Ark of the Government deal confirmed, joint venture established

In a massive departure from the usual big supplier merry-go-round of government IT contracts, the Cabinet Office has confirmed a £700m legacy "Crown Hosting" deal with small data centre biz Ark, as revealed by El Reg last week.

In a statement, the department claimed the joint venture company, in which Ark will own a 75 per cent share (with the Cabinet Office taking the remainder), will save £105m over seven years and help unbundle "legacy" hosting contracts.

The facilities will be available to all public sector bodies, with the Department for Work and Pensions, the Home Office and the Highways Agency being the first to use the services.

Each will be able to use the service on a "pay for what you use" basis.

Some concerns has been raised as to whether a business of Ark's size can handle such a weighty contract. According to its Companies House records, last year the company made a loss of £7.3m, and a gross profit of £5m. Ark employs 31 staff.

Philip Carse, an analyst at Megabuyt, said the company's external revenue rose 21 per cent to £9.6m, "a figure which is reasonably consistent with the £8.3m that can be inferred from the Ark Data Centres Limited accounts", he said.

However, he added that Ark has a reputation for high levels of security within the industry, which will have made it an attractive bidder to the government.

Frank Jennings, cloud and commercial contracts lawyer at law firm Wallace, said it was usual for the government to assess the financial viability of a company before signing a contract of any significant size. "I'm not questioning Ark's ability or technical capability, but I am surprised it has won a deal of this size."

Mark Craddock, the former lead of CloudStore, the web shop of G-Cloud, said any risk has been taken out of the deal as the Cabinet Office is taking a sizable stake in the arrangement.

"I don't think there is risk, because in the worst case scenario the government could take it over," he said.

Craddock sees the deal as taking a "lift and shift" approach to legacy hosting, effectively shoving the government's old mainframes into the Ark data centre and shutting down all extraneous sites.

This will be the third recent joint venture between the Cabinet Office and a supplier. Last year it formed a deal with Capita under the Axelos entity, to provide professional IT qualifications to government.

In 2013, it signed a £1bn joint venture with French outsourcer Steria for an ERP shared services centre across government. ®