Stephen Allott, the Crown Representative for SMEs, writes about G-Cloud and the opportunities opening up in government IT for small, innovative suppliers.
What share of public sector IT business do SME suppliers win, given a perfectly level playing field? Astonishingly, the answer is 60%. It’s true that by the end of February 2014, 60% of total public sector spend by value through the G-Cloud framework had gone to SME suppliers.
Government Digital Service (GDS) and the Crown Commercial Service (formerly GPS) have shown what is possible if you take a new approach to building digital government. With G-Cloud they have captured huge value from SME suppliers by doing things in a new way – rather than by favouring SME suppliers.
The SME percentage share of central government IT spend, including through G-Cloud, is even higher. No less than 62% using the latest figures. Note that both central government and the wider public sector are buying through G-Cloud, and central government is the bigger spender.
This figure of 62% is in stark contrast to the 10.5% of central government spend in 2012/2013 (across all categories not just IT) going directly to SMEs when the playing field is not level. Figures for the SME percentage share of central government IT spend through all channels (not just G-Cloud) are not available, but let’s assume they are not materially different from the 10.5%. Even after adding the SME share of spend down the supply chain (9.4%), the impact of the tilt in the playing field is clear. When the playing field is level, the value of business won by SMEs (62% against about 20%) is more than three times what it was in the past.
This matters, because when SMEs win IT business they win it because they offer much better value. Tony Singleton recently blogged that the average savings through G Cloud were 50%. Levelling the playing field for SME IT suppliers is a huge opportunity to generate savings for the taxpayer. The current run rate of annual spend is now over £180 million (January and February 2014 combined sales of £30m times 6), and it’s growing fast, as shown by this chart:
A plan to go forward
To help the G-Cloud framework grow as fast as possible, I believe we should:
1. Build the customer base: identify and address key barriers to take-up, to encourage more public sector customers to use it. We have barely scratched the surface.
2. Build the product catalogue: make sure the products they want to buy are listed in the catalogue.
3. Build the supplier base: make sure that the most competitive and innovative suppliers are listed in each product category
4. Debug the processes: make continuous improvements to processes as problems emerge. Security accreditation is a current bottleneck that needs to be improved.
Now is the time to get on board
Government customers should take a look at what’s on offer, and I would encourage SME product suppliers in IT to register for the next refresh of the G-Cloud framework. If, by contrast, you build bespoke agile systems, then register for the next refresh of the Digital Services Framework, another point of access to government business for smaller, innovative firms.
When SME suppliers offer what’s needed, and at the best value for money for the taxpayer, government should buy from them every time. The G-Cloud is showing the way.
Following this article, Stephen Allott agreed to share his thoughts with Clustre on the radical new G-Cloud registration process. These insights are featured here in a fascinating Q & A session…
That stat alone proves two things…
First: SMEs are eminently qualified to pitch for – and win – a substantial share of government business. SMEs undoubtedly command a new respect in procurement circles.
Second: the arithmetic is immensely compelling. There’s a very big procurement pot to be shared and I believe that G-Cloud has put it within reach of every SME supplying cloud services.