in the UK in 2020
Powering the UK's fastest-growing companies
Executive summary
Cloud computing is one of the most significant technological advances of our time. Unfortunately, at the moment, we have limited official data on cloud uptake and outcomes.
In order to better understand the impact of cloud computing on the UK economy, Amazon Web Services, (AWS) a leading provider of cloud technology and tools, commissioned Public First to undertake new quantitative research on the use and benefits created by its services across the UK.
Today, AWS is being used by many leading British brands, including AstraZeneca, Aviva, AO.com, Barclays, BBC, British Gas, BP, Channel 5, ClearScore, Deliveroo, Dunelm, EDF Energy, Formula 1, Gousto, HSBC, Majestic Wine, Monzo, Nutmeg, Ocado, OakNorth, Guardian News & Media, ITV, National Rail, Sainsbury’s, Sage, Starling Bank, and Travis Perkins.
In total, we conservatively estimate that AWS is generating £8.7 billion in economic value for businesses across the UK - the equivalent of 0.4% of GDP. That is more value than some entire industries in the UK - for example, the Premier League, the music industry, or half of the pharmaceutical sector.
This impact is distributed across businesses large and small, and from every sector. It is not, however, equally distributed among all regions in the UK, with some falling behind others. As we will explore, helping these regions catch up is one way we could level up UK growth. While our polling and modelling were undertaken before the recent COVID-19 crisis, it seems likely that, if anything, the importance of cloud has significantly increased for the UK economy. Over the last few months, many companies have discovered the power of cloud tools for the first time. At the height of the crisis, over a third of British workers were working from home,1 with millions regularly using video conferencing, group chat and other online tools as part of their job for the first time.
Economic Impact by Parliamentary Constituency (£ mn)
Key Findings
AWS is accelerating the growth of the UK
First pioneered with the invention of AWS in 2006, cloud computing has proved to be more cost efficient, more flexible and secure than traditional computing.
In total, we estimate that AWS is generating £8.7 billion in economic value for businesses across the UK, more economic impact than either the Premier League or music industry.2
Companies running on the cloud are nearly three times as likely to be growing over 5% a year than those who are not.
AWS is saving businesses money and earning them extra revenue
In order to better understand the impact of AWS, we ran a nationally representative survey of UK businesses. We found strong evidence that AWS is helping businesses reduce costs, earn extra revenue and reduce their carbon emissions.
85% of AWS-using small businesses say that the use of cloud has made it easier to flex their IT (Information Technology) to meet their business needs, helping save costs.
On average, AWS customers receive a return of £2 for every £1 they spend on AWS from higher revenue and reduced costs, with the top 10% of customers reporting a return of £10 or more.
AWS is powering the cloud tools that growing businesses rely on
Even if they don’t always realise it, the vast majority of workers and small companies are now using cloud tools to communicate and coordinate with colleagues, manage their accounts or manage their work. Cloud tools are particularly important for growing businesses who don’t have the capital to outlay on technology, and for supporting more flexible ways of working.
Over half of the world’s 25 largest software-as-a-service (SaaS) companies use AWS, including Zoom, Slack and Atlassian.
Businesses that used more than three cloud tools were twice as likely to be growing as businesses that use none.
AWS is powering the UK's fastest-growing companies
By giving small companies access to the economies of scale that were once reserved for large enterprises, it has enabled completely new business models. From start-ups to scale-ups to unicorns, AWS and the cloud are today powering some of the UK’s fastest-growing companies.
67% of AWS-using businesses say that their business or operating model would not be possible without the cloud.
39 of the UK’s 50 fastest-growing tech companies and 16 of the UK’s 17 current unicorns, worth over £20 billion in total - including Babylon, Deliveroo, and Monzo - are using AWS. A ‘unicorn’ is a private company with a valuation of over $1 billion. There are currently around 400 unicorns globally.
AWS is supporting a growing industry of small tech companies across the UK
By providing the underlying technology for them to build on, AWS is enabling a new industry of small partner companies that consult on and develop technology solutions for the cloud, located all across the UK.
On average, AWS APN (AWS Partner Network) partners reported growing revenue between 21% and 50% over the last three years.
80% of AWS APN partners say that AWS helps them deliver better customer outcomes, while 58% say AWS helps them win more customers.
AWS is helping businesses improve public services and deliver better value for money
The combination of cloud platforms like AWS and initiatives like the UK’s G-Cloud have made it far easier for small businesses to bid into government, reducing the state’s dependence on traditional, large government IT suppliers based out of London and the South East, delivering innovative new services for the public sector, and freeing up resources.
Through the government’s G-Cloud, over 150 companies have used AWS to help them deliver their own services worth more £1.3bn to the government, with over half of these companies categorised as small and medium enterprises (SMEs) at the time of delivery.
70% of companies using AWS to sell into the public sector said that their business or operating model would not be possible without cloud platforms.
The cloud can help level up productivity across the UK
There is still a wide disparity in the uptake of cloud by businesses across UK regions. Given what we know about the positive impact of cloud on business productivity, boosting take up of cloud is one way to help level up the growth of left behind companies and regions in the UK.
If we could boost the cloud prevalence in the North East to match that of London, it would help boost local productivity and wages by 2.6% - or £1.4 billion - the equivalent of three years' worth of pay rises.
Over the next decade, the total impact of the cloud on gross domestic product (GDP) is likely to double as a growing share of the economy takes advantage of cloud technology.
Foreword
When facing a rapidly growing challenge like COVID-19, every day matters. On 23rd March - just as the UK was going into lockdown - digital health company Babylon was already offering a new dedicated COVID-19 Care Assistant, providing a continually updated symptom tracker, virtual consultations and rapid referral to hospital care when needed.
A rare silver lining of this crisis has been that it revealed, for all we tend to worry about our economy's long term productivity challenges, some parts of the economy are as agile as ever. Babylon was far from the only company to reconfigure its offering at astonishing speed. From global video chat services seeing an order of magnitude increase in traffic, to small businesses switching to delivery or virtual classes, we have seen clear examples of innovation across the economy.
One reason that many companies were able to rapidly pivot, or scale what they were offering, was that their core business infrastructure was built on top of the cloud. First pioneered with the invention of Amazon Web Services (AWS) in 2006, cloud computing makes it much easier for small companies to combine the flexibility of a start-up with all the computing power and security of the world's leading technology companies. Instead of committing to expensive purchases of IT equipment up front, companies have the ability to flex up and down their computing resources to match their exact needs from day to day - or even hour to hour.
The flexibility of the cloud not only allows for companies to react to the unexpected - a historic global pandemic, say - but it also makes possible entirely new types of business. It means online education tools like Firefly can ramp up their resources during exam season, or a fantasy sports platform like FanDuel can meet the rush of a game day. It allows a visual effects company like Milk to access enough raw computing power to simulate an ocean, or support AI specialists Faculty in solving the problems of clients from the BBC to the NHS.
As this report by economic consultancy Public First highlights, cloud computing has become increasingly important to the UK's fastest-growing companies. Public First estimates that AWS generates £8.7 billion in economic value for business across the UK, more than the Premier League or the music industry - and that over the next ten years, the total impact on the cloud on GDP is likely to double.
The cloud acts as a catalyst for four of the main drivers of growth: technology, human capital, entrepreneurship and market competition. On average, using cloud services is a significantly more cost effective and more flexible solution for individual businesses, boosting their productivity. By reducing the start-up costs needed to get into a particular sector, the cloud helps drive innovative new business models and increases competition in existing sectors. Finally, by making it easier to build online tools and share data, the cloud supports greater worker collaboration and more flexible forms of work.
According to Public First's research, companies running on the cloud are nearly three times as likely to increase their revenue by 5% or more per year as those who are not. More than half (58%) of cloud-using businesses say that their business or operating model would not be possible without the cloud.
In 2019, 39 of the 50 fastest-growing British companies - each growing at least 600% per year - were using AWS. 16 of the UK’s 17 current 'unicorns' - a private company with a valuation of over $1 billion - are currently using AWS, including Babylon, Deliveroo, and Transferwise. By building on the cloud, these companies can focus on what makes their service unique - and scale to meet the needs of a global consumer base. Digital bank Monzo, for example, has grown from zero to four million customers in under five years.
Unfortunately, the benefits of the cloud are not always equally spread. While half of companies in Greater London reported using cloud platforms, the same was true for only around a quarter of companies in the East Midlands.
The UK has always had a long tail of businesses that lag behind the rest of the economy, slow to adopt the latest technology or business practices. If we are to level up all parts of the UK, we need to care as much about these softer drivers of productivity as we do more traditional investments such as roads and apprenticeships. If we could boost the cloud usage in the North East to match that of London, Public First estimates that it would raise local productivity by 2.6%, the equivalent of three years’ worth of pay rises in one go.
The lockdown world has shown us the power of the internet and cloud computing. Now, in the post-COVID world, as this research highlights, there is an opportunity to use that same technology to boost productivity, wages and living standards, right across the UK.
Professor Richard Kneller
University of Nottingham
What is the cloud?
Ever since the beginning of the modern industrial era, most businesses have not needed to buy their own power or water treatment plant. Instead, they purchase resources from much larger networks run by dedicated infrastructure providers. In the same way, moving from on-premises computing to the cloud can help businesses take advantage of far greater economies of scale, without needing to build their own expensive server farms.
In the 1950s, large mainframe computers could weigh almost 4 tonnes, take up a whole room, and cost the equivalent of over half a million pounds.3 While today’s PCs and phones are orders of magnitude both more powerful and smaller than their historical predecessors, there remain many things they cannot do on their own. Just as the internet revolution of the 1990s made it possible for our devices to share information intended for humans, the cloud revolution of the 2000s enabled devices to access much larger pools of computing resources such as processing and storage.
By the early 2000s, the largest enterprises were enjoying the advantages that came from running their own server farms and online tools. There was no easy way, however, for smaller companies to share the same advantages, without costly investment in their own infrastructure.
AWS changed this. In 2006, Amazon launched the Amazon Simple Storage Service (Amazon S3) allowing companies to store information for anything in the cloud. S3 was soon followed by Amazon Elastic Compute Cloud (Amazon EC2), which enabled companies to rent virtual computers in the cloud to run their programs. While the ideas behind the cloud had been theorised by technologists for decades, this was the first time that they were implemented at scale. S3 and EC2 were soon followed by other services as part of the growing AWS portfolio, which today includes over 175 different services.
At the heart of AWS was a vision that computing services could be built around standardised, scalable and modular components. For Amazon itself, the belief was that this would make it much easier for the company to retain the agility and innovation of a start-up. Rather than needing to coordinate and build afresh for each new initiative, any engineer could build off the standardised tools and systems that had been created.
Once this had been done, however, there was no reason why the same systems could not be opened up to other companies too. This would allow companies of any size - or those just starting - to take advantage of the same technologies and economies of scale as the largest enterprises, ensuring that they would not have to waste time reinventing the wheel. By the end of 2010, Amazon’s main website was fully migrated to AWS.
In the past, large companies have often been seen as efficient but slow moving, while small companies were agile but had to build everything afresh. The cloud eliminates many of these differences, making it possible for large enterprises to retain the flexibility of a start-up, and start-ups in turn to utilise the same computing power and high levels of security as the world’s largest technology companies.
For new, growing or innovative companies, these changes have often been revolutionary. For the first time, anybody could start a business running on the latest technology - without having to invest potentially millions up front in IT.
Key Benefits of Cloud
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Capacity. With an always available, central place to store data, the underlying databases and programs that power businesses can collect, store and distribute data from millions of devices. This has, in turn, made it easier for businesses to train computer algorithms, bringing about today’s era of big datasets, allowing much smarter Artificial Intelligence (AI) and machine learning solutions. |
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Scale. By building on the infrastructure that providers like AWS already have in place, start-ups can scale frictionlessly from serving zero to millions without having to continually update and reconfigure their computing setup, or build new data centres across the world to serve a global audience. |
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Agility. With the ability to add new resources in minutes, businesses can experiment and develop new products and solutions much faster. |
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Flexibility. Businesses don’t need to guess at the level of computing resources needed. By sharing in the power and existing infrastructure of a large cloud provider, it’s easy to scale up to meet peak demand, and then scale back down once the peak has passed, only paying for what you use. |
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Cost. This increased flexibility means that businesses no longer have to invest in excess computer hardware that will sit idle the majority of time, leading to significant savings for them. As well as the financial benefits, cloud computing is also on average significantly more energy efficient than on-premises computing, helping businesses reduce the carbon footprint of their IT. |
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Security. Instead of relying on individual users or businesses to remember to install the latest software updates or security patches, the majority of cloud software - by design - is always up to date. At the same time, the core infrastructure of AWS is built to satisfy the security requirements for military, global banks, and other high-sensitivity organisations. |
Saving businesses money and earning them extra revenue
The growing take-up of the cloud
While a majority of companies use at least one online tool as part of their business, a growing number are also directly investing in the cloud themselves.
In our polling, 62% of companies currently using cloud computing say that they’ve begun using it in the last two to three years. According to Eurostat, the proportion of UK businesses with more than ten employees which are using the cloud as a platform more than doubled over the last few years, from 11% in 2014 to 26% in 2017.4
When we asked companies why they used the cloud, the most highly-rated benefits were increased reliability (89%), automatic back-ups (88%), higher security (88%) and automatic software updates (84%). AWS customers selected similar reasons for their use of the platform.
What are the most important benefits of cloud computing to your company?
AWS has a high return on investment
On average, small business AWS customers reported saving £9,000 per year due to their investment in the cloud. While reduced costs are not the only benefit from the cloud, many users note it to be significant: 71% of small business AWS users reported saving money when using the cloud compared to using traditional on-site servers.
In our business poll, cloud-using businesses agreed that flexibility and power were helping them save company money and remain competitive:
In addition to reducing costs, AWS and the cloud are also helping businesses earn additional income. In our business poll, 81% of AWS users estimated that the cloud was helping them earn additional revenue. Businesses with:
- 0 to 9 employees saw an average of £11,000 in extra revenue
- 10 to 49 employees saw an average of £61,000 in extra revenue
- 50 to 99 employees saw an average of £35,000 in extra revenue
- 100 to 249 employees saw an average of £93,000 in extra revenue
When you combine both the savings and additional revenue, we found that AWS customers reported enjoying an average return on investment (ROI) of 2. At the same time, the top 10% of customers reported a return significantly higher, of over 10 to 1.
In other words, for every £1 a company spends on AWS services, it receives an average of £2 back in higher revenue or reduced costs.
Other estimates of the financial benefits of cloud computing
Our estimates align well with previous studies, which generally have found that the cloud delivers significant savings for the majority of companies:
- Deloitte (2018) found that public cloud customers achieve a net return on investment of $2.5 for every $1 invested in cloud services.
- IDC (2018) projected that AWS customers achieve a 51% lowered cost of operations and a return on investment of 637% over five years.
- McKinsey (2011) estimated that cloud platforms enabled a 25-50% improvement in labour productivity compared to on-premises models.
AWS is reducing energy usage and improving sustainability
As well as saving companies money, cloud computing also helps improve their sustainability and reduce their energy usage. On average, cloud computing is significantly more efficient than on-premises computing:
- Given its larger economies of scale, a cloud provider like AWS can enjoy much higher utilisation of each server compared to an on-premises enterprise data centre, which on average only see utilisation rates of around 18%.
- By using advanced building designs and cooling systems, data centres are significantly more power efficient than on-premises servers, with three quarters of enterprise data centres seeing electrical efficiency of below 80%.
- Data centres are more likely to use less carbon-intensive sources of power. Amazon is committed to powering their operations with 100% renewable energy by 2025 as part of their goal to reach net zero carbon by 2040.
In recent years, the transition away from on-premises data centres to the more energy efficient cloud has helped offset most of the increase in demand for digital services. While the total amount of computing output increased six times over globally between 2010 and 2018, academic research suggests that overall energy consumption has only increased by 6%.5
Powering the UK's fastest-growing companies
In a mature economy like the UK, there are four main sources of growth: technology, human capital, entrepreneurship and market competition. All four of these channels are positively being impacted by the cloud:
- Productivity. The greater economies of scale and flexibility provided by cloud computing saves significant costs for IT businesses.
- Entrepreneurship. Having access to immense computing power on demand makes possible new business models, enabling new types of start-up.
- Competition. By reducing the barriers to entry and the need for expensive IT investment up front, the cloud attracts new entrants and creates a more competitive economy.
- Workforce. Cloud tools help employees in a company work better together, unlocking their existing human capital.
The UK is a world leader in tech, putting it in a good position to benefit from cloud. In 2019, there was £10.1 billion of investment into UK tech companies, putting the country behind only the United States and China. London has over double the tech investment of the next largest city in Europe, Berlin.6 At the same time, the country is a global centre for research in new technologies such as AI, and has one of the world’s most advanced markets for online retail.
In today’s economy, increasingly tech is important for every business. In the last few decades, IT has been responsible for around 40% of UK growth.7 More and more, however, businesses are no longer investing in their own in-house IT servers, or relying on ad hoc spreadsheets to run their day to day. No matter their size or sector, companies are using online tools to communicate, keep track of inventory and monitor cashflow.
The cloud is particularly prevalent within new and fast growing companies. By building on the cloud, new British companies like digital bank Monzo could jump from zero to four million customers in under five years,8 while digital health provider Babylon now delivers 4,000 clinical consultations a day.9
In this section of the report, we look at AWS’s impact on fast growing companies:
- How businesses are increasingly relying on new tools supporting flexible and remote work, such as Zoom and Slack, which are powered by AWS.
- How the cloud has helped start-ups, scale-ups and unicorns develop and grow new business models.
- The potential future impact of the cloud on accelerating UK growth.
AWS is powering the cloud tools used by the UK's most dynamic companies
Today, almost every company uses the cloud. In our polling, the average business in the UK reported using three or more cloud tools. While the most popular tools are standard productivity services (email and office applications), a significant proportion of businesses use cloud tools to help with their finances and employee collaboration, while a growing proportion of industries, from manufacturing to design, are also using a long tail of more specialised cloud apps.
By keeping data in sync and secure, cloud tools make it easier for companies to become more agile, support flexible working and deeper collaboration between their employees. Thanks to the cloud, a busy executive can check in on the latest metrics from the Tube - or a company can move its entire workforce to work-from-home overnight.
In our polling, we found a clear association between business growth and the number of online tools each business used:
- 60% of businesses that do not use online or cloud tools reported that their revenue had stayed around the same level or shrunk in the last three years.
- By contrast, 70% of businesses that used 3-4 online or cloud tools reported that their revenue had grown in the last three years, with 37% saying it grew by over 5% a year around the same level in the last three years.
- 91% of businesses that used more than 10 online or cloud tools reported that their revenue had grown in the last three years, with 60% saying it grew by more than 5% a year.
Number of cloud tools used
While cloud tools are only one driver of a growing business - and our poll cannot by itself distinguish between correlation and causation - the strength of this connection suggests that growing businesses really do find cloud tools more helpful to support their growth. When we asked directly as part of our polling, the majority of businesses agreed that cloud tools made it easier to grow.
Ensuring that these tools stay online, can serve many terabytes of data, and scale across the globe requires an extensive network of underlying infrastructure. Half of the world’s 25 largest software-as-a-service (SaaS) companies use AWS, including Zoom, Slack and Atlassian. By building on top of larger platforms such as AWS, they can take advantage of AWS’s scale and technology - and seamlessly adapt to growing demand. Over the first quarter of 2020, the number of daily meeting participants on Zoom increased from around 10 million to over 200 million.10
In the UK, AWS is increasingly helping many start-ups building new tools to scale to serve the global market - and indirectly supporting the productivity of millions of small businesses using accounting, web hosting or Customer Relationship Management (CRM) software that runs on its platform.
AWS is driving innovative new business models
Cloud services not only save costs for businesses in their day-to-day operations, but also make it possible for them to grow into world leaders.
While it is possible to build your own data centre, this requires significant up-front investment - the average on-premises data centre can cost between £150 to £800 per square foot to build11 - will not necessarily scale to other global regions, has a long lead time, and risks leaving the business with a stranded asset if the business decides to pivot to a new model.
By contrast, cloud services can be scaled up and down instantly to meet global demand, are generally more cost effective and allow a business to focus on what makes it unique. It allows small businesses to have access to the same best-in-class technology as the world’s largest enterprises.
Through the combination of its scalability and the power of its underlying technology, AWS is supporting innovative British businesses such as:
Panintelligence (Leeds) provides business intelligence software hosted on AWS to companies worldwide, helping them use data to visualise trends in real time and operate more effectively.
DigitalBridge (Manchester) uses artificial intelligence run on AWS to help people design and visualise new bathrooms and kitchens online, with customers including B&Q in the UK and Castorama in France.
Milk (London & Cardiff) is a visual effects company that uses AWS to deliver effects that would otherwise be impossible for a company of its size, from simulating an ocean for the feature film Adrift to adding artificial wings to the angels in Amazon Prime’s Good Omens.
See.Sense (Belfast) uses AWS to power the data processing for its intelligent bike lights, which use smart sensors to increase their brightness at moments of risk, notify an emergency contact in the event of an accident, and collect data on the quality of the roads to inform future infrastructure planning.
FanDuel (Edinburgh) uses the flexibility and stability provided by the cloud to run fantasy one-day sports contests, enabling them to scale to meet the peak traffic that can come on game day - and seeing 50% reductions in infrastructure costs from running on AWS.
AWS is already being used by many of the UK's most successful companies
In our polling, we found a clear association between business growth and direct usage of cloud:
- 82% of businesses investing in cloud reported growing in the past three years, compared to just 46% of businesses that had not invested in cloud.
- 54% of businesses investing in cloud reported growing over 5% a year in the past three years, compared to just 19% of businesses that had not invested in cloud.
Average growth by use of cloud platforms
We see this association between growth and use of cloud all the way up - from small businesses just getting started, through to unicorns.
Take scale-ups. While small businesses make up the vast number of businesses in the economy, only a small minority of these are responsible for growth. As defined by the Organisation for Economic Co-operation and Development (OECD), scale-up companies are companies with more than ten employees which have grown at a rate of faster than 20% a year over the past three years. While only around 2-4% of UK small companies are scale-ups, these companies are responsible for most of SME growth. According to the Scaleup Institute, by far the most popular sector for technology scale-ups is software-as-a-service, or creating cloud tools.12
In our survey, 94% of scale-ups13 reported using using one or more cloud services and:
- 81% agree that online tools have made it easier for their business to compete with larger enterprises.
- 73% agree that their business or operating model would not be possible without cloud.
- 75% agree that the use of cloud platforms has made it possible for them to take their business global.
The importance of cloud becomes even more striking when you look at the upper end of the distribution, and the UK's most successful companies. In 2019, 39 of the 50 fastest-growing tech companies were using AWS. Every one of these companies grew faster than 600% a year, with an average growth of 3,300%.14
Likewise, AWS has been a key support for many of the UK’s most successful start-ups and scale-ups as they grow into global brands. A ‘unicorn’ is a private company with a valuation of over $1 billion. There are currently around 400 unicorns globally, with just under twenty of those located in the United Kingdom.
16 of the UK’s 17 current unicorns are using AWS, including Babylon, Deliveroo, Monzo, Transferwise, Starling, Oxford Nanopore, Snyk, and OakNorth. In total, these companies are worth over £20 billion.15
Supporting a growing industry of small tech companies across the UK
Where does a company turn when it wants to adopt cloud technologies?
For many organisations in the public and private sector, it often makes sense to draft in external experts to help. There is now a growing industry of independent businesses that help other organisations design, build and manage their cloud-based systems.
By building on top of the cloud, a growing number of cloud service providers and consultancies are able to help other organisations in their digital transformation.
While there have long been IT consultancies, the power and openness of the cloud has radically reshaped the market - making it much easier for small companies to enter the market or serve the needs of customers of all sizes.
This matters not just in the private sector, but in the public sector too - which in the last decade, has seen a radical move away from the dominance of a few core suppliers in the South East to a far more diverse and geographically dispersed supply chain.
In this section of the report, we explore the growing industry of third party companies that help other organisations take full advantage of the power of the cloud:
- How AWS partners are using their expertise with the service to gain new revenue and support a growing number of jobs.
- How these partners are spread across the whole of the UK.
- How building on the cloud has enabled a much more diverse set of suppliers for the public sector, saving taxpayer money and unlocking important innovation.
AWS is supporting a new industry of technology partners
The AWS Partner Network (APN) is an international programme that helps to connect AWS suppliers with new customers. In order to support the network, AWS hosts a central listing of accredited partners for customers to choose from, as well as technical and marketing support for the providers themselves.
In the UK, there are thousands of businesses registered as APN partners, distributed right across the country. While many of them remain small businesses, others have grown into significant businesses in their own right. Previous research by Forrester Consulting found that AWS partners could see a typical Return On Investment of 138% over three years from clients deploying cutting edge managed services.16
In order to better understand the multiplier effect AWS has had for businesses, we worked with AWS to survey over 100 AWS APN partners, including consulting partners, technology partners, independent software vendors, managed service providers, resellers and systems integrators.
We found that:
- AWS APN partner companies are growing rapidly. On average, APN partners reported growing revenue between 21% and 50% over the last three years, and headcount by around 20%. (By contrast, businesses in our whole economy sample reported revenue growth of only around 0-5% and that headcount had largely stayed the same.)
- AWS is being used to support a wide variety of companies and use cases. In our survey, significant numbers of partners reported using AWS for everything from content delivery to machine learning, and industries including financial services, government, energy, retail, and healthcare.
- Partners choose AWS for its flexibility and the power of the platform. We asked AWS APN partners what the most important reasons were for their clients choosing a cloud solution. The most important reasons AWS APN partners cited for their clients choosing cloud were its more scalable and/or flexible capacity (92%), increased reliability (83%), and lower costs (78%.) APN partners choose AWS in turn for the power of the platform (94%), the flexibility it provides (94%), the size of the market (88%) and its innovative and cutting edge technology (88%).
- AWS is earning its partners significant additional revenue. On average, AWS partners reported earning around 60% of their revenue through their work with AWS - and that over the last five years this revenue had increased between 25% and 50%. 41% of the partners we surveyed said that their business would not be possible without AWS.
Helping businesses improve public services and deliver better value for money
AWS and G-Cloud are making it easier for small businesses to bid into government.
Government has often struggled with IT: seeing frequent delays, cost overruns and technology that lagged behind the cutting edge.17 In the private sector, we are used to many of the most impactful innovations coming from small teams and start-ups, challenging the conventional wisdom with new ideas. In the public sector, by contrast, government has traditionally struggled to procure from small companies. Given the importance of many public services and the sensitivity of the data underwriting it, only large companies could afford to build and accredit the required security standards. When combined with the barriers from a highly bureaucratic procurement process, this left government IT procurement reliant on a small number of large consultancies or IT providers, largely all based around London and the South East.
Location of government IT suppliers
Cloud has changed this. In 2012, government introduced G-Cloud, comprising a standardised set of frameworks to reduce the cost of bidding and procuring, and a centralised digital marketplace in which public service customers could easily connect with suppliers, whatever their size. G-Cloud is completely transparent - allowing anyone to see who has won what contract, and how much that contract is worth. In 2013, the government followed up G-Cloud with a formal Cloud First strategy - re-affirmed earlier this year18 - in which central government and the wider public sector are advised to “consider cloud solutions before alternatives.”19
A crucial third element to this strategy has been the existence of large scale cloud platforms like AWS. AWS has been directly available through G-Cloud since 2013 - but, as importantly, it also acts as an underlying platform for many SMEs, allowing them to build off a technology stack with best practice already baked in, and focus their energies on where they can uniquely add value. For example, by extending Amazon Connect, a cloud contact centre service, Swansea based provider Mobilise helped the Driver and Vehicle Licencing Agency (DVLA) significantly reduce call centre times and reduce costs.
Up until the end of 2018, over £4 billion of spend has been procured through G-Cloud. 71% of all contracts procured through G-Cloud have been won by small companies, and around half (45%) of the total amount spent. Over 4,000 suppliers were registered in the last round of G-Cloud,20 and these suppliers are spread out all over the UK. The G-Cloud model is now being copied by many other countries such as Australia, which launched its own digital marketplace in 2007.
Through G-Cloud, over 150 companies have used AWS to deliver their own services worth over £1.3bn to government, with over half of these companies categorised as SMEs at the time of delivery.
New suppliers are driving significant innovation for the public services
More broadly, in our business polling we saw good evidence that AWS is helping businesses sell into the public sector:
- 70% of companies using AWS and selling into the public sector said that their business or operating model would not be possible without cloud platforms.
- 84% of companies using AWS and selling into the public sector said that the use of cloud platforms made it easier for their business to innovate and bring new products to market.
Similarly, in our Partner survey we saw that:
- On average, APN partners selling into the public sector, reported that around half of their revenue was related to work with AWS - and this had grown by over 25% in the last five years.
- 42% of APN partners selling into the public sector said that their business would not be possible without AWS.
- 88% of APN partners selling into the public sector said that the use of cloud platforms made it easier for their clients to innovate and bring new products to market.
For the public sector, this has meant savings of around 20% compared to past contracting regimes21 - and, as importantly, has helped make it much easier to roll out new innovations and high profile services such as:
- Supporting the DVLA in meeting the more than 70 million requests it receives a month through its API on the tax status of individual vehicles.22
- Helping National Rail Enquiries more efficiently scale to meet unexpected peak demand, such as disruption from heavy snow,23 or for UCAS to rapidly scale up to meet student demand after A-Levels are posted.24
- Enabling the Met Office to reach consumers directly through a smartphone app, track the impact of weather in space25 and act far more agilely, testing new services in hours rather than months.26
Levelling up productivity across the UK
Technology is an important driver of economic prosperity
The UK has one of the most unequal distributions of economic growth of any advanced economy.27 On average, workers in the most productive region - Camden and the City of London - generate thirty times as much growth as those in the least productive areas.28 As a key part of its agenda, the Government has committed to ‘level(ing) up every part of the United Kingdom’, 29 working to reduce the current gaps in productivity, wages and living standards.
While there are many reasons for this gap,30 differing rates of uptake of new technology are one of the most significant:
- Technology is one of the most important drivers of new productivity. IT has been responsible for just under half of UK productivity growth in recent decades.
- Companies with lower productivity are often slower to adopt new technologies. As late as 2015, around 40% of companies operated with only a minority of employees using computers.
In our polling, we saw a significant disparity in cloud uptake across regions. While 52% of companies in Greater London reported using cloud platforms, the same was true for only 25% of companies in the East Midlands.
Percentage of companies using cloud
Increasing cloud prevalence has significant potential for helping local economies. If we could boost the cloud prevalence of the North East to match that of London, for example, our estimates show that it would boost local productivity and wages by 2.6%, or around £1.4 billion a year in total.Based upon recent trends in real wages, that would be the equivalent of three years' worth of pay rises in one go.31
Encouraging greater take-up of the cloud
As part of our polling, we talked to many businesses that don’t currently use cloud and asked them to discuss the important barriers standing in their way. The most significant barrier appeared to be a lack of knowledge of what the cloud could offer and how to adopt it - but many people also pointed to poor broadband speeds (31%) and a shortage of trained staff (16%).
Increasing cloud uptake is not just about encouraging businesses to try it for the first time - but also about accelerating the transition of businesses that currently use both on-premises and cloud solutions.
In our poll, the average business using cloud solutions still also spent over £10,000 a year on traditional IT infrastructure, employing multiple dedicated IT staff members. When asked about the main barriers to investing more in the cloud, companies saw as important factors such as expense, a shortage of trained staff and the tax treatment of cloud services.
The cloud has the potential to further accelerate UK growth
How much further room is there for the economic impact of cloud computing to grow?
In order to estimate the potential future impact of the cloud for the UK, we produced two new scenarios:
- A conservative scenario, in which UK cloud prevalence rises to the level of that already seen in Finland, where cloud prevalence is already significantly higher.32 This sees the total growth impact of the AWS rise from 0.4% to 0.7% of GVA.
- A central scenario, in which UK cloud prevalence follows the standard S shaped diffusion curve that has been seen by past technological advances. On conservative assumptions, we estimate that the total economic impact of the cloud could double over the next ten years, raising from 1.7% of GVA in 2020 to 3.6% of GVA by 2030. That’s the equivalent of adding today’s entire agriculture and pharmaceuticals industries to the economy.
Use of high cloud computing services (accounting software applications, CRM software, computing power), Eurostat33
Economists that study technological adoption often differentiate between the intensive and extensive margin of adoption:34 even after a company starts using a new technology, there can be a further lag while usage of that technology within the company ramps up.
While a majority of companies in the UK now use some form of cloud computing, often this usage is relatively shallow. Moving beyond the start-ups and fast growing companies we have focussed on in this report, there still remains significant scope for more intensive adoption and digital transformation within legacy companies.
While it is impossible to predict the future, there are multiple reasons to believe that the impact of cloud computing is likely to grow significantly over the next decade:
- Most technologies, particularly these that are business focussed, have historically taken many decades to reach full maturity.35 Even if we date the cloud’s birth from the invention of AWS, it is less than fifteen years old.
- While the UK is relatively advanced compared to many other European countries, levels of business cloud prevalence remain behind the levels seen in the US or Nordic economies.
- According to estimates by IDC, global spending on the public cloud continues to grow at around 20%, significantly faster than growth in the economy as a whole, leading to an overall doubling by 2023.36 That suggests that the cloud is likely still in the fast growth of its diffusion curve, and not yet close to market saturation.
- Despite its recent rapid growth, according to Gartner total spending on the public cloud remains only 8% of total IT spend in the UK.37
- Cloud computing is generally a crucial prerequisite for other business technologies that are growing in importance, such as big data or machine learning.
Example of technology diffusion curves (US households, Our World in Data)38
In the short term, the priority for the economy is to adapt and restore lost jobs in the wake of the COVID-19 recession. However, in the longer term, the UK still has a significant policy challenge to ensure that companies from right across the economy can benefit from the advantages of new technology. In this report, we have focussed on the firms at the cutting edge of innovation - but to really raise widespread living standards we will have to ensure new technologies penetrate to the long tail of the economy which has seen much slower growth in recent years. According to the ONS, in recent years, productivity has been near stagnant for the bottom 80% of firms.39 Many commentators have already suggested that one of the economic silver linings of COVID-19 is that it may have forced many companies to experiment with new ways of working and more flexible technology, accelerating trends that could have otherwise taken years to evolve.40 A priority for policy makers in the coming years should be to look at how we can support companies shifting their working model or tech stack for the longer term - and fully take advantage of the growth benefits the cloud offers.
Appendix A: Methodology
Like machine learning or the smartphone, cloud computing is one of the most significant technological advances of our time. Unfortunately, at the moment, we have limited official data on cloud uptake and outcomes. While the ONS collects some data through its annual e-commerce survey,41 data on cloud usage is only available at a very high level and for businesses with more than 10 employees through Eurostat.42
In order to help fill this gap and to better understand the impact of AWS and cloud computing on the UK economy, we combined multiple research methods:
- We ran a new representative poll of 2,001 senior business decision-makers, giving them an in-depth questionnaire about which software and cloud services they were using. The questionnaire sought information about the cloud’s impacts on their businesses and what would make them invest more in this area. In order to ensure our data was representative of the UK economy as a whole, we quotaed and weighted our data to include a range of business sizes, industries and regions.
- In order to better understand the AWS Partner Network ecosystem, we asked AWS to distribute a second survey to 100 partners.
- Drawing on the academic literature on the economic impact of cloud computing and the fresh data provided by our polling, we built new economic models to fully understand the impact of AWS and how this varies by industry or parliamentary constituency. Our modelling was reviewed by multiple independent reviewers.
Estimating the impact of AWS on business productivity
The core measure in our study is an estimate of the total gross value added (GVA) supported by AWS in the UK - or in other words, the total amount of profits earned by businesses and their supply chains, thanks to their usage of AWS.
Our priority was to look at the benefits enjoyed by customers of AWS - we did not seek to measure the direct or induced impact of the investment by AWS in data centres or local offices in the UK.
As part of our survey, we asked businesses to estimate:
- Their business revenue, and its average growth in the last three years
- Their total spend on cloud computing
- The amount they had saved from using cloud computing as compared to in-house IT
- The additional revenue they earned from using cloud computing, not including the above cost saving
- Their level of confidence in the latter two estimates
For example, in order to estimate their savings from cloud, we asked businesses:
In an average year, roughly speaking, how much do you estimate your business saves by using a cloud service for your IT infrastructure, as compared to more traditional on-site servers?
Given the timeline and scope of our study, we believed that using an anonymous online business survey was the most proportionate research methodology.
However, as with all self-reported data, polling data comes with inevitable limitations:
- Respondents to an online survey may not be representative of businesses a whole.
- Businesses may misremember, simply not know or inaccurately estimate key financial data.
- Many business leaders may poorly understand the cloud or how their business uses it.
In order to guard against these possible shortcomings, we took these steps:
- Provided respondents with a lengthy explanation of what cloud computing is and is not;
- Asked respondents to provide their level of confidence in their estimates separately and used this to weight their response, and;
- Wherever possible, calibrated our data against other sources.
As is standard practice in economic impact studies, our results look only at the gross economic impact of AWS - the overall business revenue supported by it - rather than comparing it against a hypothetical where AWS does not exist.
In order to generate our headline estimate of AWS’s economic impact, we first created an estimate of the ratio of economic activity created to cloud spend for each business:
- We converted estimates of additional revenue into additional gross value added by applying the average UK GVA fixed effects multiplier, taken from the latest input-output tables from the ONS.
- We added this to each company’s estimate of cost savings, and then divided by their estimated spending on the cloud.
In order to generate an estimate of Return of Investment (ROI) for each business:
- We converted estimates of additional revenue into profitability by applying Eurostat data on the average UK gross operating surplus.
- We added this to each company’s estimate of cost savings, and then divided by their estimated spending on the cloud.
In order to aggregate our estimates for the UK economy as a whole, we averaged our estimates for five size classes of business, weighting by the respondent’s level of confidence in their estimates:
- Micro businesses (0 to 9 employees)
- Small businesses (10 to 49 employees)
- 50 to 99 employees
- 100 to 249 employees
- Large businesses (250+ employees)
We then multiplied each average by:
- The ONS’ estimate of the number of businesses in each size class, taken from the Inter Departmental Business Register (IDBR).
- The proportion of businesses in each size class using cloud, and of those, using AWS, taken from our polling.
In order to estimate the economic activity created for each parliamentary constituency, we first averaged two models:
- Apportioning out the national impact by that constituency’s share of total UK GVA, drawing on existing ONS estimates of GVA by local authority, and each constituency’s share of the relevant local authority’s postcodes.
- Using ONS data on the number of businesses in each constituency by size class, and our estimate of average GVA impact per business for each class.
We then applied an adjustment to this average, based on the region’s relative cloud share, drawn from our polling.
Sensitivity Analysis
In general, we sought to stay with conservative assumptions:
- When calculating AWS’ impact on the economy, we did not include a type 2 multiplier of induced demand. This type of multiplier measures the impact of additional spending by employees in raising demand in the local economy, but is less relevant for national technologies like the cloud.
- We used economy wide averages for the ratios between revenue to GVA or profitability. Given our polling data shows that cloud companies are growing significantly faster than average, we believe that it is likely that their profitability is also higher.
- We weighted down the answers of respondents who said they were only somewhat or not very confident in their estimates, and did not include at all respondents who said they were not at all confident.
- We drew our estimate of the number of businesses from the IDBR, which does not include businesses unregistered for VAT or PAYE.
- We did not ask businesses to provide an estimate of the non IT savings they earned from cloud from better ways of working.
Our headline estimate is that AWS is generating £8.7 billion in economic value for businesses across the UK, and that businesses enjoy an average ROI of 2.2.
However:
- If we adjust revenue to GVA by the average GVA effect for ICT companies rather than the economy as a whole, the total impact increases to £9 bn.
- If we adjust revenue to profitability by a blended model, assuming much of the higher revenue from cloud will not lead to higher non-ICT costs, the average ROI increases to 3.2.
The potential future impact of cloud on economic growth
In order to estimate a rough approximation of the potential future impact of cloud computing, we calibrated a logistic S-curve model against:
- Our existing estimate of the total economic impact of cloud computing for the UK.
- A conservative assumption that complete adoption will take 30 years, based upon the experience of other business facing general purpose technologies.
- Eurostat data on total prevalence of cloud computing among small, medium and large enterprises in the UK.
- Third party data from IDC and Gartner on the growth of total spending in the public cloud market.
In order to keep the calculation tractable, we assumed that the average benefit per company remained constant. While ceteris paribus early adopters are likely to have gained a higher marginal return from adopting cloud than the median firm, the benefits from cloud are also growing over time as technology and the wider ecosystem improve.
Appendix B: Regional Estimates
| Regional cloud prevalence | Cloud GVA (2019, £ bn) | Match to London increase in GVA (£ bn) | |
| North East | 19% | 0.5 | 1.4 |
| North West | 52% | 4.8 | 4.9 |
| Yorkshire and The Humber | 27% | 1.8 | 3.4 |
| East Midlands | 25% | 1.5 | 3.1 |
| West Midlands | 44% | 3.2 | 3.8 |
| East of England | 19% | 1.6 | 4.5 |
| London | 52% | 10.2 | |
| South East | 39% | 5.3 | 7.1 |
| South West | 45% | 3.4 | 3.9 |
| Wales | 44% | 1.5 | 1.8 |
| Scotland | 18% | 1.2 | 3.5 |
| Northern Ireland | * | 0.9 | 1.2 |
Appendix C: Business poll sample details
In order to better understand how cloud technologies were being used by businesses across the UK, we ran a new dedicated two stage business poll in the UK, working with the panel provider Dynata to poll 2,001 senior business decision makers from across the UK, different industries and size of business:
- In the first stage, we sought a representative panel of UK businesses - allowing us to better understand cloud prevalence across business types.
- In the second stage, we restricted our sample to cloud users only, boosting this part of the sample to allow us to zoom into their experience of the cloud.
Sample size by region
| Total sample | National representative sample (unweighted) | National representative sample (weighted) | |
| East Midlands | 125 | 70 | 59 |
| East of England | 134 | 78 | 96 |
| Greater London | 459 | 188 | 144 |
| North East | 65 | 29 | 31 |
| North West | 241 | 126 | 112 |
| Northern Ireland | 33 | 17 | 12 |
| Scotland | 135 | 66 | 61 |
| South East | 255 | 148 | 183 |
| South West | 163 | 92 | 110 |
| Wales | 71 | 38 | 43 |
| West Midlands | 163 | 67 | 64 |
| Yorkshire and the Humber | 157 | 78 | 83 |
Sample size by number of employees
| Total sample | National representative sample (unweighted) | National representative sample (weighted) | |
| None - Sole Trader | 44 | 34 | 34 |
| 1 | 393 | 283 | 97 |
| 2-4 | 291 | 158 | 509 |
| 5-9 | 164 | 80 | 178 |
| 10-24 | 165 | 79 | 86 |
| 25-49 | 104 | 48 | 58 |
| 50-99 | 145 | 53 | 16 |
| 100-249 | 168 | 73 | 8 |
| 250-499 | 179 | 65 | 3 |
| 500+ | 342 | 119 | 3 |
Sample size by sector
| Total sample | National representative sample (unweighted) | National representative sample (weighted) | |
| Accommodation & food service activities | 53 | 26 | 57 |
| Administrative & support service activities | 41 | 17 | 84 |
| Agriculture, forestry & fishing | 40 | 25 | 55 |
| Arts, entertainment & recreation | 140 | 83 | 64 |
| Construction | 155 | 76 | 125 |
| Education | 85 | 49 | 16 |
| Electricity & gas supply | 23 | 5 | 2 |
| Financial & insurance activities | 168 | 60 | 22 |
| Human health & social work activities | 81 | 42 | 37 |
| Information & communication | 222 | 75 | 83 |
| Manufacturing | 173 | 84 | 27 |
| Mining & quarrying | 10 | 1 | 1 |
| Other service activities | 189 | 116 | 27 |
| Professional, scientific & technical activities | 239 | 131 | 172 |
| Public administration & defence; social security | 5 | 2 | 2 |
| Real estate activities | 65 | 40 | 37 |
| Transportation & storage | 90 | 47 | 41 |
| Water supply, sewerage & waste management | 8 | 5 | 3 |
| Wholesale & retail trade including repair of motor vehicles | 214 | 113 | 142 |
- https://www.ipsos.com/ipsos-mori/en-uk/half-british-workers-finding-it-harder-do-their-job-during-covid-19
- Our full methodology is explained in an appendix at the end of the report.
- Ferranti Pegasus computer, 1956.
- eurostat: Cloud Computing Services
- Recalibrating global data center energy-use estimates
- UK Tech For A Changing World - Tech Nation
- UK Tech For A Changing World - Tech Nation
- monzo.com
- https://techcrunch.com/2019/08/02/babylon-health-confirms-550m-raise-to-expand-its-ai-based-health-services-to-the-us-and-asia/
- https://blog.zoom.us/wordpress/2020/04/01/a-message-to-our-users/
- http://www.sphomerun.com/data-center-sales-and-marketing-blog/what-does-it-cost-to-build-a-data-center
- https://www.scaleupinstitute.org.uk/wp-content/uploads/2019/11/ScaleUp-Index-2019-FINAL.pdf
- By scale-up, we mean businesses that report having average revenue growth over the last three years of 20% or more, and now have more than ten employees.
- Based upon http://www.deloitte.co.uk/fast50/index.html
- Valuation taken from https://www.cbinsights.com/research-unicorn-companies
- The Business Case for Next-Generation AWS Managed Service Providers, Forrester, 2017
- https://policyexchange.org.uk/wp-content/uploads/2018/05/The-Smart-State-1.pdf
- https://www.publictechnology.net/articles/news/no-intention-%E2%80%98watering-down%E2%80%99-cloud-first-policy-minister-claims
- https://www.gov.uk/guidance/government-cloud-first-policy
- https://www.publictechnology.net/articles/news/bidding-opens-%C2%A32bn-g-cloud-12
- https://www.publictechnology.net/articles/news/g-cloud-saving-government-20-legacy-contracts
- https://aws.amazon.com/solutions/case-studies/driver-and-vehicle-licensing-agency/
- https://aws.amazon.com/solutions/case-studies/national-rail-enquiries/
- https://aws.amazon.com/solutions/case-studies/ucas/
- https://www.cbronline.com/news/space-weather-service-onto-aws
- https://aws.amazon.com/solutions/case-studies/the-met-office/
- UK Regional Productivity Differences: An Evidence Review
- Office for National Statistics: Regional gross value added (balanced) per head and income components
- The Conservative and Unionist Party Manifesto 2019
- Policy Exchange: Powering the Midlands Engine
- Based upon the most recent ONS data on the annual increase in total real regional GVA in the North East (0.85%).
- https://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do
- All enterprises, 10 employees or more, excludes financial sector
- Technology Diffusion: Measurement, Causes and Consequences
- Speech given by Andy Haldane at the Guild Society, University of Oxford, on Wednesday 23 May 2018
- https://www.businesswire.com/news/home/20190228005137/en/Worldwide-Public-Cloud-Services-Spending-Forecast-Reach
- Gartner Says IT Spending in EMEA to Return to Growth in 2020
- https://ourworldindata.org/technology-adoption
- Firm-level labour productivity measures from the Annual Business Survey, Great Britain - Office for National Statistics
- https://www.ben-evans.com/benedictevans/2020/4/13/covid-and-forced-experiments
- https://www.ons.gov.uk/surveys/informationforbusinesses/businesssurveys/ecommercesurvey
- https://ec.europa.eu/eurostat/statistics-explained/index.php/Cloud_computing_-_statistics_on_the_use_by_enterprises#Enterprises.E2.80.99_dependence_on_cloud_computing