Are government IT leaders prepared for fight with System Integrators over SME contracts?

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It's long been a complaint of SMEs that government spend on systems integrators (SIs) eats up the vast majority of the public sector IT budget (80%-90%), leaving very little for innovative small businesses.  

Having spoken to several SMEs part of the gripe isn't just that they're only left crumbs from the public sector table.  SIs will often subcontract specialist work to small businesses and take the lion share of the profits themselves.

I've also heard cases where SIs have  said it would not be in their interest to work with small companies,  as they don't want a quick and innovative solution but something which creates long drawn-out contracts, enabling them to keep  milking the public sector cash cow.

I had an interesting chat with Chris Chant, responsible for setting the strategy for the use of cloud computing, who believes moves toward the cloud will help break up the 'oligopoly'.

"We've got to recognise that some of the organisations we outsource to are as big as the civil service, so why would we expect agility with something that big," he said. But with a lengthy legal contract lock in still in place, the cloud panacea still seems a long way off for the moment.

And of course, it's important not to underestimate the power of these contractors, many of which have account managers with one-to-one relationships with people in government that SMEs simply don't have.

"These providers are used to getting a certain amount of money from the government and they can't afford for their shareholders to lose out by reducing their income in the area of public sector contracts. So of course they will push back against change," says Mark Taylor, appointed by the Cabinet Office to lead its New Suppliers to Government working group.

If the government is to change the entrenched culture of awarding contracts to a few large suppliers, it will need to recognise it will have a fight on its hands. The question is, will it be able to back up it good intentions with the necessary action?

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About this Entry

This page contains a single entry by Kat Hall published on August 15, 2011 12:33 PM.

Hundreds of outsourced IT staff in government could soon walk out on strike was the previous entry in this blog.

If banks can put down their weapons and share their toys any industry can is the next entry in this blog.

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