In February 2012, the Cabinet Office stated that 25% of government contracts must go through SMEs by 2015. But as of this month, progress towards that goal is going slower than might be hoped in order to achieve that goal.
Over at Computerworld UK, Derek Du Preez asks whether the big SIs are in danger of becoming an unwanted middle man between the government and its target SME audience. Du Preez notes that over the past year the direct spend with SMEs went up by a tiny 0.4% , but the indirect spend with the same audience went up 2.9%. He comments:
Indirect spend with SMEs can be defined as spend that has gone through key suppliers to government, but landed in the pockets of SMEs that are part of that larger supplier’s supply chain.
So the money is still going firstly to the big vendors which is supposedly exactly what the government doesn't want to see happening. Du Preez rationalises:
There have been a number of high profile scams and cock-ups within the public sector, which have largely been blamed on projects that have been poorly delivered by the traditional suppliers to government – the large SIs…the key players in the Cabinet Office believe that by working with SMEs that can deliver projects in a more agile, cost-effective and timely manner, it will transform procurement and IT in Whitehall.
If the government continues to increase its spend with SMEs via its usual ‘Oligopoly’ of suppliers, are the cock-ups and scams going to become less prevalent? Will Whitehall actually become more agile and deliver products on time, which are also easy to use and cost less? Some may question the likelihood of this outcome if big SIs are going to play the middle-man between government buyers and the eagerly sought after SMEs?
It's hard to argue against this - although perhaps some in the 'oligopoly' camp might give it a go?
Push harder on the G-Cloud
Over at research house Ovum, chief public sector analyst for EMEA Joe Dignan argues that a good number of such oligopoly vendors appear to have decided that the best policy is to play deaf, dumb and blind when it comes to the government's procurement policy intentions.
Ovum has been privy to analyst events held by the reputed 18% of companies that have 80% of central government contracts and has been struck by the mismatch between their recognition of what the UK government is attempting to do and their future sales strategy.
This IT oligopoly, often referred to as the “usual suspects”, has always understood the need to have a stable of SMEs that bring both competitive intellectual property into their offer and garner brownie points through the procurement process, so they have mechanisms in place to engage with the best of the SMEs.
But although they know what government policy is, their sales strategies still reflect a belief that they will be able to rely on the same length of contracts supporting historic margin levels. When challenged on why they think they will still be able to make margin of 40%+ and have ten-year mega-contracts, the common (informal) response is that they know the market has changed but the shareholders still expect the same returns.
But the government is smitten with SMEs - and it's easy to see why. Dignan points to a specific instance in which the Home Office is reported to have saved 82% by using a smaller rather than larger company to do the same piece of work as a key driver for what he calls the current lionisation of SMEs.
For Dignan, critical to the success of the government's drive will be the momentum it is able - and willing - to put behind the national G-Cloud programme. In this regard, he has some concerns:
G-Cloud is the primary procurement framework for an SME that wants to work in the UK public sector, and SMEs comprise 85% of the total number of companies on the framework.
"There are concerns that G-Cloud, which came into being as part of a UK Cabinet Office attempt to create a wider and fairer market, is now controlled by procurement specialists who do not have the same zeal for the project.
Dignan also has concerns about what might be seen as a land grab over the juicier aspects of strategy:
Although there have been no overt delays in the launch of G-Cloud 4, neither has there been any rush. An example of the change in emphasis is the Government Digital Service hiving off the hot topic of “agile” for its Digital Services Framework. It is still possible to offer agile on G-Cloud but it is not allowed to be termed as such.
It's essential to resist the temptation to get into the habit of rolling out more procurement frameworks, he adds, noting that there are already signs of too many hands on the tiller:
Whack-a-mole was an early online game with the premise that whenever you thought you had managed to kill off one pest, another would spring up elsewhere. Much the same thing seems to happen with public sector procurement organizations and frameworks. We currently have the Government Digital Service and the Government Procurement Service. Then the UK Cabinet Office announced in July 2013 that there is to be a new and improved Crown Commercial Service in the second half of 2013.
By closing down other frameworks such as SIAM, the public sector was being directed towards the G-Cloud Framework. Now that the G-Cloud is no longer with the enthusiasts, the Government Digital Service/Government Procurement Service are letting another framework appear in the shape of the Digital Services Framework. This framework will allow for complex and tailored solutions not suitable for the commoditized offer of G-Cloud.
As the majority of public sector IT professionals believe that whatever they are doing is complex and requires tailored solutions, they will likely opt for the Digital Services Framework over G-Cloud, undermining government policy. Government should therefore ramp up the momentum for G-Cloud, not restrict what can be offered under it, and should continue to take competing frameworks out of the system.
I couldn't agree more with Dignan's analysis - and his warning.
It's my belief that the Cabinet Office team of the likes of Minister Francis Maude, Chief Operating Officer Stephen Kelly and Chief Technology Officer Liam Maxwell are entirely sincere in their intentions to rein in the big SIs and push towards the agile commodity IT approach.
But let's not forget the paving of the road to hell and all that…
Dignan makes a good point about the buy side in public sector IT leaning towards the familiar siren call of complexity, a message promoted for so long by the sell side.
It's going to take time to break the bad habits of several decades - and to get the skills back in-house that will enable them to be broken.
Progress has been made, but there's a long way to go yet and no room for letting up or slipping back into bad habits.