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Introduction and securing contracts
The G-Cloud framework has now entered its sixth iteration, and while it is fair to say the framework has made it easier for small firms to get government contracts, the large players appear to muscling these companies aside.
The latest government figures put the total sales through G-Cloud at £431 million, with £208 million of those sales benefiting SMEs. However, the percentage of sales to SME is in fact declining, making up just 49%. In May 2014 SME G-Cloud sales accounted for over half. Total sales to large enterprises exceeded those of SMEs in October.
It begs the question: is the framework now failing these smaller firms? SME supplier Memset, which was one of the first SMEs approved for the G-Cloud framework, questions whether any of the approved suppliers with services listed outside of Lot 4 (Special Consultancy Services) will see an increase in revenue to match.
Struggling to secure contracts
Kate Craig-Wood, MD of Memset, said: "True cloud SME providers are struggling to secure contracts via the Digital Marketplace because a lot of the business is going through Lot 4."
In November 2014 less than 15% of sales on G-Cloud were to true cloud services, i.e. those listed in Lots 1-3 covering Infrastructure, Platform and Software as a Service. "This is a bit disappointing – as the name suggests it is G-Cloud and we should be moving away from consulting towards a pay-as-you-go, standardised pool of cloud computing resources," says Craig-Wood.
She notes that it is a worrying trend that the percentage of business going to SMEs has been falling. "Historically it has been steady 50/50 split, however it has slowly been trending downwards. This might be a blip but might also be a sign that the larger companies are wising up, forcing them to become more competitive. However, overall this is not a good thing as SMEs bring agility, quality of services and focused niches to government business."
Lessons learnt
She says that a lesson her firm has learnt is that although some services SMEs are selling don't need a security accreditation, certainly in infrastructure anyway, they still need the high-level security endorsements. "Customers are conservative and always look for the higher levels of accreditations," she adds.
Mark Evans, commercial director at Imerja, says that in a Cabinet Office report, published in 2012, the government stated that by 2015 at least 25% of new government IT should flow to SMEs directly. "However, the figure currently stands at just 19% about half of which is due to bigger firms winning the contracts and SMEs securing supplier subcontracts," he says.
Evans notes that while being on a government framework is a definite advantage for SMEs, he would like to see the larger providers being encouraged to engage with the SME community on a more strategic basis, working in partnership on tenders and delivering solutions.
"If big providers are committed to the SMEs they work alongside, government organisations will realise the benefits of working with innovative and agile SMEs within a larger delivery team – allowing them to become more than just a name on a list," adds Evans.
Craig-Wood says that initially her firm sold direct but soon realised that it needed to work with partners and systems integrators.
"It makes sense as they are already tied up with government," she says. "The only way to get through the door is to buddy up with an incumbent. There is an appetite by the incumbents to work with SMEs too as they currently have a bad reputation within government and they need to up that. Also working with SMEs can help drive their costs down too."
Speculative services
Dan Sutherland, chief executive officer of Carrenza, says that many of the services currently offered by SMEs are speculative.
"They allow SMEs to test demand while they invest in their ability to deliver," he says. "I suspect G-Cloud 6 will show the successful suppliers offering many more services than they did under G-Cloud 5."
Sutherland adds that it's also very easy to get onto the framework, but it's not very easy to be ready to sell things. "Processes need to change, services need to become compliant, significant investment is needed. These are barriers to SME suppliers that they have to commit to getting over. That's expensive and it takes time."
Selling to government customers is not the same as selling to commercial ones. "It's not initially about talking to people, relationships, or traditional business trust. That comes later, after you have delivered. Getting that first win with a given client is about making your services easy to buy by ensuring that they meet or exceed the requirements laid down," says Sutherland.
Maybe the problem is that SMEs haven't put enough effort into looking at what the government wants to buy and tailoring a public sector offering accordingly.
"Some suppliers have missed this point, and instead have just taken the services they already sell, and offered them via G-Cloud and looked at it in terms of 'if you build it, they will come'. What they should be doing is investing in their product to make sure it does the job government needs it to do," says Sutherland.
Building a foundation
Evans says that SMEs which have been successful in securing a subcontract should view this as a foundation to build on.
"Although it's sometimes frustrating for SMEs when they don't secure direct contracts, it is often the case that without their input on a tender, bigger providers would fall at the first hurdle. SMEs need to be confident in their approach to a contract, trusting in their ability to adapt to the customer – acting strategically with the bigger providers, not just as a generic supplier."
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