Global cloud domination could mean UK is sleepwalking into oblivion

UKCloud CEO Simon Hansford assesses what he sees as the serious impact US cloud giants could have on the UK economy

The technology industry in the UK has few large players of its own and has instead mainly been comprised of large foreign (mainly US) players and small local start-ups, many of which are bought up long before they become of any significant size.

This model has worked well for decades, with players like IBM not only employing over 20,000 staff in the UK, but also basing significant R&D establishments here, such as the software labs at IBM Hursley. Arguably, Britain did not need a large champion of its own as long as it benefited from the jobs and skills based here and from the taxes associated with these operations. In addition, the UK benefited from the vibrant partner ecosystems supporting each major vendor, and all the jobs and large capital investments in corporate datacentres managing and maintaining the systems that they supplied.

The cloud is changing all of this. There is now the very real risk that a small handful of US tech giants could dominate the tech sector in a completely different way. Not only will their size and reach squeeze out the partner ecosystems to a far greater extent than ever seen before, but they have little or no local R&D. They are hoovering up workloads from thousands of companies - leading to the loss of many skilled jobs.

Leading the pack are AWS and Microsoft Azure, each of which now boasts its own presence in a UK datacentre, but look under the covers and things are not quite as they might first appear:

1. Investment

While in its recent announcement AWS claimed to be "investing in the UK's cloud future", the global players are not actually investing anything much in the UK at all. The new facilities do not represent net new investment in the UK, as these players are simply leasing facilities that already exist,and while they are installing some equipment of their own, it is all imported - almost none of it is made in the UK.

2. Jobs & Skills

None of the innovation and little of the management for these facilities will be based in the UK. Unlike IBM Hursley that (once) provided many high-skilled, UK-based R&D jobs, AWS and Azure have their innovation centres on the US west coast along with much of their support and management. Their local facilities have minimal staffing levels and most of their UK operation is simply sales and marketing.

3. Taxes

All of these lost jobs will represent a massive loss not only in the skills base in the UK, but also in the tax base - both in terms of the income taxes that the staff pay, and in terms of the corporation taxes that these global giants have so far been effective in evading.

4. Privacy

Nothing, including Privacy Shield, EU model clauses or encryption, prevents a company being responsible for the data it holds or the regulations that apply to the data. And whatever they say, the US players are all subject to a set of intrusive US regulations that do not apply to their UK rivals.

This includes the recent amendment to Rule 41 which would allow the US law enforcement agencies access to any data held by the US cloud firms. Also just look at the compute and storage capacity available in the new facilities opened by AWS and Azure. It is simply not enough to serve all the needs of their UK clients. Therefore, a significant number of workloads will need to be processed off shore and a significant proportion of data held there also - hardly what you'd call data residency.

And even if clients are offered guaranteed data residency with all compute and storage restricted to the new UK facilities, the data is still subject to the intrusive US regulations as long as it is being handled or stored by these US firms - hardly what you'd call data sovereignty either. Indeed, typically under AWS and Azure contracts, data (including meta-data and any customer data needed to perform the services) is allowed to go anywhere in the world.

5. Open Standards

Getting the data back or moving applications to alternative cloud platforms isn't straight forward either as AWS and Azure are on proprietary technology stacks with contractual arrangements which means that you are locked in.

In the US the new administration is focused on ‘Making America Great Again'. As the UK enters Brexit negotiations and finds its feet in its new global trading relationships, it needs to consider its own needs and to what level it applies industrial policy in areas like technology.

What we need from the UK government is a clear vision for our UK IT and digital economy and policies that support that vision. Firstly, it needs to continue to lead by example, as it has with G-Cloud and other initiatives that enable local players (including SMEs) to compete on equal terms in the public sector and also to have societal value a significant consideration within the process. Secondly, it needs to use its influence to help extend this type of model well beyond the public sector to the private sector in order to ensure that a race to the cloud does not result in the domination of global cloud giants that could have massively negative societal impact in the UK.

Simon Hansford is CEO of UKCloud, and this blog first appeared on his LinkedIn page.

AWS and Microsoft were not immediately available to comment on the claims, but stay tuned to ChannelWeb.co.uk for further analysis on the topics raised.