The white heat of digital transformation opportunity is found in the crucible of SMEs working in the B2B sector with emerging technologies.

Do these entrepreneurs see public sector as a good opportunity? – Probably not.

B2G is competing with B2B for these transformational products.

B2B migrating to B2G takes a different approach and they may need a modified product.

We should realise now that we have not invested enough in making this path more friction-less. 

The best time to plant a tree was twenty years ago. The second best time to plant a tree, is now.

Time to work on bringing SMEs into B2G. 


Disclaimer: I know as much about developing and executing public policy as the next person who has never worked in government but has boxed sets of Yes Minister and Yes Prime Minister.

The question is, if they were to start G-Cloud again from scratch, would the knowledge, observations and myths that make up our present quota of ‘wisdom’ on the subject change any of the ‘big’ bits of policy and its execution? Sure, it would change many little bits, like the way the platform is coded and MISO… but the ‘big’ bits, if you were starting again, how might you re-imagine the project?

What’s it all about?

If I was in the room with the first project team, the first thing I’d want to do is check what the objective(s) is/are. As they aren’t here to answer for themselves, I’ll suggest:

Objective: Better, faster, more consistent outcomes in a public sector which is itself changed into a more flexible, forward-friendly environment which will permit and facilitate dynamic improvement in a setting of constant change.

I’m hoping this was the objective (see Disclaimer), if it was simply to save money and time buying new IT stuff, then I have probably wasted a wet Saturday afternoon.

Method: Develop a friction-less marketplace for digital transformation technologies to harness the benefits and advances of Cloud, big-data, social, mobility and the emerging AI, ML, RPA types of technology. Meanwhile up-skill and/or create a marketplace for the skills necessary to re-imagine the outcomes, delivery processes and execute their creation and effective management.

Somewhere between objective and method you might throw in stuff about data and its role in the delivery of the objective.

An unanswered question

Was there ever an objective, of the founders of G-Cloud, to nurture the native technology sector, to build intellectual capital on which a sustainable competitive advantage can grow? Call this the SME-Tech Agenda. And were there even wider social value ambitions? To stimulate education, aspiration, wealth creation? Or were these the bailiwick of other departments and in our room, they have no place on the whiteboard? If that is the case, we probably need to start another section on that whiteboard, simply headed ‘Consequences’ – because what we are about to do will certainly impact these and others.

One thing, maybe overlooked back at the moment of conception

The structure of the supply-side of the digital market is probably a layer of complexity not given as much consideration as I now think it deserved.

This diagram represents where the G-Cloud and DOS spend for the 24 months to September 2019 has gone:

This disproportionate spend on people costs suggests to me that a lot of it is a substitute for general I.T. manpower spend (either permanent or contract) covering a wide variety of activities. As my background has been exclusively software for the last 35 years, I’m going to leave this and the Hosting component to others more experienced in the field to contribute to the discussion.

What can we learn from Software?

From the perspective of managing the marketplace, the spend on software can be seen as comprising these elements:

Software is the active ingredient of digital transformation. It needs to securely run on and through something (hosting) and implementation, training, support and maintenance (professional services) are part of the whole product. But if digital transformation is the objective, it is the effective deployment of software that achieves it. Where does the innovation and revolution come from?

There are the global brands, sold directly and through resellers – some of which may be innovative, indeed some of the biggest leaps of innovation cannot be made without big laboratories and R&D spend (and the buyer will need a big budget to benefit from them). But in that spend on the global brands there is a considerable amount on business-as-usual applications, not the transformation that is essence of our objective.

Looking, as I have done, in the detail of which suppliers are receiving the public sector spend, there is a very large proportion that goes to ‘G-Native’ software vendors. This is a term to describe applications built for public sector and have little application outside public sector (e.g. local authority waste management or planning process management, prisoner and probation systems or police evidence management applications). These can be innovative, but many are spin-offs from old legacy applications that have done no more than automate old ways of working. Digital transformation requires a re-imagination of the outcomes and processes; automation is good but not the exponential delivery of value that we are looking for.

In my opinion, the white heat of transformational change should be found in the crucible of the SME private sector (here termed B2B). If the digital marketplace is to achieve our over-arching objective it needs to successfully draw the innovation from the emerging technologies in B2B and bring them to serve the needs of public sector. From the perspective of the supplier/entrepreneur successfully exploiting their innovation in a private sector business market, this involves a successful business model migration B2B►B2G. It is quite clear that this is not working as well as it could.

What’s the evidence?

Analysing the spend data: most Large organisations are making money, so are the G-Native (they must, they have no other market). In the 12 months to September 2019, only 524 SMEs received any spending on their software products. That’s out of a total of approximately 2,400 SME software suppliers on G-Cloud – only 20% are earning any income at all – and given the high proportion of G-Native SMEs in that successful 524, that means B2B►B2G are really not doing well.

Further evidence emerges if we compare the names of 2,240 Software suppliers on G-Cloud 10 to 2,630 suppliers on G-Cloud 11. This reveals that 611 ‘names’ did not appear to migrate from G-Cloud 10 to 11, that’s 27%. Some will have changed name or been acquired by another business but will have made the transition to G-Cloud 11. Crown Commercial Service (CCS) may have a better handle on the true figure, but it is reasonable to assume that (say) 500 software suppliers did not bother to make the migration.

Why should this be an issue?

This B2B►B2G sector is where we would expect the transformative emerging technologies and ideas to take hold. An SME with revolutionary technology will look for the easiest path to exploit it. A market where there is plenty of cash, demand and easy access. G-Cloud and the public sector are in competition with FinTech, eCommerce, Marketing/Advertising and many other growth sectors. Year-on-year we do get more SMEs into the ‘sales club’ and some do profit strongly from their efforts but 80% have not made it and they will be turning elsewhere. Where would a successful SME prospect for their next market – how likely is it to choose G-Cloud and how long will they stick with it?

The view from the trenches

An SME technology company has limited resources to expend on sales and marketing, the founder(s) are likely to be technologists. While G-Cloud has done well to break down the barriers to sell into the market, barriers still exist. Perception, myth or reality: public sector selling is seen as costly with long sales cycles and dominated by incumbent global players.

The biggest change I would advocate, if we were to start over again: invest a lot harder in helping the SME suppliers to succeed.

If in any doubt about the impact read Kate Craig-Wood’s article The Dream Is Dying and be sure to look through the comments where other SMEs reflect their frustration. That article was mid 2016 – over 3 years later we are just beginning to recognise this is an outstanding task that needs addressing.

Who’s fault? Who’s responsibility?

Looking at the way many hundreds of SME software vendors approach G-Cloud we can establish that they, the suppliers, are doing it badly and making elementary marketing mistakes. Many, my research suggests the majority, are unaware of the quite radical differences in the procurement practices of the public sector and the changes to the supplier’s sales and marketing tactics required to be successful there.

CCS manage the framework and do provide assistance to suppliers, running workshops and publishing supplier guidance. They have worked hard (and successfully) over 6 years to build the demand side of the equation, getting more buyers to understand and come to G-Cloud for their needs. These buyers are their customers and it would be an understandable position to take to say that managing suppliers is not their business. However, if the objective is as set-out at the beginning of this article, leaving ‘market forces’ to develop the supply side is not working. The end-game emerging appears to be a renaissance of the oligopoly – quite a triumph for the law of unintended consequences to deliver the opposite outcome to that often expressed at conception.

While not CCS ‘fault’, if they want to deliver on the over-arching objective, they are best positioned to deliver the support SMEs need to be effective participants in the Digital Marketplace and deliver the sought for benefits. Discussions I have recently enjoyed with insiders in CCS suggests that this is in contemplation. If the estimate of 500 SMEs falling off the framework is accurate, then it may be too late for some, or at least we could say it will be a harder job to bring them back than if the need for this investment had been anticipated at or near the outset.

What type of support?

Here’s the reason for discussing these observations openly. To provide the opportunity for suppliers to express their own views. I support free markets and typically frown on direct intervention, but the market seems to need to be made less imperfect. The free flow of good, actionable information is likely to be key. Educate, sign-post, counter the power of incumbents and the temptation to go straight to the global brands – get buyers to tell their stories. Even mark the suppliers’ positioning on the G-Cloud catalogue, if it’s inadequate tell them it’s the reason they are not getting business. The MP-Index I’ve published is a very rough tool, but it goes some way to starting this process.

[This article was originally published on LinkedIn 11/11/2019]