Revealed: The true impact of G-Cloud on public sector IT

Senior figures divulge what portion of public sector IT sales go through the framework and how it can be increased

Less than six per cent of total IT spending in the UK public sector goes through G-Cloud.

That is according to senior figures who gathered yesterday at an event organised by industry body EuroCloud UK to discuss the framework. In order to encourage frank and honest debate, the event was held under Chatham House rules, meaning the speakers spoke under the condition of anonymity.

G-Cloud was established in 2012 with the aim of encouraging more SMEs to work with the government in order to get the public sector the best value on its technology. So far, total sales through the framework have surpassed the £500m mark – just under half of which has gone through small suppliers.

But, on the flip side, figures revealed to the meeting showed the framework's impact across the public sector has been minimal, with only between one per cent and six per cent of total IT spend across the public sector going through G-Cloud.

One speaker admitted: "This is very, very low. We all know it is really good value for money from SMEs, but is it that good? It's a bit unfair to do a true comparison because [the total] will include hardware and absolutely everything else, not just services."

They added that this is despite measures having been put in place to encourage use of the framework.

"Every digital project over £100,000 and every IT project over £5m goes through a spend-control process and part of that spend-control process is 'is this cloud-first?' And if not, why not?" they said. "Does the commercial strategy align with going through G-Cloud through the Digital Marketplace, and if not, why not?"

SMEconomics

Another speaker said G-Cloud's SME-friendly agenda was at first not truly understood in the Civil Service because many civil servants strongly believed in the economies of scale offered by larger suppliers.

"There were a lot of misunderstandings about SME policies," the speaker said.

"There was some nervousness from the Civil Service. The economists discovered that SMEs are less efficient, so in fact, by diverting spend from big companies to small companies, you make the economy less efficient and you create jobs just because people are less efficient.

"A lot of people thought it was a CSR [corporate social responsibility] agenda – trying to help this disadvantaged class of small companies by handing them business on a plate. The Civil Service thought it wasn't legitimate. They all believed in the economies of scale."

But the speaker added that after discovering the economic concept of diseconomies of scale – which claims SMEs can offer better value – they decided to prove naysaying civil servants wrong.

"I set off on a quest to prove they were intellectually wrong and I have done it," they said. "What I discovered is aggregation in the Civil Service is actually a mistake.

"The lever when you're buying tools [like IT] is not aggregating demand and getting a few pence off, it is about buying the right new stuff. Think of two levers – 'buying the right thing' and 'buying the thing right'. Buying the thing right is aggregation and being a good negotiator but... what is the bigger lever – innovation or aggregation? In a fast-moving industry like IT, what is it? Innovation.

"Would you, if you were this marvellous procurement authority, have advised the Royal Navy in 1939 to buy either aggregated battleships across the Commonwealth and get 10 per cent off the price of the battleships, or would you have bought aircraft carriers?"

They explained in that analogy that buying aircraft carriers was the better option because in the aftermath of Pearl Harbour years later, the use of battleships was not an appropriate strategy – making the point that regardless of the price, the appropriateness of kit should be a buyer's first concern.

"SMEs are really here to stay to provide value for money. It is not about handouts to grow the economy. It's business. For austerity reasons, the government can't afford not to get full value from SMEs."