To mark Small Business Saturday, which is designed to encourage everyone in the UK to support our small businesses, Stephen Allott, the Crown Representative for SMEs, writes about G-Cloud and the opportunities opening up in government IT for small, innovative suppliers.
What share of public sector IT business do SME suppliers win, given a perfectly level playing field? Astonishingly, the answer is 56%. Yes, as of the end of October 2013, 56% of of total public sector spend by value through the G-Cloud framework had gone to SME suppliers.
Government Digital Service (GDS) and the Crown Commercial Service (formerly GPS) have shown what is possible if you take a new approach to building digital government. With G-Cloud they have captured huge value from SME suppliers by doing things in a new way – not by favouring SME suppliers.
The SME percentage share of central government IT spend including through G-Cloud is even higher. No less than 68% at the last count. Note that both central government and the wider public sector are buying through G-Cloud, and central government is the bigger spender.
This figure of 68% is in stark contrast to the 10.5% of central government spend in 2012/2013 (across all categories not just IT) going directly to SMEs when the playing field is not level. Figures for the SME percentage share of central government IT spend through all channels (not just G-Cloud) are not available, but let’s assume they are not materially different from the 10.5%. Even after adding the SME share of spend down the supply chain (9.4%), the impact of the tilt in the playing field is clear. When the playing field is level, the value of business won by SMEs (68% against about 20%) is more than three times what it was in the past.
Savings
This matters, because when SMEs win IT business they win it because they offer much better value. I don’t have exact figures, but my impression is that savings of between 25% and 75% are not uncommon when using SMEs. Levelling the playing field for SME IT suppliers is a huge opportunity to generate savings for the taxpayer.
But how big an opportunity? The current run rate of annual spend is now over £80 million, and it’s growing fast. Look at this chart:
Let’s take some rough numbers to illustrate the potential savings for central government. If SME suppliers are half the price of traditional suppliers, the potential savings at the current run rate are £35 million per year.
How big could G-Cloud get? Five or 10 times the current size? Government, which spends billions on IT, is going digital. This could mean savings in the hundreds of millions, and the orders going to SMEs would also help growth in the economy.
A plan to go forward
To help the G-Cloud framework grow as fast as possible, I believe we should:
Now is the time to get on board
Government customers should take a look at what’s on offer, and I would encourage SME IT product suppliers to register for the next refresh of the G-Cloud framework. If, by contrast, you build bespoke agile systems, then register for the next refresh of the Digital Services Framework.- another point of access to government business for smaller, innovative firms.
When SME suppliers offer what we need and at the best value for money for the taxpayer, government should buy from them every time. The G-Cloud is showing the way.
9 comments
Comment by Chris Chant (@cantwaitogo) posted on
Nice - important to include customer comment publicly too
Comment by Guest Post: The results are in – on a level playing field, SMEs win 56% of public sector IT business – G-Cloud | Public Sector Blogs posted on
[…] Original source – G-Cloud […]
Comment by Tony Singleton posted on
Welcome Stephen. This is a great post about how G-Cloud is helping to increase the business that the public sector is doing with SMEs and driving down the amount that government is paying for IT services. The comparison of 68% of G-Cloud sales going to SMEs compared with 10.5% of central government spend in 2012/2013 is particularly encouraging.
I welcome Stephen’s five point plan and support that it is the way to grow G-Cloud as quickly and as widely as possible. I will blog more about how we are working on this in the near future.
Comment by Lou Valdini posted on
"When SME suppliers offer what we need and at the best value for money for the taxpayer, government should buy from them every time" ...absolutely!
I can see how the Cabinet Office can exert a degree of control over direct Government department procurement, but how will local authorities be 'encouraged' to sign up to this initiative?
I do believe SMEs selling into Central Government are benefiting from the Cabinet Office's actions, but I am still finding it difficult engaging with local authorities using the CloudStore model. They are still issuing RFPs for small solutions which they could easily obtain from the CloudStore, saving them and us significant time, effort and cost, and by doing so, deliver value to the the business much faster. In the case of Fraud & Error Investigation, this means a hard, identifiable saving!
Comment by Andy Powell posted on
First off... I work for an SME and I very much support the current policy agenda around SMEs. Having said that, there is an 'agenda' here. I don't think you can describe a market around which the government has explicit policy aims in terms of the market share held by SMEs as being a "level playing field". It's not level, it's skewed. The question is, do you agree with the skew or not? I happen to... others may disagree.
As soon as you skew the market, the market will respond accordingly. And so you'll end up with situations such as SMEs fronting non-SMEs (or even collections of non-SMEs) in order to work more effectively within the current policy agenda. By the way, that's fine as far as I'm concerned. It's ultimately the creation of a proper vibrant market that will lead to the most effective use of public money. I may work for an G-Cloud supplier... but I'm also a taxpayer! I think G-Cloud is doing a good job in bring that about but let's not be totally naive about it.
Of course, the policy agenda isn't the only way in which the market is skewed. So, for example, you mention accreditation, which represents a pretty big overhead on most G-Cloud suppliers, certainly in Lot 1. And, I suggest, the overhead on an SME is much bigger than on a non-SME.
Secondly... there is a transparency issue around the current SME market share claims being made around G-Cloud. There is a lot of openness around G-Cloud sales - which is great and to be commended, thanks - but it's not clear to me where the "56% SME by value" claim comes from. This is a shame because that claim would carry much more weight if the underlying data about which G-Cloud suppliers are SMEs and which aren't was made available. My G-Cloud sales analysis - http://bit.ly/IiQYtw - suggests that the current big winners (by value) from G-Cloud are not SMEs. I appreciate that the combined weight of a very long tail can overcome a relatively small number of 'big' suppliers at the top end but it would be nice to be able to do the analysis and show how this works.
Thirdly... claims about savings made by buying from SMEs are pretty much impossible to substantiate now, and will remain so for the foreseeable future. "If SME suppliers are half the price of traditional suppliers, the potential savings at the current run rate are £35 million per year" says very little in reality because you can't back it up and I can't argue against it! I think you are better off focusing on the fact that it is an open market that will bring about the benefits you want to see.
Finally, your 5-point plan includes 'debugging the process' which I very much support. Part (most?) of the value of G-Cloud is in moving us to a largely commodity market. I think most suppliers are on board with this. But a commodity market only works if the customers understand that is what it is as well. If customers continue to try and treat the market as giving them access to fully bespoke solutions then the process breaks down and the potential value won't be fully-realised.
Comment by Tony Singleton posted on
Hi Andy.
We do provide the names of individual suppliers and an assessment of the send at http://gcloud.civilservice.gov.uk/about/sales-information/ By our calculations the 56% is correct. Would it help if we tagged those suppliers we consider to be SMEs?
Comment by Andy Powell posted on
Hi Tony.
Sorry, I didn't intend to suggest that it wasn't correct... just that it would be interesting to be able to do some further analysis (for example, an SME breakdown by Lot). So, yes, if you could tag that data with SME or not, that would be great. Alternatively, just publish a list of company names and a flag to indicate SME or not as a separate CSV file. Thanks,
Andy
Comment by Raphaelle Heaf posted on
Dear Andy,
Please see a list of all of the organisations and their SME/Large status now added to the Sales information page.
http://gcloud.civilservice.gov.uk/about/sales-information/
This list includes organisations that are currently and were previously on the framework.
Comment by Andy Powell posted on
Awesome. Spot on.
(Now I can spend my Christmas break honing my R skills - thanks for that!)