The potential threat posed by large platforms like AWS, Microsoft Azure and Salesforce to SME suppliers in the public sector has raised concerns about an oligopoly of larger companies taking over the market with SME suppliers struggling for breathing space. How real is the threat, and should SMEs be concerned?
Bigger players are doing incredibly well in the government space, and are winning business at an ever-increasing rate. This has led some to believe that the government should rectify the situation, by ensuring that SMEs are invited, included, or even preferred in procurement exercises. This, in theory, could level the playing field.
But is intervention necessary and does the current state of the market not allow room for SME suppliers to grow?
A new reality
In some respects, it seems that many government procurement professionals are struggling to reconcile the reality of the procurement landscape with their experience of the traditional value-added reseller (VAR) model. For them, volumes were the key metric and if you bought large enough, you needed to speak directly to the original equipment manufacturer (OEM) to get the best deal.
The logic seems clear: AWS, Microsoft and others are here to replace the original behemoths like Capita, Fujitsu and Accenture as the magnet for 90 per cent of government procurers (and public cash).
In my view, this isn't quite true.
Unlike the traditional outsourcers, AWS and Microsoft are also creating opportunities for SME suppliers through their advanced and trusted partner networks.
This, of course, depends on the nature of the SME business. If you run a small datacentre or co-location facility (ie a private cloud), then AWS and Microsoft Azure are direct threats to your existence - not just in the public sector, but anywhere. This is not new, and has been clear for a long time. There is nothing that government could, or should, do about that. It may be that this is simply another shift in the tide for businesses working in that space, where the bigger players will simply win out.
If, on the other hand, you offer true value to customers through expertise, managed services or some other means, then AWS and Microsoft Azure can create amazing possibilities for your business. They can give you the opportunity to apply your value to massive infrastructure scale, widening your scope and allowing you to play in the same arena.
Educating the government
The problem arises when government departments insist on working with AWS, Salesforce or Microsoft directly and prevent their partners from applying for business - and some absolutely do insist on this. There are some very notable projects where this has happened, even though both the SME suppliers and the big players know that there are no advantages to it. In the end, it will cost more for the customer and business will be lost for the SME.
If the government were to mandate the ‘go-direct' strategy, then could these platforms eventually become the new oligopolies? I believe a complete overhaul of the current procurement framework is unlikely, given how diverse government and business needs are. Traditional, larger companies and SME suppliers alike will always have a part to play within the procurement landscape - how large this part is, is subject to changing technology needs, regulations, and business strategies.
Big players can help increase knowledge and understanding by spending more time explaining to government the potential value of working with their advanced and specialist partners. This would certainly help create more opportunities and scope for SMEs to grow, while the government would be able to take advantage of the massive scale and diversity of services that AWS and Microsoft ecosystems offer.
Smaller, more niche, and specialist providers can apply these hyperscale technology platforms to newer and more complex problems within governments, be entrepreneurial, nimble and hungry. If customers understand their value (with the help of the education process driven by the platforms), then opportunities become vast and everyone wins. As an example, Salesforce has decided not to be present on G-Cloud directly, preferring instead to work through partners. Perhaps this is a standard worth following for all the larger players.
The power of partnership
A collaborative approach can bring SME suppliers, large enterprises and the government more benefits than direct market competition. Small and large players can work together to apply innovation to real problems and bring value to government. Leveraging the power of the technology and expertise that lies with the partner networks makes the difference between staying on top of the changing tides, and being consumed by them.
Denis Kaminskiy is CEO and co-founder of Arcus Global
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