There is now a golden opportunity for smaller IT suppliers to get their foot in the £57bn-plus UK public sector procurement door, according to government supply chain consultancy GovData.
Speaking at an Avnet GovPath University event at the House of Commons last week, Chris Hugo, chief executive of GovData, which creates strategic relationships between public sector buyers and suppliers, said the changing attitudes in government towards IT spend, and the fact that the government has pledged 25 per cent of deals to go through small suppliers by 2015, means the time is right to move into the space.
“In the past the market was very fragmented and decision making was spread across different departments, which meant they were unable to keep control of price points and who owned the budgets. It ended up with no gamekeepers and everyone was a poacher.
“The larger SIs controlled 80 per cent of government spend and eventually they stopped innovating,” he said. There was also a reluctance to challenge poor performance, he added.
In all, this made the public sector almost a no-go for smaller suppliers who were turned off by unwieldy contracts, lengthy tender times and difficult customers. However, under the coalition government this is all changing, Hugo explained, and Whitehall is frantically trying to cut the average procurement timeline from 478 days to 120 days, make all frameworks and tenders SMB friendly, and have no deals above £100m apart from in exceptional cases.
He said the rebirth of the “intelligent” public sector customer, which actively looks for innovation and is more engaged with their supplier, will be a much-needed leg-up for smaller IT VARs.
In addition, the fact that the government is finally toughening up by terminating contracts if the incumbent supplier fails, or challenging suppliers if they are not happy with the service, means the environment is a lot more competitive and SMB friendly. But he warned that suppliers needed to change their attitudes towards government procurement too and accept that it was changing.
“You need to completely throw away all preconceptions. This is a brave new world for government and it can be an opportunity if you are aware of how to implement it. We need to make sure it is a level playing field.”
Hugo said VARs should look to collaborate with their peers to offer a complete solution, and not be afraid to do so. He also urged VARs to challenge contracts if they feel they are not being fulfilled correctly.
“The government has made it fairly clear that the incumbent will not always win. If you want to win a deal, you have to go and challenge it,” Hugo said.
“If something feels wrong, it’s because it is wrong. Don’t be afraid of offending people. It is not your responsibility to prove who is wrong, it’s their responsibility to prove they are right.” But what do some of the more established public sector players think of the move?
Rhys Sharp, public sector CTO at integrator SCC, said his firm had noticed a shift in attitude already. “We do see it changing already, but for us we have never acted like the big system integrator and we still operate in a way that is similar to our SMB roots. The way we have invested in G-Cloud, for example, allows us to operate in a market where future spend will go, but we are also able to leverage our expertise as an infrastructure provider.
“In terms of the smaller deals, that is yet to play out, but we are seeing lots of tactical procurements and not that many big deals have gone through yet. However, what has been for some a phase of denial is now realisation that things are going to change.”
Chris Swani, head of public sector at Bytes Software Services, questioned whether some of the smaller players would be able to handle the volume of work required for public sector procurement. “According to government classification we are a large reseller and a lot of our business is Microsoft, and from that perspective there is not a lot to be changed there. However, the advantage for the government with this new approach is that they are going to get niche resellers delivering specialist cloud, storage and security services.
“But if the government doesn’t want just a niche offering, how are they going to scale? Also, getting on one of the frameworks opens up a lot of business opportunities – will smaller resellers be able to cope?”
Q&A Frank Bennett (FB) (left), SolutionsPath lead, Avnet UK Wayne Gratton (WG) (right), business development director SolutionsPath, Avnet EMEA.
Do you believe the government procurement process really will change to benefit smaller suppliers?
(FB) Yes, over time. But we have to set expectations correctly. There is a change in policy that the government has set and that is being pursued, but it is going to take some time to filter through. Targets are changing and people should be aware that they are changing.
How do you see it changing?
(FB) We have to be prepared to go and have conversations with public sector customers. Everyone has to be on message and should read documents such as Philip Green’s [procurement report on government waste) and equip and arm themselves with as much information as possible. Government customers will respect you because you have an understanding of what is on the table.
Why has it been so difficult for smaller players to get a foot in the door in the past?
(WG) Because of the complexity of deals and size of projects. How on earth can you manage a £2bn project? That has created a lot of difficulty for SMBs in the past and because of that lots of them have qualified themselves out of the running. The private sector has been more astute, particularly when looking at project length. SMBs have not been able to afford to spend that time convincing public sector customers of their value. But the changes announced publicly now represent a great opportunity for SMBs as well as for corporate resellers and system integrators.
How can Avnet help resellers secure those public sector deals?
(WG) We have our SolutionsPath strategy which has three steps. Firstly, vision – what is the opportunity and where can you as a partner fit? Secondly, enablement – define what you want to do and we will give you the skills and solutions around the different technology areas. Finally, execution – one of the elements of SolutionsPath is lead generation, using messaging that we know is resonant with government.
What can smaller players offer that the larger incumbents don’t?
(FB) The government is seeking innovation and it has sometimes found that lacking, which needed to change. Where is that innovation occurring? The SMB community. If you want to beat the larger players, you have to be innovative either in the technology solution you are offering, or the process. SMBs are more nimble and come with a different attitude. They are hungry and determined to prove themselves. Also, because projects are being split up, there is more choice and contracts are open to a wider range of people – perhaps at a local level, or based on particular specialist skill sets.
Is public sector procurement something that distribution is fully equipped to help with? Or does it add another layer of complexity?
(FB) What we are doing with SolutionsPath is actually demystifying the complexity. We are showing our resellers that it is different to how it was. We will help them understand the changing nature of how governments are going to be using IT – for example the citizen experience – it is not just going to be about satisfying internal requirements, but how government interacts with citizens and businesses. It is also about helping partners deliver solutions on systems that are already in use as well as new technology.
(WG) If distribution were not involved, who else would bring the right vendors, partners and customers together to bring the right value to the table?
10 popular myths about public sector Procurement (source GovData)
1 Government knows all the rules
2 It’s illegal to talk to customers before procurement
3 We lost because of a “brown envelope”
4 The incumbent always wins
5 The customer is a demi-god (unapproachable and aloof)
6 All deals have to go to tender
7 Competition is the only way to get best price
8 The big boys have all the right relationships and the customer trusts them
9 You must have existing references
10 Financial track record – You must have two years of accounts
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