the UK was going to have a new government, which afforded new opportunities for change. In Europe, there are also regulatory processes underway in a number of member states looking at the cloud. So all in all, the environment changed to allow decision makers and policymakers to wake up and smell the coffee about what’s been happening in the market. It’s almost as if we’ve sleepwalked into a position which is highly anti-competitive and very difficult for challenger cloud providers to even have a voice, let alone get an opportunity.
Having worked inside government and now in an advisory capacity, what changes have you seen in how the UK public sector approaches the cloud market?
When we were in the Cabinet Office, we’d all drunk the Kool-Aid and thought the cloud was going to be the silver bullet. But we didn’t understand the risks – primarily that of being locked into one provider and being unable to leave.
There was the belief that the cloud was going to free things up and make them more competitive – it was going to create new opportunities for SMEs and so forth. But really, fundamentally, what happened in the end was the opposite. The market began to coalesce around the two dominant cloud providers. The CMA has identified this happening in the UK’s public sector, and it’s happening in the rest of Europe now too.
It’s created something of a self-fulfilling prophecy, where two hyperscalers are receiving the majority of investment and interest, but it means that they became the only cloud providers being used. This has created a no-choice scenario that’s become very hard to get out of.
What are the dangers of market monopoly?
Competition is important, firstly because it drives value for money; for businesses, for the taxpayer. There is no way the UK Government can demonstrate that they have secured value for money for taxpayers when it are directly awarding business to the dominant cloud providers without any formal competition.
Secondly, it snuffs out innovation. You may argue that the most dominant cloud providers are all extremely wealthy organisations that can afford to put a huge amount into R&D, but this may not be bespoke to a company’s specific needs. So there comes a degree of compromise because these larger providers produce pretty homogenous offerings, whereas smaller cloud providers are more willing and able to tailor their products to the needs of the customers.
We also live in a geopolitically unstable world, and there’s increasing value and importance being placed on data – where it is and who is controlling it. So digital sovereignty is becoming a thing. And if people care about this, then they need to have a choice.
How can we make the market more competitive?
There are a lot of different ways we can do this. For one thing, anti-competitive software licensing practices need to be stopped. More could also be done around egress fees, which are currently making it expensive for companies to get out of contracts.
The dominant providers are very good at offering things like free training to governments, meaning they’re getting the digital skills they need, but this is creating the feedback loop I mentioned, where the only providers getting upskilled are the hyperscalers. The dominant providers are also able to offer huge cloud credits, which the smaller companies just can’t compete with.
There is an argument that hyperscalers offer economies of scale that smaller providers simply can’t match on price or resilience. How do you respond to that concern?
In terms of security, some of our members specialise in providing cloud services to the defence industry, so their levels of security are incredibly high because it’s their niche. And that’s not just the cloud platforms themselves, but also the people who work there have very high levels of security clearance, which you won’t get with a hyperscale cloud provider.
In addition, all cloud providers who are worthy of the title ‘cloud provider’ can scale considerably. No, they can’t all scale to the extent that a hyperscale cloud provider can. But do all workloads require that? No, they don’t.
What role are governments and regulators playing in supporting small-scale cloud companies? Should they be doing more?
The UK government needs to be looking very long and hard at its digital sourcing strategy. This is already happening with the Defence Information Systems Agency looking at its digital sourcing strategy and looking at how it buys cloud, because at the moment it’s not competed but is directly awarded through G-Cloud, or through Enterprise license agreements.
The CMA also has to lead by example and start actively pursuing competition opportunities. They should be looking to diversify, not least because there’s a local economic benefit, but also as there’s an added benefit in building our resilience, which we need more than ever before.
Looking ahead broadly, what changes would you like to see in the cloud market?
Our next generation of digital infrastructure is going to be completely supported by the cloud, but it needs to be a diverse and resilient cloud. The way the market currently is, reliant on two providers, that just means we have two single points of failure from a digital resilience perspective.
There are many, many reasons why the situation needs to change, but fundamentally, it all boils down to giving consumers choice in the cloud, so that they can choose the right platform for their workloads.
We can learn a lot of lessons from the last 10 or 15 years in the cloud market. But we’ve now got important adjacent and emerging markets like AI, where we have the opportunity to not repeat the same mistakes as it scales up.
Read more: The philosophical barrier to corporate AI adoption is real, says Box’s Yashodha Bhavnani
