CEO of Centerprise International, Jeremy Nash shares concerns about the security of the UK tech industry and digital economy.

Energy security has probably never been higher on the list of public interest as it is currently. For decades the UK has failed to deliver an effective energy strategy, leaving businesses and households to contend with the consequences. Do we risk a similar situation arising in the future with cloud technology?

Cloud technology continues to revolutionise how we work and how we live our lives. The opportunities for optimisation and digital transformation in business are equalled by the convenience offered to individual consumers. The economic growth from cloud-enabled innovation has been simply staggering. Thanks to the evolution of cloud technology, some of the largest and most successful companies in the world possess no physical assets and have reached phenomenal scale in the blink of an eye. With so much upside coming from cloud technology, what is there to fear? I offer a view based on my rudimentary knowledge of economics.

The real cost of monopoly

The utility (usefulness) gained from the provision of goods/services is at its highest when there is a true competitive market. Suppliers produce the required quantity of goods/ services to meet the demand at optimum efficiency, which allows customers to consume all they require at the most advantageous price point. In a true competitive market, supply and demand is in equilibrium and suppliers entering and exiting the market have no impact on either supply or demand.

The opposite of this market condition is a monopoly. This is when a single supplier dominates a market and in doing so, under delivers on utility and unilaterally sets the price point. In practice, markets operate across this entire spectrum and are often influenced by external entities such as regulators. Regulation, when effective, serves to protect the interests of both suppliers and consumers. Without effective regulation, markets can fail and lead to devastating consequences.

The cloud market needs fair and open competition to serve public interest – i.e., we need cloud providers to provide maximum utility at the most advantageous price point. Furthermore, the lack of a competitive cloud market would undermine the sustainability of a nation’s tech industry. If nations do not invest in their own cloud capability, the cloud market will be dominated by a few multinational suppliers who will control the supply and therefore determine the level of utility and the cost of services. This is what has happened in the UK energy market – a lack of investment, an over-reliance on non-sovereign provision and ineffective regulation has led to the energy industry failing its customers.

Imagine the potential impact on the tech industry and its customers if only a few cloud providers were responsible for meeting global demand. They would possess the might and means to innovate faster than anybody else, thus raising the barrier to market entry to an unobtainable level. This cycle of dominance would become irreversible, and the UK tech industry would have no incentive to invest or innovate and the UK would become dependent on multinational corporations for its digital capability. This could eventually lead to an outsourcing of our digital economy and a loss of control over our digital future.

An important solution

UK Gov needs to create the conditions to enable the UK tech industry to create a competitive cloud market. There is an obvious need for hyperscale cloud provision, but it should not stand alone and cannot be at the expense of our tech industry. We need the UK tech industry to be incentivised to innovate. We need to democratise the provision of cloud technology so regional cloud providers can work alongside the Hyperscalers to deliver the right mix of cloud.

The UK tech industry needs to be enabled, not disincentivised to create employment opportunities for the future generations of digital natives. The future generations who wish to live, work, and give back to the areas where they grew up. If we wish the UK tech industry to play a role in driving economic prosperity at a regional and national level, the UK needs technology security. This, like energy security, should be of paramount public interest. The UK needs a sovereign approach to cloud provision to remain in control of its digital destiny and drive its digital economy.