Most resellers know that offering the right technology is often the least of your worries when it comes to developing IT services in the public sector. This is an area where the IT market obeys its own rules - arguably making it not only the hardest space to penetrate but sometimes the riskiest to be involved with.
Take, for example, the case of Birmingham-based ITNET. In July the Cabinet Office cancelled an £83m, five-year project for a secure data centre to host government web sites, only 11 months after signing the contract with the firm.
It cited "breach of contract" as the reason, saying none of the services contracted for had been delivered or accepted. ITNET denies breach of contract and says it is demanding the £25m it invested in the project be reimbursed.
The contract was the subject of a tender process involving more than 100 companies, and ITNET was chosen after two other short-listed companies dropped out. This was the firm's first large government contract after proving itself by running systems for local authorities.
When it isn't cancelling projects the government seems to be tearing its hair out over its own procurement process. The recent Home Affairs Select Committee report on the National Identity Card Project was highly critical of the "closed procurement process" and lack of "independent technical scrutiny".
Meanwhile, it raised concerns about the accuracy and reliability of iris and fingerprint readers selected for the project - to the embarrassment of the vendors involved.
Unsurprisingly, most large projects are bagged by the usual suspects: BT, Mitel, Capita, Onyx, CSC, Microsoft, Oracle, Atos Origin, Fujitsu, Cable & Wireless, Accenture, Schlumberger Sema and IBM, to name but a few.
A full list of such government-approved firms can be found on the Government Catalogues for IT: GCat (IT and telecoms hardware and maintenance services) and SCat (IT and business consultancy services).
Clearly government projects are not for the faint-hearted. But these high-profile cases are not the rule. Local authorities in England and Wales spend about £25bn per year on bought-in goods and services, making more than 35 million purchases per year from some 800,000 suppliers.
Public expenditure has increased by 31.4 per cent since 1998, with key growth areas being education, health and defence. And with an election coming it is generally accepted that money destined for the public sector is about to be spent in huge quantities to ensure spending deadlines are met.
Meanwhile, a desire to tackle criticism and the need to cut costs appears to be changing approaches to tendering.
Speaking at the recent Government UK IT Summit, John Oughton, chief executive of the Office of Government Commerce (OGC), said the government is considering how to help smaller firms such as resellers to win more IT contracts.
Oughton said trials in the West Midlands and London were exploring ways of encouraging SMEs to bid for public-sector contracts, and reported that initial results show them winning 70 to 80 per cent of deals. The full results are expected soon.
"This is not about lowering standards, it's about lowering barriers," Oughton said. The OGC has claimed it will make it easier for resellers to bid for government contracts by cutting red tape. It is also examining how subcontracting is done in large government projects.
But unsurprisingly most resellers with public-sector work say the most important aspect of gaining such contracts is developing relationships with target organisations, so you actually assist in the creation of a tender in the first instance.
"If you are trying to get business through OJEU (the Official Journal of European Communities) or GCat you are probably too late. You can come in at the last minute with a cheap price but that may damage your business in the long run," says Tony Larks, marketing director at security VAR Peapod.
"Public-sector work is like stepping out of the real world; you have to leave your preconceptions behind. You can call it the 'Third Way' - it's a people-to-people situation dealing on their timeframe. In the larger contracts your real enemy is the procurement department, which has its own way of doing business."
Kelvin Brain, director of consulting at Compusys, believes many areas need updating before resellers can get a larger share of public-sector business. He says barriers to change include GCat, because it is updated only every five years, and the formal tendering process.
"I have seen too many projects that have failed because the IT people do not work out what they really need before the tendering process," he says. "It is also our experience that a tender pitch is very formalised, and the final decision is often made on a point-scoring basis. That's no way to decide on important IT projects."
So how does Brain advise resellers with little or no public-sector experience? "Stick with the kind of business you know, although you could also consider partnering with suppliers that are accredited on GCat or SCat, that may then sub-contract work to you," he says.
That is exactly the approach that IT security specialist Assurix took in getting the contract to replace the security infrastructure at the Department for International Development (DfID).
David Lannin, managing director of Assurix, says the firm made a cold call to the department, then teamed with Computacenter (CC), a GCat-listed supplier.
"When the tender was sent out to GCat suppliers we decided to team up with CC. It added a degree of complication because it meant DfID was dealing with two suppliers. But you have to be patient with these things," Lannin says.
So how much money is actually going into new IT projects? The top-level figures are enormous: £6bn for the NHS; £4bn for the Ministry of Defence; a share of an extra billion or so for local government; and a possible £3bn on a satellite tracking system for congestion charging for the Department of Transport.
The reality, of course, is that project funding often comes from a variety of sources. This is most evident in e-government projects where funding can come from the Office of the Deputy Prime Minister, the Office of the E-Envoy or the European Union, to name a few.
To complicate matters the Office of the E-Envoy is no more, morphed into the E-Government Office under the Cabinet Office.
James Governor, principal analyst at consultancy RedMonk, says smaller resellers can expect more business as the economy improves. "After the year 2000 the big consultancies targeted the public sector because of the fall-off in business elsewhere," he says.
"But now, with business coming back in the commercial sector, that leaves more opportunity for smaller resellers to get into public-sector work, and there is no doubt that there is plenty of money in it. You only have to look at the contract values in some of the larger controversial projects to see that."
Governor says he expects the upcoming Freedom of Information (FoI) Act and the need to achieve e-government targets to be key drivers during the next year.
Under the FoI Act, all public bodies must establish a facility allowing public access to any information they hold, such as housing benefit details or planning applications. The act applies retrospectively, allowing citizens to request information that is up to 50 years old.
"The funding is not really the issue. It is more a matter of ensuring that you get in at an early stage of the tendering process to help them specify what they need," says Brain.
He notes that funding for similar projects can vary wildly. "I have been involved in projects that cost £50,000, and then discovered similar projects costing other local authorities £220,000. It is an indictment of the process of tendering," he says.
Clearly one strategy for resellers is to hitch onto the coat-tails of major projects. An example is the £530m contract awarded to BT to provide and manage a broadband network, known as N3, linking all NHS organisations in the UK - 18,000 sites.
N3 will provide the infrastructure for the National Programme for IT, including electronic booking and the NHS Care Records Service. Under the terms of the contract, BT is the systems integrator and will subcontract connections to a number of telecoms companies, which will bid for tenders in different locations.
Meanwhile, Mark Bailey, public-sector manager at network reseller Telindus, says resellers need to get embedded in public-sector work. "If you are only looking at OJEU tenders then you are missing the point," he says. "If it is solution-based you have to shape it at the tender phase."
Telindus designs, implements and manages networks and works with a number of public-sector organisations, including Buckinghamshire County Council, Cornwall County Council, Leeds City Council, Warwick University, Westminster City Council and Durham County Council.
"We realised a long time ago that the real value is in understanding the sector. Success comes through knowing the IT manager, and ideally the chief financial officer, and you also need to understand national and central policy," he says. Bailey readily confirms the view that sales cycles are typically longer in the public sector, generally lasting about 18 months, and that work on proof of concept may or may not be chargeable. "It leads to a careful qualification process to ensure we don't get involved in work we think will not pay off," he says.
Despite such advice, access to tenders remains an important process, if only to gauge activity and evaluate and compare tenders nationwide.
The Tenders Direct web site (which is available through CRN Online Services at www.crn.vnunet.com) provides access to more than 30,000 current government and utility company contracts throughout the UK and the rest of Europe.
The Office for Official Publications of the European Communities provides Tenders Direct with between 400 and 900 new tender notices every day.
Tim Williams, managing director of Millstream Associates, owner of Tenders Direct, says a key component of public-sector work is understanding the large framework contracts that are organised by the OGC through OGC Buying Solutions and now with links into reverse auctions.
Under this system a local authority or a number of authorities together can define their requirements down to the last cable, then watch firms bid for the tender. Because all firms are approved by the OGC it is a fairly simple matter, in theory, to choose the lowest bid.
Williams says: "There is no tender document, no pre-qualification of suppliers. It cuts out a whole section of the channel; some companies are very concerned. I have little doubt that the size and range of this process will increase, but the fact is the value of the business is not published. There is no transparency in that."
In July, perhaps learning from leaders in online commerce, OGC Buying Solutions announced its intention to simplify the process by bringing all its activities together into one portal.
Williams says a further problem is that tracking tenders do not appear on OJEU because they are below the £100,000 threshold. "I advise people to keep an eye on the local press and trade journals," he says. "The problem is there are no national guidelines, so each local authority can choose its course of action."
But he also believes many resellers need to put more effort in. "Most resellers don't try to get to know their local council. It makes an enormous difference," says Williams.
Meanwhile, some resellers are hoping that a more open-source approach will free up government spending, bringing more funds for hardware and infrastructure.
But while the government is making all the right noises about open source, Microsoft recently signed a 10-year agreement with the London Borough of Newham as its software provider of choice - perhaps scotching the belief that open source is set to take hold in the public sector.
It appears that a cost analysis by CapGemini - funded by Microsoft - persuaded the council that the cost of migration was too high to bear. On the other hand, the Newham contract, which includes wireless connection to Tablet PCs, is likely to fuel debate about wireless services. Perhaps it will help promote such business.
Distributor Ingram Micro is upbeat. Sarah Guy, head of marketing at the firm, says: "There will be heavy growth in key areas as the government looks to support schools and government organisations, providing opportunities within the audiovisual, mobility and network connectivity markets.
"Following the successful introduction of the 'The Authority' campaign earlier this year and 'Back to School' in the run-up to September, we are taking this opportunity seriously. Distributors have dabbled in this market but not really delivered. Ingram Micro will look to change that."
Public-sector work has undoubtedly had a mini-boom in recent years, but winning bids remains a difficult and resource-intensive process for most resellers. If this government manages to improve this process it is sure to win friends in the channel.
Assurix (01635) 814 490
Compusys (01296) 505 450
Government Opportunities procurement portal
Microsoft Business Solutions (0870) 601 0100
OGC Buying Solutions Portal
Peapod (020) 8606 7171
RedMonk (020) 7254 7371
Tenders Direct (01224) 636 999
Telindus (01256) 709 200
For Green Pages go to CRN's online directory www.crnservices.co.uk.
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