Guest blog: Where is GOV shopping for innovative technologies?

Where is GOV shopping for innovative technologies?

G-Cloud is a great success, let’s make it greater. Let’s do that by reminding ourselves of its purpose, finding out how well it is achieving that and understanding the obstacles to greater achievement – then removing the obstacles. OK?

Purpose

Easily summarised by quoting Francis Maude – from a speech made in 2013

“There was for too long a misguided conviction in Whitehall that big was beautiful…

…Meanwhile more innovative and cost-effective solutions from smaller suppliers were never getting anywhere near Whitehall.”

How is it going?

G-Cloud spend: 24 months to Dec 2019  

£M

Hosting

Software

Support

Total

SME

101

265

719

1,085

Large

324

376

1,009

1,709

Total

425

641

1,728

2,794

 

Which in a chart, looks like this: 

Digital Transformation

We are looking for the innovative, cost effective solutions that deliver the re-imagining of processes and outcomes. This is a significant step beyond merely automating or computerisation of existing administrative processes and, by definition, involves the deployment of software.

The disproportionate spend on Support (professional services) is an aberration. Professional services are required for the ‘re-imagining’ and genuine support for implementation, but resource augmentation, which in context is on top of department’s IT payroll and other contingent labour supply channels has run at 70% of total spend on G-Cloud since its inception (£4bn out of a total spend of £5.8bn). This manpower expense is clearly masking a lot of other demand-side needs. To look at achievement of the Digital Transformation goals, we need to focus on Software.

Where is public sector shopping for Software?

Large enterprises account for 60% of spend. They deliver innovation, scale and dependable execution – but at a price. Big is beautiful and very necessary but they are always with us, G-Cloud was to level-up the market because, as Francis Maude (Lord Maude of Horsham) went on to say, the dominance of these suppliers “…was bad for the taxpayer and service users. And bad for businesses and growth.”

25% of SME spend goes to resellers of these global brands (or a small part to odd things that should not be in the Software Lot).

50% goes to products born in the public sector that don’t have a market elsewhere. Some of these are new and innovative, but the majority are ‘old school’ legacy systems moved into the cloud which are from the era of ‘computerisation’ – vital and utilitarian – but not supporting Digital Transformation.

25% of spend is going to small, innovative companies that are successful in the B2B sector and are bringing their products to the public sector through G-Cloud. This is exciting, this is the crucible that holds the white heat of technical innovation. 10% of overall spend in the 2-years (25% of 40%) is finding its way to these products.  

That summarises demand, ‘where the public sector is shopping’. Now let’s consider supply. Who are the Software SMEs that are putting the products on the shelves and what sort of products are they?

The left-hand stack is the demand-side spend we have just seen. The right-hand stack is a count of products SMEs are putting in the marketplace analysed in the same categories. While for every £5 being spent on G-Native products £2.50 is finding its way to the B2B►B2G newcomers, if that spend were spread evenly over all products then for every £5 spent on G-Native products, we should expect to see £10 spent on the newcomers or four times more than is happening in practice. (The other categories are roughly the same).

What is happening?

Looking more closely at the B2B►B2G suppliers, there are roughly 1,200 of them – but only 150 are receiving any spend at all 87.5% have not made a sale. But these are companies with a proven value proposition in the B2B sector. So, it is no surprise that over 300 SME Software suppliers withdrew from the marketplace between G-Cloud 10 and 11. They go back to where the money is.

This is a lost opportunity.

Why is it happening?

It is clear from empirical research that the causes are mainly around lack of experience and marketing maturity in dealing with the public sector. Some successful SMEs show outstanding success, those who do not typically:

  • Are invisible to buyers
  • Make it hard to do business with them
  • Do not address the perceived risk of working with smaller businesses
  • Have a short attention span (go back to B2B without resolving the obstacles)

What to do about it

Free market thinkers may argue to leave it up to Darwinian selection and resist intervention. But it is a highly contrived marketplace with a great deal of intervention (e.g. no increase in prices when input prices rise). It is wasting an opportunity to better achieve the original aims of getting SME innovation to the public sector.

Crown Commercial Service earn management charge of 0.75% of all spend on G-Cloud (currently £12m pa and growing at 25% year on year). A significant amount is invested in managing demand, with effort going into getting more public sector entities to buy through the framework.

A smaller but valuable investment is put into interventions with suppliers in education, engagement and research.

The return on increasing this intervention into supply should be positive and bring about better achievement of the original goals. This should start with research to test the observations in this article, pinpoint the causes and propose cost-effective intervention activities and targets. But to bring 300 of the SMEs which are failing to address the public sector needs into full engagement would, to paraphrase Francis Maude, be good for the taxpayer and service users. And good for businesses and growth. 

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