AWS secures £894m in cloud spend across three contracts with UK government on same day

Amazon Web Services’ hold on the UK public sector continues to tighten, following the revelation that on a single day in late 2023 it clinched contracts worth £894m with three central government departments

Caroline Donnelly,
Senior Editor, UK

Published: 12 Jan 2024 12:45

Amazon Web Services (AWS) looks set to make more money on three multi-million pound government contracts that went live on the same day in December 2023 than it has previously amassed through its decade-long involvement with the G-Cloud procurement framework.

The public cloud giant signed three 36-month contracts with several different major government departments that all went live on 1 December 2023, including one valued at £350m with HM Revenue and Customs and another worth £94m with the Department for Work and Pensions (DWP).

The remaining contract is one Computer Weekly previously reported on last month, worth £450m, that involves the provision of AWS public cloud hosting services to the Home Office.

These three contracts were all arranged via the government’s G-Cloud procurement framework under the terms of the second iteration of the One Government Value Agreement (OGVA), which entitles public sector bodies to committed spend discounts on AWS services.

The contracts are collectively valued at £894m, and – based on the government’s own G-Cloud spend data – mean AWS will make more money on these three contracts alone than it has during its 10-plus years of participation in G-Cloud, which has seen it accrue £757.7m in sales.

The G-Cloud framework was introduced in 2012 to make it easier for small and medium-sized enterprises to win public sector IT deals, as part of a package of measures the government at the time introduced to prevent lengthy, high-value IT contracts being awarded to the same handful of big tech suppliers.

The fact all three of these multi-million pound cloud contracts have been awarded through G-Cloud will raise eyebrows, said Owen Sayers, a senior partner at IT security consultancy Secon Solutions, given the go-live dates for the contracts occurred just days after the government’s hyperscale-focused £1.35bn Cloud Compute 2 (CC2) framework went live.

This is because the first iteration of the Cloud Compute framework was set up to counteract the problem of hyperscale cloud providers using G-Cloud to directly award multi-million pound cloud contracts. “£894m of spend on services that should naturally fall under the new CC2 Framework [going] through G-Cloud is at least eyebrow-raising,” said Sayers. “And when we then look at how relatively disproportionate that single day’s spend is, based upon historic G-Cloud spend for AWS, it ought to set alarm bells ringing.”

HMRC, DWP and the Home Office are, according to the government’s G-Cloud sales data, Amazon’s top three public sector customers in terms of spend, and each of these new contracts appear to be renewals of deals they signed previously under the OGVA.

And each of these new deals is significantly larger in value than its predecessor. As previously detailed by Computer Weekly, the £450m Home Office contract was also nearly four times the value of the previous deal it had in place with AWS.

The last OGVA deal HMRC did with AWS was valued at £94m, meaning its spend with the public cloud giant will be almost quadruple what it was this time around, while the previous DWP contract was valued at £57m, meaning its spend with AWS is set to almost double this time around.

HMRC is known to be in the midst of an ongoing migration of its legacy IT systems either to the public cloud or the government’s Crown Hosting colocation facility in support of its cloud-first stance on new technology deployments.

Computer Weekly asked a representative from HMRC for further details about why its spend with AWS is set to rise so significantly over the next three years, and received the following statement in response.

“Taking advantage of hyperscale cloud is helping us transform how we operate, enabling us to build and run more resilient services to support customers,” the HMRC spokesperson said. “It allows us to easily update services and scale up quickly to meet peaks in demand. Our new contract supports our cloud-first approach and provides significant discounts for us and the taxpayer.”

Cloud spend

Computer Weekly also asked DWP to give an account for its projected uptick in cloud spend, but the department did not directly answer the question.

The department is known to be in the process of moving its frontline workloads from its own private datacentre to the public cloud, and has set itself a goal of having 70% of its infrastructure running in the public cloud before the end of the 2023/2024 financial year.

Nicky Stewart, former head of ICT in the UK government’s Cabinet Office, predicts the next few months will see many more government departments renew contracts with AWS that will allow them to benefit from the OGVA terms.

As previously revealed by Computer Weekly, the UK competition watchdog – the Competition and Markets Authority (CMA) – is in the throes of an anti-trust probe involving AWS, and is also one of the beneficiaries of the OGVA scheme.

“All of these contracts will be attracting a discount based on committed spend – [which] is one of the ‘theories of harm’ that the CMA is currently investigating,” she said.

“It’s beyond ironic that the current government thinks it’s appropriate to lock itself, taxpayers and any incoming government into this level of commitment, particularly in the context of the CMA investigation,” said Stewart.

“This is just another indication of how deeply HM government is locked into AWS cloud services – it probably had no option given that spending is so high and discounts must be preserved at any cost, but it is hard to see how these contracts are going to work in the longer-term best interests of government and the taxpayer. But it will be interesting to see if the CMA renews its own OGVA contract with AWS.”

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