UK's Focus Shifts From Brexit to Mexit as Next Policy Matter

UK's Focus Shifts From Brexit to Mexit as Next Policy Matter

In the heart of the digital age, the UK finds itself heavily reliant on Microsoft for its digital infrastructure. This reliance, as highlighted in the State Of Digital Government Review (SODGR), is seen as a positive move towards off-prem and AI, but concerns remain about the structural flaws it introduces.

The widespread adoption of Microsoft's software ecosystem, with approximately 80% of UK public sector and 88% of the private sector using Microsoft's core infrastructure, has led to a deep integration of Microsoft technology in operations. This integration, combined with the tightly connected services offered by Microsoft (Azure, Outlook, OneDrive, Teams, SharePoint), creates network effects and operational efficiency, but also causes lock-in, making switching costly and complex.

The UK Competition and Markets Authority (CMA) has flagged Microsoft for unfair pricing models, including egress fees that penalise moving data away from Microsoft’s cloud, and contract terms that keep users locked into Microsoft platforms. For example, it is cheaper to run Windows Server on Azure than on competitors’ clouds, further limiting choice.

The market dominance of Microsoft, combined with a "hyperscaler duopoly" alongside Amazon AWS, stifles competition and innovation, inflates costs, and concentrates control in few hands. This dominance, along with the pervasive market dominance and deep integration across both public and private sectors, results in systemic dependencies on Microsoft technologies, making a Microsoft exit challenging but motivating interest in alternative solutions emphasising digital sovereignty.

Potential alternatives and strategies for a "Microsoft Exit" include:

1. Open Source Solutions: European governments are increasingly shifting towards Linux and LibreOffice to reclaim digital sovereignty, reduce dependency, control costs, and improve data security. These open-source platforms avoid vendor lock-in and increase transparency.
2. Multi-Cloud and Hybrid Approaches: Diversifying cloud infrastructure providers (e.g., incorporating Google Cloud, IBM Cloud, or UK-based cloud providers) can reduce reliance on Microsoft Azure and Amazon Web Services, though current challenges include pricing models and integration complexities.
3. Regulatory and Market Reforms: The UK CMA is using new laws like the Digital Markets, Competition and Consumers (DMCC) Act to regulate Microsoft’s market behaviour to promote fairness and innovation, potentially leveling the playing field for alternatives.
4. Investment in Domestic and European Cloud Providers: Supporting smaller or regional cloud providers can provide viable substitutes to Microsoft for public sector digital infrastructure, aiding sovereignty goals.

However, the evolution of a 21st-century digital infrastructure answerable to the people of the UK is not without its challenges. Many big state IT projects in the UK have a history of failure. The UK government is accused of mistaking a fondness for AI and data centres for a digital strategy. The UK spends around £26 billion annually on digital technology, with one pound out of every 13 spent going to Microsoft. UK state IT lacks co-ordination, leadership, funding, talent, and executive influence, with 55% of personnel budget going on outside contractors, analysts, and consultants.

Involving all IT professionals in the state sector is crucial for the success of this digital strategy. A unit with sufficient expertise is needed to provide guidance for implementation of this strategy, both inside the government and with suppliers. A proper digital strategy should aim to identify where critical data is flowing to untrustworthy entities and set a deadline for it to be held and processed in legally secure locations. The strategy should aim for true vendor independence, including an internal market and mindset where open source can be deployed freely. Therefore, the UK cannot consider these data centres suitable for state data.

The UK public sector is committing approximately £9 billion over five years to Microsoft for digital technology licenses. The digital strategy, if executed effectively, could potentially lead to a shift away from these large commitments, towards a more diverse and secure digital landscape. The UK's digital future hinges on its ability to navigate these challenges and seize the opportunities presented by the digital age.

1. The UK's reliance on Microsoft for its digital infrastructure, as highlighted in the SODGR, is a positive move towards off-prem and AI, yet concerns about structural flaws remain, with Microsoft's dominance stifling competition and innovation in the industry.
2. The widespread adoption of Microsoft's software ecosystem has created network effects and operational efficiency but also causes lock-in, making switching costly and complex, as seen in the tight contracts and unfair pricing models identified by the UK Competition and Markets Authority.
3. In response to these concerns, potential strategies for a "Microsoft Exit" include embracing open source solutions like Linux and LibreOffice, multi-cloud and hybrid approaches, regulatory and market reforms, and investing in domestic and European cloud providers to promote digital sovereignty and reduce dependencies.
4. A properly executed digital strategy should aim for true vendor independence, focusing on identifying where critical data is flowing to untrustworthy entities, setting a deadline for it to be held and processed in legally secure locations, and encouraging the deployment of open source platforms for greater transparency and flexibility.
5. The success of the UK's digital strategy is crucial for navigating the challenges posed by the digital age, with the potential to lead to a shift from large commitments to Microsoft towards a more diverse and secure digital landscape, lowering costs and fostering innovation within the technology and finance industries.

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