There is no doubt that the public sector is a potentially huge market for resellers. It employs about a quarter of the UK workforce, accounts for 40 per cent of GDP and, in these cash-strapped times, is the one part of the market that seems to have both money and the willingness to spend it.
The public sector - a term that covers a wide area, including the health service, central government departments, education, police, the army, local government and universities - is benefiting from a spending bonanza.
But is that investment trickling down to smaller suppliers, or just being gobbled up by the usual suspects?
The massive NHS National Programme for IT (NPfIT), a £2.3bn project to modernise systems, is the highest profile government project, but there are also many smaller ones going on.
The question for resellers is can they get involved, or is this just a game for the big boys?
The stakes are enormous. The NHS, for example, currently spends £1.1bn per year on IT hardware, software and services, and this is set to rise by a further £400m this year, £700m in 2004 and £1.2bn in 2005 as the NPfIT kicks in.
When it comes to getting smaller suppliers involved in the provision of kit and services to the public sector, the government is sending out conflicting signals.
It has just launched a website aimed at providing a single point of entry for SMEs that want to supply the government.
On the other hand it seems to stick to a small coterie of large suppliers, a cosy club that the small reseller cannot break into.
The NPfIT is a case in point. Traditionally the NHS, unlike most other parts of the public sector, has devolved power and allowed individual hospitals and trusts to do deals with local suppliers with which they feel comfortable.
Although this has created a patchwork of legacy systems, it has worked well. It has also benefited a number of smaller resellers, which have been able to forge links with the NHS at a local level.
But no longer. The NPfIT is designed to create a more centralised system delivered, largely, by big suppliers.
"We have concerns about the role of smaller suppliers in the programme," said Laurence Harrison, healthcare programme manager at Intellect, formerly the Computer Services and Software Association (CSSA).
The programme is scheduled to run for five years. As its central plank is a scheme to create an Integrated Care Record Service, an electronic patient record that all parts of the system would be able to access.
Harrison explained that about 250 of Intellect's members - about a quarter - are involved in some way with delivering IT systems to the health service.
"We have a representative role to play, making sure that the business environment is right for our members," he said.
The process of awarding the contracts for the NHS programme is continuing; it has so far been whittled down to 30 separate companies and consortia, with the usual high-profile suppliers very much in evidence.
About 80 per cent of the CSSA's members are SMEs, and Harrison feels that, although the massive NHS programme is a good thing overall, it is these smaller suppliers that risk being frozen out, as much by lack of information as by anything else.
Local service providers
The NHS NPfIT creates five geographic regions across the UK, each of which will be dealt with by a local service provider (LSP).
These LSPs will be large service companies, and they will use smaller niche suppliers to deliver specific projects.
The problem, according to Harrison, is that small IT suppliers are finding it hard to get the information they need simply in order to get involved with the various consortia.
"Information flows out from large NHS centres but there are problems with it filtering down," he said. "This creates access problems for SMEs."
It can be hard for the small dealer to even identify the LSPs, which means that by the time they do find out they may already be too late to get involved.
Intellect, which meets regularly with NHS IT supremo Richard Granger, is fighting the small suppliers' corner.
Harrison points out that because legacy systems are such a key part of the NHS infrastructure, the SMEs that set up these systems will have to be involved in some way with this brave new world.
(However, many small niche healthcare suppliers have been snapped up by larger vendors keen to capitalise on their contacts and no longer actually exist.)
Although perhaps not a typical project, the NHS programme does throw up the sorts of problems that dealers are likely to face going for any public sector IT contracts.
One common cause of confusion is the fact that there is no single organisation that buys goods or services on behalf of the government as a whole, so it can be hard for smaller suppliers to make contact with the right people.
The closest any organisation comes to being a central buyer for the government is the Office of Government Commerce (OGC) which, with Business Links, is the driving force behind the supplying government website.
The OGC centrally manages contracts and many government departments buy through it. Although the OGC has committed itself to opening up government commerce to smaller suppliers there is still a long way to go.
The launch of the website is a tacit admission that small suppliers found dealing with government bewildering, and it does a good job of cutting through much of the public sector jargon.
A survey last year conducted by the OGC and Tenders Direct found that 60 per cent of firms polled found it hard to get information on government contracts, and 70 per cent said they found it difficult to make public sector contacts.
Forty per cent felt that the government was not interested in dealing with smaller firms. Many cited the way that small contracts are aggregated into larger ones as an example of this 'bias' against small suppliers.
The British Chambers of Commerce has called on the government to open up the tendering process by creating a clearing house for contracts under £100,000.
The £100,000 threshold is important because any contract over that has to be advertised in the Official Journal of the European Communities (www.ojec.com) which, although it is no longer available in print form, is an essential guide to upcoming contracts.
One of the main problems that small businesses face in the hunt for public sector contracts is the bewildering amount of red tape.
"We have long lobbied to get small firms a fair share of government contracts," explained David Bishop, a representative of the Federation of Small Businesses.
"There is little thought as to how these contracts are advertised. They come in huge documents that small businesses do not even have the time to go through."
Bishop insisted that the biggest problem has always been cultural, that the civil servants that draft these contracts and run the procurement side have no experience of dealing with small businesses, and no idea what they are like. But things may be starting to change.
"The government has been sending out more positive messages about the role of SMEs in the economy and how important they are. Even civil servants are starting to become more aware of the needs of small businesses," said Bishop.
"This may be a good time for small resellers to start thinking about making a pitch. They might be taken more seriously."
GCAT and SCAT
One sure-fire way to be taken seriously by government buyers is to be listed on its 'pre-approved' buying catalogues: GCAT for IT systems and SCAT for IT services.
Technically, according to the OCG, the online catalogues are not 'approved lists' but rather 'frameworks'. They are run by OGC Buying Solutions and provide government customers with 'pre-tendered' products and services from the larger suppliers.
Government customers do not have to use the GCAT scheme to buy, and some use it just to get indicative pricing, but the pre-tendered suppliers include some very serious channel players, including Computacenter and SCC as well as new entrant PC World Business.
All do large volumes through the site, and the government sector is now Computacenter's largest division.
Although all the suppliers in the different GCAT sections - hardware, software, telecoms, maintenance, managed services, VARs and solution providers - are large companies, there can be opportunities for smaller firms.
"Small dealers need to partner with larger ones," said John Griffith, director of consulting at public sector reseller Compusys. "We are working on a bid with an SCAT-accredited partner that is much larger than us."
Griffith claims that the key is to have experience already working in the public sector. This means that Compusys gets to hear about upcoming tenders, and can work with the right partners.
"This allows us to box above our weight in the public sector," explained Griffith. "We have won OJEC contracts going up against competitors 20 times our size."
Public sector involvement also requires a very hard-working bids and tenders team, scanning the horizon for likely opportunities, and Griffith admits that this is very time-consuming.
Bidding for public sector contracts can be hard and thankless work. Often the tender requires three-year accounts, reference sites and previous experience of a similar contract, which puts the reseller in a chicken-and-egg situation.
But although it can be hard work, there are less obvious benefits in bidding for public sector contracts.
One is that, although the initial request to tender may not provide very much information because the length of the notice is limited, many public sector customers are happy to provide more information about what is required.
"Public sector quoting is very formal," said Griffith. "But as customers they tend to be very honest. They will tell you how they are choosing the bid, how much it will be on price and how much on vendor experience."
Public sector bodies are also required to provide feedback within 15 days to those that have been unsuccessful. Again this provides a real opportunity for a reseller to hone its offering and try to do better next time.
One product area where the government is a big, demanding consumer is secure systems. The government has been at the vanguard of demanding secure systems, and not just for the defence services.
There are obstacles for suppliers in terms of getting products accredited, but the public sector does provide good business for security specialists.
"The government is demanding when it comes to procuring security products, but that is a good thing," said Peter Edgeler, director at specialist security distributor Portcullis Computer Security. "These products are helping to protect the critical national infrastructure."
The starting point for supplying secure systems to government is the website of the Communications Electronics Security Group (www.cesg.gov.uk), part of GCHQ, the government's secure communications division.
Despite the additional costs for the supplier, Edgeler insisted that there are benefits in putting security products through stringent government accreditation programmes.
"There is a payback, because increasingly commercial customers are asking for certification too. They need it if they want to deal with government, and it gives us the edge in dealing with them because we can show our expertise," he explained.
It means that security vendors have to prove their credentials, which is a good thing for the market.
Despite Portcullis' security expertise, Edgeler admits that size matters when trying to win public sector contracts, and claimed that some large customers will not deal with a supplier of their size.
"We have a turnover of about £3m and many government customers are not prepared to take what they see as a risk dealing with us," he said.
"They would rather deal with a larger supplier, even if they have a smaller security division and less expertise."
The assumption that bigger is better is the fundamental flaw in the way that government sources and uses IT.
It is no coincidence that those government IT contracts that have hit the headlines for the wrong reasons - delays and spiralling costs - have tended to be the most ambitious ones, where large suppliers have over-promised and under-delivered.
This is in marked contrast with the efficient way smaller dealers have supplied public sector customers, particularly in the health service, in a low-key way for many years.
The public sector is more than just the health service, of course, and there are other lucrative contracts coming up.
For instance, the government plans to spend £2.7bn on IT for the police and courts this year, so dealers need to keep scanning for tenders and not be afraid to go for the big deal.
Compusys (01296) 505 100
Federation of Small Businesses (020) 7592 8100
GCAT (0870) 268 2222
Intellect (020) 7395 6700
Portcullis Computer Security (020) 8868 0098
Communications-Electronics Security Group
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