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Public sector IT suppliers blast CCS over rising G-Cloud commission charges

CCS confirms commission charges on G-Cloud sales are to rise from 0.5 to 0.75% when the next iteration of the framework drops in May 2017, but suppliers fear it could harm their ability to innovate

Government procurement chiefs are set to ramp up the commission they receive on G-Cloud sales, prompting suppliers to accuse the Crown Commercial Service (CCS) of putting profit before innovation.

A Government Digital Service (GDS) blog, published 13 February 2017, confirmed the commission CCS receives from sales made via the G-Cloud framework is to rise from 0.5% to 0.75% when the ninth iteration of the framework launches in late-May 2017.

“As announced in their 2016/17 annual business plan, CCS is rolling out a change to its funding model,” the blog post states.

“The management charge for G-Cloud 9 will be increased from 0.5% to 0.75% of all charges billed by the supplier to the buyer.”

The increase in management charge is in direct response to the 2015/16 Spending Review, the blog added, but government IT suppliers have not taken kindly to the news, with several privately contacting Computer Weekly to outline their dismay. 

“It’s exploiting the success of G-Cloud, and it’s not very helpful for anybody. Not for the end client, who’ll end up bearing the brunt of the charges, and it’s not very good for the suppliers who have to pay out more in commission,” said one, who asked not to be named.

Growing supplier concern

The CCS annual business plan, referenced by GDS, contains a single line reference to upcoming “marginal increases in percentage levies”, but does not overtly state exactly how, if and when this will affect G-Cloud suppliers.

Speaking to Computer Weekly, John Glover, sales and marketing director at G-Cloud-listed collaboration software supplier Kahootz, said he would be interested to hear CCS’s justification for the move.

“In 2012 when CCS told us the management fee was only 0.5%, we thought this was too low, given that – as a supporter of the G-Cloud – we felt it was important to invest in its growth. After 5 years at that rate, we would question what justifies a 50% price hike,” he said.

“Just think what our G-Cloud clients would think if we hiked all our prices by 50% between frameworks?”

Meanwhile, Roger Newman, senior partner at procurement and business consultancy DeNove, said the change could make it harder for suppliers to reinvest in their own platforms, which – in turn – could have a detrimental impact on their ability to innovate.

“Many of the most innovative suppliers on G-Cloud already operate on very thin margins, [so] CCS boosting their commission by 50% is just going to stifle innovation,” he told Computer Weekly.

“What CCS should be focused on is making G-Cloud even more successful so they earn more money from it.”

Computer Weekly raised the aforementioned concerns with CCS and received a statement confirming the change and the benefits it claims will be brought about by it.

“We are increasing the percentage supplier levy on the new G-Cloud 9 framework by one quarter of a percent after five years of holding it at a very low level,” the statement read.

“This will be offset by the commercial benefits delivered to our customers across government and the wider public sector.”

All change for G-Cloud 9

The proposed rise in management charges is one of a number of major changes set to effect the way the G-Cloud framework operates once the ninth version goes live.

Whenever a new G-Cloud framework launches, the previous version continues to run alongside it until the next iteration launches, meaning there is usually two versions running at once.

This time around, G-Cloud 9 will be the only version of the framework available for public sector buyers to use, as both the seventh and eighth iterations will be discontinued when it launches.

The reason for that is likely linked to GDS’s decision to cut the number of Lots – from four to three – and rename them in G-Cloud 9 to help simplify the purchasing process for users.

As such, the software-, platform- and infrastructure-as-a-service Lots will be replaced by Cloud Software and Cloud Hosting, while Specialist Cloud Services is set to be renamed Cloud Support.

GDS said it is also introducing improvements to ensure the search terms cloud buyers use to trawl the Digital Marketplace for services are more closely aligned with the ones suppliers use to market their wares.

“We hope this will give suppliers confidence that their services will appear in buyers’ search results,” the blog post continued.

“Suppliers will no longer need to rely on guessing which keywords match buyers’ search terms.”

Arrested development 

G-Cloud is widely considered to be a success, having secured close to £1.7bn in public sector IT spend since it began in 2012, but sales growth through the framework has started to tail-off over the past 12 to 18 months.

According to Jessica Figueras, it is a trend that is likely to continue without some form of intervention from GDS to encourage a new tranche of public sector IT buyers to start using the framework.

“Procuring from G-Cloud is a skill in itself. Some organisations got on board early and learnt how to procure the G-Cloud way and others didn’t,” Figueras told Computer Weekly.

Therefore, GDS’s efforts to make it easier for the public sector to use G-Cloud may help with that, while encouraging more people to use the framework to procure off-premise services rather than alternative procurement methods.

“Public sector cloud spend generally is growing very quickly, but not necessarily going via G-Cloud. That could be a sign that deals are getting bigger and more complex,” she said.

“Some organisations are doing pre-tenders because they are still thinking about their cloud strategy, and want more input from the market than G-Cloud [currently] allows for.”

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