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Budget Cuts drives demand for cloud-based IT solutions By Poornima Subramaniam


Fujitsu13 Aug 15. The UK Ministry of Defence (MoD) has reported that it has made savings of GBP1 billion that can be diverted towards the procurement of much-needed equipment. The MoD says it has signed two contracts for its IT and communications supply that will bring significant savings of over GBP1bn over 10 years. It has confirmed that all savings made will be reinvested directly into Defence.  Interestingly, the two IT contracts are suggestive of the way in which the UK MoD is increasingly looking to adopt cloud-based solutions as a secure and cost-effective option to manage its IT systems. The Government Cloud Strategy advised that cloud computing can go a long way in cutting costs and making savings. This aspect of cloud computing is especially important for the defence sector, which is already operating under constrained budgets.

Embracing cloud-based solutions

The MoD has split its IT contracts into two projects – the ‘New Style of IT’ and ‘Global Connectivity’ – designed to overhaul and improve its computing capabilities.

The New Style project is worth GBP993 million and was awarded to the Atlas Consortium comprising HP, Airbus Defence and Space, CGI and Fujitsu. The project is a renegotiation of the original extension of the Defence Information Infrastructure and will be used to supply technology that allows the MoD to work in a more flexible, capable and collaborative way while maintaining high security levels.

An MoD statement says the programme will deliver “a new IT system fully exploiting the power of cloud computing, along with Microsoft Office 365 software, and securely delivering greater agility and mobility to our service personnel wherever they may be”.  The Global Connectivity project, on the other hand, will replace the Defence Fixed Telecoms Service when this ends in July 2016, and will focus on delivering communication capabilities for the MoD. While these two contracts fulfil most of the IT requirements of the MoD, analysts have said that the MoD still lacks contractors to fulfil some voice, video and mobile phone elements of the Global Connectivity project.

Demand from the UK defence sector

The move to cloud-based solutions was formally necessitated by the UK’s 2013 Defence ICT Strategy. The government committed to a “cloud-first” policy, through which it aims for 50 percent of new government IT funding to be spent on public cloud computing services.

The defence sector is expected to be an area with increasing cloudbased technology adoption. For example, news reports from June 2015 suggested that the British Army is considering the adoption of cloud technology to help modernise its own IT systems.

In March 2015, the MoD announced that it would host some unspecified applications in a private cloud as it turns to a shared services model. The first applications for the MoD’s Information Systems and Services division were migrated onto the platform hosted at systems integrator CGI’s datacentre in Wales.  Major defence contractors, IT companies, and SMEs alike appear to be eyeing opportunities to engage in this market. BAE Systems Applied Intelligence announced, on 22 June 2015, that it is bringing cloud-based cyber security to commercial organisations in Europe for the first time. Companies like Exelis are also offering cloud-based platforms to national militaries to increase situational awareness.  The upcoming DSEI exhibition in London from 15-18 September will see several companies demonstrating various cloudbased solutions. BT, for instance, will be exhibiting mobile and integrated cloud-based solutions.

Will savings lead to other defence procurements?

While the MoD’s reported saving seems like a large sum, MPI assesses that this would not in itself directly result in the fruition of the various defence procurement programmes planned for the next decade, as the GBP1 billion still falls short of the projected savings required over this period in order to fulfil crucial procurement needs. The government is required to make total savings of GBP4.1 billion over the next 10 years.  The forward-looking 10-year projections were made by the government in its Equipment Plan 2014-2024, allowing for a total budget of GBP163 million. This amount is less than what was previously projected for the plan for 2013-2023. The MoD achieved this by removing more than GBP6 billion from budgets within the Plan in anticipation of achieving significant savings from contracts. The largest element of this is the removal of GBP4.1 billion from the support cost budget, and a further GBP2.25 billion that was removed from the procurement budget.  A March 2015 report by the Commons Public Accounts

Committee expressed scepticism over the government’s projected defence spending of GBP163 billion over the next 10 years. “While forecasting future costs is more difficult, the department accepts that the costs of its 10year equipment plan could be understated by at least £5.2 billion,” the report said.


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