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Government IT contracts: Are the new kids taking over the block?

A new breed of SME supplier is challenging the reported status quo on government contracts and replacing the usual suspects. However, with distractions such as Brexit and GDPR, can David really take on Goliath?

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According to the Crown Commercial Service (CCS), small and medium-sized enterprises (SMEs) benefited from £12.2bn worth of central government spending in 2015-16. The total spend with SMEs is currently estimated at one pound in every four, which is an encouraging stance considering the initial proposed target of one in three by 2022.

The government has set out plans for a series of measures to break down barriers for SMEs. The proposed new measures include using transparency to encourage large businesses to employ more SMEs in the supply chain, improving visibility of opportunities available to SMEs in the supply chain, and making prompt payment part of the selection process for larger suppliers.

A consultation on these proposals is in the process of being launched, so it seems SMEs are on track to gain some of the lion’s share of government business. Today, G-Cloud boasts more than 2,000 government IT suppliers, and the vast majority of those are SMEs.

Most recently, CCS introduced the Technology Services 2 framework. Of the 160 suppliers in the framework, more than 60% are SMEs, which highlights the further opportunities for SMEs to get in front of government.

Barriers for SMEs still exist 

Former G-Cloud programme director Tony Singleton, an independent consultant with over 35 years of experience in the civil service and the driving force behind the G-Cloud framework and Digital Marketplace, as well as strategic advisor at Advice Cloud, believes it is now the time of the SME due to their eagerness to help and innovate.

He says procuring from SMEs gives the public sector access to new innovations from suppliers they probably won’t have had the opportunity to work with previously.

“Although it opens up more competitive pricing structures, the biggest advantage is the flexibility and innovation that working with SMEs can bring, as they are open to new ideas and, in my experience, more willing to work on solving the problems I have faced,” says Singleton.

Yet, despite the progress over the past few years, hurdles and barriers to entry remain: austerity, lack of appetite for perceived risk, cultural attitudes and the fear of doing things differently – all of which prevent many SMEs from being successful.

Rob Anderson, central government analyst at GlobalData, says that when G-Cloud opened for business, many SMEs thought the “shop window” would be enough for them to win business.

“The SMEs that were successful continued to thrive, but the less established players struggled and thought ‘why should we carry on?’ However, they need to actually talk to the users to build trust and understanding – to inevitably secure the business,” he says.

Singleton agrees, but adds that the biggest barrier is still simply getting through the door.

“Once an SME is on a government framework, they still have to put in the hard work to get orders. There is no magic button that will have buyers queuing up at an SME’s door. The most successful SMEs understand this and have put strategies in place to secure the sales they have,” he says.

Lack of government focus 

It’s not just the fault of SMEs. A lack of focus in government also plays a significant part, something that has become more prevalent after the end of the so-called “Francis Maude era”, says Anderson.

“Since the coalition ended and Francis Maude left, momentum has been lost slightly. Brexit has been another stumbling block and a huge distraction,” he says. “Understandably, government has been preoccupied, and there is evidence to suggest that contracts have been extended due to a reduced bandwidth to undertake a new procurement process.”

Fortunately for the UK market, there are examples of rapidly growing SMEs that have overcome those resistors – growing and winning significant contracts that were once the privy of large, established systems integrators.

One “new kid on the block” currently doing well – commanding around 12% of the anticipated £81m spend on the initial CCS Technology Services framework – is Nottingham-based managed services provider Littlefish. The company holds several central government contracts, including the Houses of Parliament, UK Export Finance, the Oil and Gas Authority, Historic England and the Food Standards Agency.

Freedom of good choice

Steve Robinson, managing director of Littlefish, puts the change in landscape down to freedom of good choice, and its individual success down to experience.

“There are so many more suppliers and quality alternatives in the market now,” he says. “Departments going out to tender have the option to move away from rigid, expensive legacy outsourcing deals offered by a small number of large firms, to work with more agile, flexible and innovative suppliers.”

Another of the new breed of SME is Mozaic, an independent service integration specialist that works with the likes of the Home Office, Transport for London (TfL), Department for Environment, Food and Rural Affairs (Defra), and NHS Digital.

Mozaic director David Courtley says the company established itself by “having the right offering at the right time”, and has since worked to keep it up to date with the market.

“We saw that many organisations wanted to take more control of their IT strategy and operations, relying less on traditional suppliers, and that a specialist with the right expertise could really help them do this,” he says.

Focus on collaboration 

Arcus Global, which builds cloud-based products on the Salesforce platform for the public sector, has seen an increase in technology companies wanting to collaborate with it after finding the company on the public sector frameworks.

Nick Howes, sales and marketing director at Arcus Global, says this means the world is “slowly but surely” moving away from traditional managed service providers in favour of disaggregation.

This is apparent across Whitehall. The government is pushing for the end of monolithic outsourcing deals in favour of smaller, more agile contracts, bringing capabilities back in-house and taking a multi-supplier approach.

Robinson says this aggregation approach has been the key to the success of many SMEs.

“Some SMEs simply don’t have the scale to provide every IT service component, like the larger suppliers, so the fact that government departments are breaking down the monolithic contracts into smaller chunks has created the market for us, allowing smaller agile disruptors to apply expertise and provide a high-quality service. That’s why there is now a shift to the ‘new kids’ such as ourselves,” he says.

“With the new breed of SMEs, you will find they are specialists, keen to please and don’t have the diseconomy of scale that larger organisations have. This means they can be flexible on pricing, building a purer charging model based on efficient overheads, therefore providing better value for the customer.”

This isn’t just about SMEs doing their bit. CCS recently appointed Emma Jones, the founder of small business support group Enterprise Nation, as its new small business crown representative to help smaller companies win government contracts.

Read more about SMEs and government

Former G-Cloud boss Tony Singleton adds that the launch of the “government is open for business” campaign has given SMEs good advice on how to bid for and win contracts.

“The Small Business Panel has also been refreshed to identify remaining barriers to SMEs in doing business with the public sector,” he says.

But should the government be doing even more to highlight SME supplier successes to give confidence to others who wish to disaggregate contracts and get SMEs on board?

Robinson believes government “must push the success stories out and demonstrate that there is life outside the static old guard, leading to arguably better outcomes”.

Arcus Global’s Howes says there are “far too many frameworks” out there, and suggests the government should cut it to one, making it simpler for everyone.

“My suggestion is that we just have one,” he says. “These days, especially in the local space, bodies will come to market and run a framework for companies to tender. Why go through all of that process and cost when there is already a framework set up? In my mind, that causes a lot of confusion, especially for SMEs who are new to the market.”

Government commitment

The government itself says it is working hard to ensure an increasing number of contracts are awarded to SMEs.

Dan Saxby, category director at CCS, says government is “fully committed to working with small businesses to identify and reduce any remaining barriers to doing business with the public sector” and to “increase the awareness among small businesses of opportunities to deliver true value-for-money outputs on government contracts, as well as drive innovation from early engagement and new idea generation”.

“The most successful way we’ve seen to open doors is to share stories and case studies with CCS. This generates real trust among customers in the delivery of their service outcomes,” he says.

So, although the government is levelling the playing field for SMEs and introducing the necessary measures to encourage success, it is really down to the SME to do the hard work and go the extra mile to prevail.

This was last published in December 2017

Read more on IT for government and public sector

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