Does the UK government still care about its SME agenda?

Over the past six years the UK government has proudly beaten its chest about its ambitions to open up its doors to SMEs wanting to sell to the public sector. Large IT suppliers have gleaned somewhat of an unfavourable reputation in Whitehall, following two decades worth of project failures that have cost the taxpayers billions of pounds.

Of course, those failures aren’t just the fault of the IT suppliers. Government has played its part in poorly managing projects and contracts, often leading to problems that last for years.

However, this history, combined with the market view that SMEs perhaps encourage more innovative thinking, resulted in some early government leaders at the turn of the decade introducing new mechanisms to encourage smaller companies to sell to the public sector.

The likes of Chris Chant, Denise McDonough and Liam Maxwell were keen and vocal advocates of driving a path for SMEs to work with the public sector. This resulted in the creation of the G-Cloud, a now £1.5 billion+ framework, which is mostly made up of SMEs, and a target of 33% of government spend going to smaller companies by 2020.

However, when I saw recently that the events organiser for the Las Vegas based CES said that the UK government’s lack of support for SMEs attending was a “source of embarrassment”, it got me thinking about the Cabinet Office’s broader SME strategy.

Whilst the CES debacle was consumer facing and largely not of interest to what we cover here at diginomica/government, it did occur to me that it has been months, if not over a year, since we have heard anything about the government’s ambitions in this area.

For a while all we heard was about how the government was doing what it could to break the stranglehold of the ‘Oligopoly’ on government business. However, last year we saw a number of central government departments extend their lengthy outsourcing deals, as they continue to try and figure out how to disaggregate the contracts going forward.

And, well, things have just been rather quiet. So we at diginomica/government spoke to some SMEs that supply to government already and tried to get an understanding of where things still need to improve and how things are progressing.

It’s fair to say that whilst things have definitely improved since 2010 - the G-Cloud in particular has been a great opportunity for many - it’s also true that old habits are continuing to die hard. Engagement from the Crown Commercial Service (CCS) appears to be lacking, education on modern procurement practices continues to be minimal, buyers are still fearful of challenging the status quo and success stories are not being showcased.

I’ll repeat it and say that this does not mean that ALL public sector buyers are ignoring the SME opportunity, or that government has done nothing over the past six years to help SMEs - BUT it appears that momentum has died down and that there is still a lot of work to do going forward. We are raising this now in the hope that it will ignite some renewed passion from the Cabinet Office and CCS.

In a state of flux

Part of the problem as it relates to the SME agenda is that it fits within a broader strategy that appears to be in a state of flux. That’s according to UKCloud CEO Simon Hansford, a leading supplier of infrastructure services to UK government, who highlighted that the government is failing to give us insight into its top level priorities, let alone the detail on its work with SMEs.

For example, we revealed before Christmas that the government’s long awaited Digital Strategy (now entitled Transformation Strategy), which was promised by the end of 2016, had been canned but the Prime Minister’s office - without further word about when it would officially be released. Hansford said:

We’ve got an industrial strategy that is yet to be defined or articulated. Within that, the digital policy was meant to fit under the industrial strategy.

As you know that was due out before Christmas - we still don't have it. It’s sitting in Number 10. So what is the government transformation policy? How does it fit in the broader industrial strategy. Where do SMEs play in this? It's just not clear. And it hasn't been clear now for over a year. It was January last year that we were first told that this was all meant to be announced and clear to us.

Similarly, our whole Brexit strategy hasn't been articulated, but you would like to think digital fits in there somewhere.

Hansford added that this means that the government’s renewed target of 33% of business going to SMEs is lacking in detail in terms of execution. He said that SMEs are currently “sitting in a vacuum” and that there has been little direction or guidance from CCS about how CIOs and SMEs can reach this target.

I’m in with government CIOs every day - they’ve got business as usual. Brexit is sitting in front of everyone. Paralysing them. Number 10 has got a stranglehold on everything. Everything goes through Number 10. So there's all these priorities that the CIOs have got, the last thing that they need to be given is yet another target with no policy, no articulation, no guidance or how they're meant to achieve it.

There's support in the target, but there's no support on the streets. No road map guidance, articulation of help. There's just nothing.

Improvement Prevention Officers

One of the hardest problems that the government faces is actually changing the behaviour of buyers.

CCS, GDS and the Cabinet Office can put all the mechanisms they like in place, but there needs to be active engagement in the buyer community towards changing the way that people purchase IT.

This has been carried out in a mixed fashion in the past. Again, losing those vocal leaders in the early days has seen to have had a negative impact - as it doesn’t seem that they have yet been replaced with leaders that can make as much noise, highlighting the issues at play. Equally, the government has been consistently criticised for not carrying out routine education, promotion and engagement exercises to tell procurement departments that it is okay to buy from an SME and use simpler frameworks.

The result? SMEs continue to face roadblocks in the buying process, as public sector buyers continue to be risk averse and stick to their lengthy/expensive procurement processes and inevitably end up with the same familiar faces at the table.

Sales and marketing director at Arcus Global, Nick Howes, said that he still comes across local authorities that don’t understand the G-Cloud and raise concerns about things such as the two year limited on contracts (this is a long standing complaint - but is misunderstood, as it’s very easy to renew after two years, but should give buyers more power to keep contracts fresh).

Howe said:

In the local authority world you've got a lot of people who have kind of found a niche for themselves, particularly some of those colleagues unfortunately in procurement, where they are actually acting as an improvement prevention officer.

The number of times we tried to engage with an authority, and they say, 'No, no, no, no. We're in a process of writing a tender.' Okay. So you don't want to look at the marketplace to see what's out there? You get into this kind of situation where the authority always thinks that they know better. Then they write a tender that reflects what they heard 15 years ago. What they're not doing is engaging with the marketplace. They're not opening themselves up.

They could do self market testing quite easily, and the enlightened authorities actually do that quite comprehensively. They give you a brief, they encourage you to talk to their officers. They make panels available for you to engage with, and they set up times for kind of solution workshops, for demonstrations with products, et cetera.

Howe added that Arcus Global has had engagements with some of the larger central government departments - such as HMRC - which have then turned around and essentially taken their ideas and given them to the larger outsourcers to carry out. He said that it feels sometimes like Arcus Global’s “pockets are being picked”.

Howe also said that a lot of this confusion is being driven by the larger outsourcers and suppliers, which continue to benefit from the complexity that longer procurement processes and the expense it creates for them (wiping out competition from SMEs). Howe added:

Certainly in working for some of those guys, you look at it and go, actually what you're ending up doing is costing us as citizens an absolute fortune because you've encouraged this kind of behaviour in some of the customers that you've got. They direct them to the wrong things. Now don't get me wrong there are a lot of good things those companies have done.

Some of them absolutely excellent - but they are few and far between. They genuinely are the rare forms. But I think a lot of people just look at it and say actually if you can live with the projected procurement cycles, public sector is actually a relatively easy target for large organizations.

More to be done

The general consensus amongst the SMEs that diginomica/government spoke to was that CCS and the government could be doing more to engage with SMEs and buyers to shift business away from the larger suppliers.

In fact, some suggested that despite the work that has been done to make procurement simpler via frameworks such as the G-Cloud, it seems that a lot of government work is still out of reach for SMEs. Dave Mann, head of engagement at digital services provider dxw, who also previously worked at the Government Digital Service, highlighted this point. He said:

We certainly hear encouraging noises coming out of government in support of SMEs doing more with them and things are certainly better than they were. However, experience on the ground is mixed. Many teams in government are still accustomed to working with larger suppliers and expect smaller companies to jump through the same kind of hoops, especially during procurement exercises.

Working on bids can be incredibly time-consuming, especially in smaller companies that don't have bid-writing teams, and I don't think this is taken into account. The more onerous a tender process, the less likely SMEs will be in a position to bid, which means certain projects are effectively off-limits.

UKCloud CEO Simon Hansford made a similar point and said that the simplicity seen in G-Cloud needs to be driven into other parts of government. He said:

G-Cloud is a superb example. We all navigate or gravitate towards G-Cloud, and the achievements there are superb in terms of SME support. But G-Cloud's a small part, a tiny part, of government spend.

Even in IT it's a small part. So all of those principles in G-Cloud, where are they being propagated into other frameworks? We don't see any evidence of that. And yet collectively, industry and government talks about G-Cloud as being a shining example. There's tons of goodness in there, and goodness for SMEs, but it's not being taken in into any other framework.

The government could also be doing more to share success stories of public sector/SME work to drive awareness into areas that are resisting change. This is a criticism that has been thrown at CCS before - and one SME agrees that more could be done in this area.

Littlefish are a fast growing Managed Services Provider to government, and UK managing director Steve Robinson shared a recent experience of winning a contract with a government department to take over much of the work from a much larger service provider - and has, according to the customer, been doing a much better job.

The head of IT for the department then wrote a blog post about the great experience working with SMEs and the disaggregation of the supply chain, but Littlefish was advised by the department that they couldn’t share the story publicly as their own work. Robinson said:

We obviously wanted to get some kind of halo effect off the back of that, but the guidance was that we couldn't explicitly associate ourselves with it. Which is a bit of a pain, cause it is a good news thing. So off the back of that, I got in contact with CCS, and said it could be a win-win. The guy from CCS has said that he'll raise it, or we raise it with the SME representative at the January meeting, so I'll need to wait until they've had that meeting to find out whether they will do some things to promote it.

I think that's the thing, they want people to embrace SMEs, but a lot of people in procurement, and in IT - certainly in central government - they don't know anything better than, nor anything other than, the usual suspects that they always deal with.

My take

As I noted at the start of this article, this isn’t all the government’s fault. Suppliers too have in the past assumed that because they are on the G-Cloud that they will win business and everything will fall into place. That’s not the case. Suppliers still need to market themselves properly, educate, network and prove that they are up to the job.

Having said that, the suppliers I spoke to for this piece have a track record of winning business with government, have large government customers as clients, and still believe that the government isn’t doing what it can to promote the benefits of SME business. This is particularly surprising given that we have seen the government cozying up to the likes of Microsoft and Amazon in recent months - an interesting strategy in a post-Brexit environment.

The Public Accounts Committee has already said that isn’t even yet clear that SMEs are better able to compete with larger providers or whether they are actually getting any more government business than before. It stated in a recent report that much of the government’s ‘increased’ spend with SMEs could perhaps be attributed to the requirement on departments to better track their SME activity.

Equally, the Committee said that “it is not clear how the government decided on 33% as a target or how achievable it is”.

That being said, there are positives. The G-Cloud is a genuinely innovative framework and there is now more of an awareness in government that SMEs can bring good business to the fore. However, it’s concerning that the same problems that were facing SMEs two or three years ago persist.

Buyers still aren’t being educated, the engagement process seems to be minimal, SMEs aren’t sure who is leading the charge in government, procurement officers persist in reverting to the old ways of doing things, and there isn’t a clear strategy in place.

We need more action.