How resellers can become local heroes

Simon Meredith explains how to break into the market

Despite the potentially huge financial benefits that local authority work can offer resellers, only a select handful seem capable of landing the deals. Many VARs assume that it is impossible to break into the local government market unless your business is on approved lists or has a very distinct specialisation. They are wrong.

Silversands is a Microsoft Gold Partner based in Poole. It has won contracts with local authorities around the country by focusing on their needs and by selling its ability to tailor Microsoft technologies to meet them.

“Many local authorities are looking to do very similar things and it makes sense for them to learn from each other,” said James Mallalieu, head of collaborative solutions at Silversands.

The technology that has been helping Silversands win business is Microsoft SharePoint. It arrived just at the time when local authorities were looking to make information more easily available electronically and Silversands has found a niche in helping them to do that. The trick, it seems, with local government is getting your foot in the door.

Local authorities don’t like being guinea pigs and are more likely to trust a supplier if they are not the first to try it.

“Over the past four years we have had a particular focus on local authorities,” said Martyn Harris, democratic services manager at one of Silversands’ customers, Shepway District Council. Harris underlined the importance of being established. “Silversands had a proven track record, coupled with the fact that our budget would not stretch to having the bespoke solution which we had been looking at.”

This was why Shepway went with the SharePoint project, an internal document management system for council members. Silversands had also already done some work with the Shepway IT team, and demonstrated that it wanted the business.

Getting the first break is not easy. For Silversands, it came some time ago, and Mallalieu confessed that he does not know exactly how it happened. But the company now has more than 20 local government customers. Replicating what you have done for one authority is another key to success in this market.

The Silversands experience shows that it is possible to break into the local government market, and that it is certainly worth targeting. IDC predicts that local authorities in the UK will spend about £2.15bn on external IT equipment, software and services this year. Datamonitor expects that, over the next three years, local councils will pump a total of £687m more into external IT spending raising the total to £2.55bn by 2007.

Massimiliano Claps, programme manager for government IT research at IDC, told CRN that spending will grow at between five to six per cent a year for the next three to four years as local government moves from getting its front-end electronic services up and running to related areas such as electronic payments and the development of smart-card systems. A lot of local authorities have also realised that their back-office functions need sorting out, he said. “So far they have only automated the interface. It doesn’t mean that the efficiency or effectiveness of service delivery has been improved.”

In other words, there is still a great deal to do within local authorities and much of it will be traditional systems integration work. According to Datamonitor, now that most of the 2005 egovernment targets have been met, front-office spending will slow and begin to shift from internet-based solutions to enterprise resource planning, financial solutions and other internal and back-office systems that will drive overall efficiency. There are various types of authority in the UK and they number 400 or 500, depending on the criteria you use. While there is plenty of budget, there is not going to be room for everyone.

“It is competitive because it attracts the major players such as IBM, Accenture and CapGemini, as well as local ISVs and VARs. There are also a number of [business process outsourcing] BPO suppliers such as Capita that are going after the local government market very strongly and combining their traditional consultancy skills with IT,” said Claps.

Many organisations are looking to take IT services off the hands of local authorities as part of an outsourcing deal. According to Ovum, between now and 2008 the strongest area of growth in spending will be BPO, at about seven per cent a year.

But that’s not the way all local government organisations want to go. According to Datamonitor, only seven per cent of local authorities outsource more than half of their IT spend and only 25 per cent expect their outsourcing spend to increase over the next three to five years.

Unlike the Inland Revenue and the Department for the Environment, Food and Rural Affairs which are involved in very large-scale outsourcing contracts, local authorities seem to look at outsourcing on a case-by-case basis. This is because budgets are set, and projects launched and put out to tender for different areas of the authority separately. It is rare for a council to work with only one supplier, unless it is for more general-purpose products.

The picture is not simple, though. Some authorities, driven by the need to reduce cost and the failure of older approaches, are giving contracts to single suppliers, and putting intense pressure on them to deliver.

Kathleen Klasnic, director, vertical market technology at Data-monitor, told CRN: “Historically, local authorities have tended to use one supplier in some segments, which then sub-contracts. This is shifting due to failures in the sub-contractor layer. As a result, the prime supplier is accountable for the quality of work and financial stability of the sub contractors.”

Claps agreed it can be difficult to meet the stringent demands that a local authority places on a supplier. “More and more projects are tied to cost savings or efficiency gains and you have to have broad shoulders to run those projects.”

But it is not just cost pressure that makes local authorities so demanding. “Everything has to be publicly visible. They are a very cautious about spending and there is a great deal of focus on hitting the targets and the success of the project,” Mallalieu noted.

To get your foot in the door, you need to have a partnership with a credible supplier, or something that appeals directly to an authority, said Klasnic. “You need a track record or partners with adequate connections or experience. Failing that, offer a solution tailored to their market or to communicate the benefits in a language they can understand.”

Eric Woods, government practice director at Ovum, said: “One of the key issues in local government is to recognise that there is a vast difference between a large metropolitan authority such as Birmingham, a mid-sized county council and, say, a small district council. Their budgets, resources, culture and approach to procurement are going to differ.”

For smaller authorities, being a local supplier helps, said Klasnic, and so does being on the S-Cat (specialist services) and GCAT (for general IT hardware and software) schemes that are run by the Office of Government Commerce (OGC).

Peter Rusling, client service manager at Parity, a well-established government VAR, told CRN: “Take ebusiness; there is an awful lot of activity in that area at the moment, and if you are on the list you can pick up business. That could be a small amount of consultancy to systems development contracts worth hundreds of thousands.” (See CRN, 31 October for an alternative viewpoint from the perspective of resellers selling to central government.)

Being on the primary lists is not essential, Silversands, for example, is listed only as an approved sub-contractor for primary contractors on the list. But being on the OGC lists does no harm either, and now is a good time to apply, according to Rusling.

“The government wants to make sure it has companies with the right credentials. It is going through a process of not only refreshing the suppliers but revising the whole scheme to take on new European legislation. It is also looking at SME specialists.”

Unfortunately the word ‘specialist’ will probably exclude most resellers from the party. In his view it means: “You need to be an experienced provider to the public sector and certainly you will need to have specialist knowledge of how to work with local government and their standards and targets.” Unfortunately, even if you do come up to scratch, the process can take more than a year, Rusling added.

One attribute needed to sell to local authorities is patience, said Will Bell, head of public-sector sales at Extreme Networks. Tendering and decision-making can be very drawn out. “It is a very different culture, a more consultative sell, so don’t expect your customers to have the same urgency as private business. The financial year is April to April and anything not included in this year’s budget will not go through, except in an emergency. This means that sales cycle for new projects can last up to 12 months,” he said.

As well as being lengthy, the process can be frustrating, said Simon Aron, managing director of Eurodata, which has numerous local government customers. “Contracts go out to public tender, which is a very lengthy, costly and time-consuming process often based on price and not quality. Furthermore, there are no guarantees on getting the business and the limited communication means that approaches and responses are kept on a very formal basis.”

Knowing what a local authority’s current priorities are is very important. Bell told CRN that it is always worth looking up an authority’s Implementing Electronic Govern-ment (IEG) Statement on their web site. “This will give you information on their egovernment progress and spending plans. Resellers should also try to find a copy of their IT strategy document.”

Bell also advises selling as high up the organisation as possible. “Go straight to the IT director if you can, with a differentiated, egovernment-relevant solution. The success or failure of IEG rests directly on the IT director’s shoulders, and I guarantee that the incumbent suppliers will be on good terms with the IT director.”

Seminars also go down well if they are relevant. Bell recommends hosting them at a local public-body venue, keeping any hospitality discrete. “Overt jollies are often frowned upon, whereas a seminar at a local NHS Trust is much easier to sell. Don’t forget the hospitality – just don’t make a fuss about it.”

As well as being patient and treading carefully, you may also need to explain technologies and concepts in simpler terms. The levels of expertise among those responsible for buying IT varies within local authorities. This is complicated by the fact that these individuals are answerable to governing members or executives who can be rather inexperienced.

“They have to submit a longer term plan and get the buy-in from members rather than a chief executive. The members are often not business people and may not be IT literate at all,” Aron said.

Much of the time, said Mallalieu, local authorities don’t know what it is that they really need to do. “They can produce a tender on which what they ask for is not what they need. Having a relationship with the customer has helped us because we’re able to help them understand what it is they require in the first place.”

If you are already in the market you have a much better chance of winning local authority business. It is as much about understanding the sector as anything else, said Rusling. “You need to understand the culture and the rules – particularly in areas like S-Cat. The public sector is there to provide a service to the public, not for purely financial reasons. They are passionate about what they do, care about the services they provide and are a pleasure to do business with,” he said.

While not everyone may agree that they are good to do business with, they are certainly loyal, said Aron.

“One of the main benefits is that once you get into the local government and you gain their trust, they like your advice and they will continue to use you. They are loyal and keep coming back. Additionally, local governments tend to have more projects than corporate clients,” he said.

But even if you do break into the circuit, don’t expect it to be easy. “They have lots of sites and lots of budget holders in individual departments. For one council we are dealing with, we have 115 different individual accounts,” Aron added.

In the end, success is all about being hands-on. All interviewees agreed that the more flexible you are, the more business will come your way. To succeed in the government sector you must have a proven track record, and take a personal and professional interest in how a local government is set up. The hard part is getting started.