Clearing the air

Think tank: Social Market Foundation

Author(s): Jake Shepherd; Hari Menon; Bohyun Bang

July 3, 2024

This report from UK think tank the Social Market Foundation explores the costs of restrictive software licensing practices on the public and private sector.

This Social Market Foundation report explores the costs of restrictive software licensing practices on the public and private sector. It reviews existing literature on the cloud, draws upon interviews with IT professionals who oversee usage of cloud services in their daily roles and quantifies the potential economic harm resulting from these practices.

Cloud provides online access to services without the need for specialised hardware or software, bringing benefits like agility, scalability, efficiency, and cost savings – presenting a significant opportunity for public sector productivity.
The government’s ‘G-Cloud’ procurement framework mandates that central departments adopt cloud services and encourages them among wider public sector organisations, spending £17.3 billion between 2012/13 to 2023/24. But interviews with IT professionals, predominantly from the public sector, unveiled various potential costs and complications associated with software licensing.

In the two illustrative examples we identified, restrictive licensing practices may incur direct costs to the public sector worth £300 million over the next parliament. The total cost of restrictive licensing practices is likely to be significantly higher.

In light of these concerns, this report makes suggestions for ensuring the cloud sector operates more smoothly, minimising harm to customers and improving efficiency within the public sector. To address possible harmful practices, there are principles for fair software licensing in cloud that providers can adhere to, including the freedom to bring previously purchased software to the cloud. With specific regard to the public sector, one remedy may be to centralise the procurement of cloud contracts, negotiating terms with software suppliers to help accommodate smaller organisations and circumvent lock-in.