SMEs win 60% of Public Sector IT

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.

Savings
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.

5. Refine the web experience: continuously improve the web site (the G-Cloud framework web site is called CloudStore) This project has already started

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…

Q: In a nutshell Stephen, what’s the business case for SMEs to register with G-Cloud?

A: The business case is that the application process for the G Cloud is relatively straightforward, the call-offs are low friction and there are major opportunities to win business. You must be a supplier however of Cloud products and services as defined in the G-Cloud. With SMEs winning over 60% of central Government business, you’ll have a good chance of winning some business.

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.

Q: You talk about simplification and speed but how exactly has G-Cloud changed the game? What’s so different from the old system?

A: The G Cloud Cloudstore is radical revolution in procurement routes. It’s open to new suppliers every 6 months. Entry barriers are low and over 1000 suppliers have registered. Prices are public. Suppliers can reduce them but not raise them. Call-offs are simple. The buyer searches the catalogue for the best value solution and then places an order. Details of all business placed are published…

Q: And what’s the bottom-line benefit for the Government?

A: Dramatic – there’s no other word for it. Procurement is quicker. Savings are substantial. Buyers love it because they can buy the latest technology as a cloud service.

The only challenge is to spread the word and get everyone using G-Cloud…

As Tony Singleton recently remarked in his excellent article (February 13^th 2014): “G-Cloud has the potential to reach an estimated 30,000 buyers across the public sector. Yet research carried out by the 6 Degree Group suggests that nearly 90% of local authorities have not even heard of G-Cloud.”

There’s still a long way to go and we need to move rapidly to build awareness and secure that critical mass of users.

Q: So what do you see as your greatest challenge? What is going to decide the future success – or failure – of CloudStore and the G-Cloud framework?

A: Well, I think we have come a long way in a very short time. We have over 13,000 services now available via the CloudStore. That is impressive. We also have around 1,300 suppliers registered through G-Cloud. That, too, is an achievement.

But this isn’t a numbers game. We want to attract a diverse range of suppliers delivering great value and innovative solutions.

That’s why – and here comes an unashamed commercial – I urge every SME offering Cloud services in Clustre and any other accredited innovation community to register with G-Cloud.

On a level playing field, SMEs win 60%of public sector IT business