Tech Insight : Restrictive 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.

Featured Article : Currys, Accenture, Microsoft & New ‘GPT-4o’

International omnichannel retailer of technology products and services, Currys, has selected Accenture and Microsoft to deliver the core cloud technology infrastructure that will enable it to leverage the latest generative AI technologies.

Accenture? 

Accenture is a US multinational professional services company (IT services, cloud, data, AI, and consulting) headquartered in Dublin, that helps leading businesses, governments and other organisations build their digital core. Accenture says it has 742,000 “people serving clients” in more than 120 countries.

Why? 

Accenture says their involvement with Microsoft, as part of their joint venture called Avanade (established back in 2000), will be working closely with Currys to “modernise, secure and simplify its technology estate” with the intention “enabling Currys to accelerate the adoption of Microsoft AI technologies such as Azure OpenAI Service”.

What Will It Do For Currys? 

Currys says that using Microsoft’s AI technologies will enable it to “unlock value across every part of the business” bringing benefits like:

– Making it easier for customers to shop due to personalised and relevant product information and suggestions tailored to the consumer’s needs at the correct the moment.

– Improved customer retention and loyalty through the provision of improved post-sales experience and warranty services.

– A better experience for staff because they will be equipped with faster and easier access to information including product availability, delivery costs, and add-on services so they can better serve customers and identify potential cross and upselling opportunities.

– Future growth and profitability through the integration of AI into marketing, HR, finance, and legal processes. Currys anticipates that this will increase productivity across core business functions and that AI could be used to create/reveal opportunities to improve omnichannel experiences.

Net Zero?

It’s also hoped that this transition to embracing AI will help accelerate Currys’ journey to meet its net zero emissions before the 2040 target by moving nine existing data centres (including more than 2000 servers and 200 applications) onto Azure, to create a more energy efficient infrastructure.

Technological Leap 

Alex Baldock, Group CEO of Currys plc said: “AI is the biggest technological leap of our lifetime. Currys exists to help everyone enjoy amazing technology, so as well as bringing the benefits of AI to millions of customers, we’ll do the same to our own business.” 

Ralph Haupter, President (EMEA) at Microsoft said of its new deal with Currys: “By deploying the latest cloud and AI technologies, Currys can enhance the shopping experience for millions of customers, both in-store and online, whilst ensuring its 25,000 employees have the insights at their fingertips to unlock value across the entire business.” 

Competition

What Currys hasn’t mentioned in its announcement about its deal with Microsoft and Accenture is that it will enable Currys to compete with other major retailers who are already leveraging AI technologies from Microsoft and Accenture. These include, for example, John Lewis Partnership, Argos (part of Sainsbury’s), Tesco, Amazon, and AO World.

Currys has faced mixed financial performance in recent years due to challenges like increased competition, supply chain disruptions, and changing consumer behaviour. Also, Currys has seen a decline in physical store sales but has tried to offset this with growth in its online sales. Efforts to streamline operations and cut costs have been part of their strategy to adapt to market conditions and improve financial stability, and the deal with Microsoft and Accenture could, therefore, be seen as part of this strategy.

Open AI Announces “Omni” Model 

Just four days after the Currys/Microsoft/ Accenture announcement, OpenAI (which is a close partner of Microsoft) made another significant AI announcement with the release of its next-generation GPT-4o (“o” for “omni”) model – now available in ChatGPT. Open AI says it is: “a step towards much more natural human-computer interaction” and that it “accepts as input any combination of text, audio, and image and generates any combination of text, audio, and image outputs.” 

OpenAI has also been keen to stress how fast it is (compared to 3.5 and 4.0) saying: “It can respond to audio inputs in as little as 232 milliseconds, with an average of 320 milliseconds, which is similar to human response time in a conversation.” 

Omni’s key USPs include advanced contextual understanding, superior problem-solving skills, a broader knowledge base, and (apparently) robust ethical safeguards.

Here’s a brief summary of the key features of GPT-4o: 

– Multimodal capabilities. GPT-4o can process and generate text, images, audio, and video, enabling diverse applications like image descriptions, video summaries, and interactive media experiences.

– Improved contextual understanding. It can maintain coherence over long conversations, making it highly effective for virtual assistants and other roles requiring extended interactions.

– Advanced problem-solving skills. OpenAI says GPT-4o offers enhanced reasoning, logic, and problem-solving abilities, suitable for tackling complex mathematical problems, data analysis, and scientific research.

– Real-time adaptability. Omni can adjust responses dynamically based on user feedback and changing contexts, improving personalisation and accuracy.

– A broader knowledge base, because it’s been trained on a larger, more diverse dataset, thereby enabling it to offer accurate and informed responses across a wide range of topics.

– Ethical and safe AI practices (according to Accenture) which incorporate advanced safety mechanisms to detect and mitigate harmful content, bias, and misinformation.

– Enhanced integration capabilities for easy embedding into various applications, such as chatbots, customer service platforms, and content creation tools.

What Does This Mean For Your Business? 

Currys’ collaboration with Microsoft and Accenture to integrate AI technologies into its operations is a strategic move aimed at transforming its business model and enhancing its competitive edge. By leveraging advanced AI solutions, Currys hopes to streamline its technology infrastructure, improve operational efficiency, unlock value, improve productivity, and deliver personalised customer experiences. Currys no doubt hopes that AI could help it turn around some of the performance of recent years and improve how its online business operates as it moves away from physical stores.

For Currys, the benefits are, therefore, many. For example, the more tailored and personalised shopping experiences that AI can bring could enhance customer satisfaction and loyalty. Also, improved post-sales services, facilitated by AI, could further boost customer retention. Additionally, equipping staff with AI-powered could help drive sales growth. Not forgetting the core functions, integrating AI into HR, finance, and legal processes could increase productivity for Currys and reveal new growth opportunities, particularly in enhancing omnichannel experiences.

It could also be noted that transitioning to a more energy-efficient infrastructure powered by Microsoft’s Azure could help Currys in its net zero emissions by 2040 ambitions, helping the company to present a greener image.

This story also shows how (in the broader business landscape) AI is proving to be a significant advantage across various sectors. Companies using AI are being seen to streamline operations, enhance customer experiences, and make data-driven decisions more effectively. The ability of AI to process vast amounts of data and generate actionable insights is transforming industries from retail and finance to healthcare and logistics, providing a competitive edge to those who adopt it.

The recent launch of OpenAI’s GPT-4o also underscores the rapid advancements in AI technology. With its multimodal capabilities, GPT-4o looks like being a versatile tool for diverse applications. Also, for many ChatGPT users, news that it’s extremely fast will be welcome, and its real-time adaptability, superior problem-solving skills and broad knowledge base may make it a very useful model for the many businesses that are increasingly reliant on generative AI to help with their productivity, innovation, efficiency, and customer engagement.

For OpenAI, the launch of GPT-4o could, of course, strengthens its position in what is already now a highly competitive AI industry and could (probably for a brief period) set a new benchmark for competitors.