Private sector born SMEs struggle to appeal to G-Cloud buyers

Profile picture for user ddpreez By Derek du Preez March 3, 2020
Summary:
New research suggests that only 12.5% of 1,200 B2B>B2G SMEs on G-Cloud are making any sales at all…

An image of a road leading to a cloud filled sky

SMEs that have seen success in the private sector and are attempting to sell their services to government are struggling to appeal to buyers that are looking for products via the G-Cloud framework. 

In fact, just 12.5% of 1,2000 such B2B>B2G suppliers are making any sort of sale at all. This is according to Lindsay Smith, author of the research and a well-respected G-Cloud analyst and consultant. 

G-Cloud 11 went live in July last year, with a whopping 4,200 suppliers in total, approximately 700 more than G-Cloud 10. Over 90% of all the suppliers listed are SMEs. 

G-Cloud was launched back in 2012 to much fanfare, given that it gave government buyers - for the first time - a procurement mechanisms that listed SME suppliers alongside large technology suppliers/providers in a transparent way. And in many respects G-Cloud has successfully opened up the Whitehall market to SMEs that otherwise would have struggled to gain access. 

However, Smith’s research highlights that this isn’t necessarily true for SMEs that aren’t dedicated to providing government solutions, but have seen some level of success in the private sector. 

The research focuses on the Cloud Software Lot, but Smith notes could equally be applied to Cloud Support (Lot 3) and in some cases Cloud Hosting (Lot 1). 

He has divided the marketplace of 2,600 software suppliers into the following groups: 

  • Large enterprises

  • SME resellers of large enterprise software

  • SMEs with products ‘born’ in public sector (these have no real application in private sector and are referred to as G-Native)

  • SMEs attempting to migrate a successful business model from private to public sector (referred to B2B>B2G)

  • SMEs which clearly aren’t selling cloud software and should not be on the marketplace

The research specifically focuses on the B2B>B2G group of sellers, of which Smith estimates there are approximately 1,200 SMEs on G-Cloud 11. Only 150 (12.5%) of these have any sales. The research states: 

10% of total software spend goes to these suppliers, but at 1,200 they represent roughly 50% of SME suppliers in the software Lot, this is a significant mis-match between demand and supply. These are innovative SME suppliers where we would expect to find the Digitally Transformative products which will help the public sector reimagine processes and outcomes and deliver savings, enhanced productivity and benefits to citizen, taxpayer and the public sector users. 

In their B2B marketplace, these suppliers have a proven value proposition at an acceptable price-point and risk profile but it isn’t working for them on G-Cloud for 1,000+ and that’s a missed opportunity for everyone.

Smith adds that these B2B>B2G suppliers are failing to get traction and hundreds do not renew between one framework and the next. 

What can be learned? 

Smith believes that he can provide some answers as to why the 12.5% of those suppliers are managing to gain traction in the government market, whilst the rest remain idle and fall to the background. He notes that much of the answer is on the G-Cloud catalogue and in the documentation published there - because much of the procurement process is undertaken from that source. 

So, how do those 150 B2B>B2G suppliers behave differently? Smith argues that the following four points are key: 

  1. Risk and reward

Public buyers are more risk averse, typically not ‘early adopters’ and open to scrutiny and legal challenge on their decisions and sizeable consequences for mistakes. Successful SMEs develop strategies to counter risks and explain these carefully in their documentation. They invest in ISMS and other certifications, use open source, code audits, penetration testing and above all carefully discuss where risk is not a relevant consideration and accentuate the rewards they bring.

  1. Research of available technologies

A full and clear articulation of product and what it can do for the purchaser is essential in the G-Cloud documentation. Successful vendors also carefully deploy budget on marketing communications (inbound thought leadership content, exhibitions, etc.).

  1. Know your customer

Firstly, select your customer – public sector is too large and balkanised to address as one market. Learn about your targets, they all publish considerable information on plans and requirements, attend market engagement events (TechUK are a good source of these) and then engage with your targets in the way you articulate your value proposition on G-Cloud. Use their language and address their particular needs. Too many SMEs carry literature from the private sector talking about ‘winning more customers’, ‘sales & upselling’ and profitability. These are alien to most public sector organisations.”

  1. SMEs misrepresent or baldly represent themselves on G-Cloud

Take time to get your G-Cloud catalogue appropriate to your audience, optimised and make it accurate and full. For example: pricing information has to be sufficient to estimate total cost of ownership; if a question is asked – it is because buyers use that in formulating their early evaluation, ‘On Application’ is an invitation to be eliminated. Also, accessibility is now a major feature in buying decisions – yet many SMEs appear to misunderstand or dodge the question. Successful SMEs have embraced accessibility and make it a differentiator.

My take

Smith’s research is worth reading in full and you can find it here. However, the key takeaway is that simply replicating your successful route to market in the private sector will not guarantee you success in the government sector. They have different needs and a different approach is required. Listen and learn.