Preview

CCS Spend Data update gives sales figures for the Digital Marketplace July-to-October 2018

Overall it seems the November 2017 forecast of £2.5bn for the year to June 2019 looks unlikely

Growth rate of spend with Large Enterprises is growing and SMEs is falling

Large enterprises are strongly pursuing the opportunity of the Digital Marketplace 

Many SMEs can improve their competitive positioning 

 

Updated Digital Marketplace Spend Data

CCS have published updates to Spend Data for G-Cloud, DOS and Digital Services. It is nicely presented in an interactive BI format here [click link]. I’ve been looking through the detailed data and offer a few observations on the aggregate figures. In a second article I will focus more on the data relating to Software (SaaS).

Update period

The reliable data added to the set spans the 4-months July to October 2018. This ignores the last month of the data-set (November)1 

Summarised Spend Data (pre-publication – draft figures)

12 months

to Oct-18

Hosting

£M

Software

£M

Services

£M

G-Cloud

£M

DOS

£M

Combined

£M

SME 50 100 320 470 156 626
Large 123 120 434 677 362 1,039
Total 173 220 754 1,147 518 1,665
SME% 29% 45% 42% 41% 30% 38%
Since

April 20123  

Hosting

£M

Software

£M

Services

£M

G-Cloud

£M

DOS

£M

Combined

£M

SME 226 269 1,234 1,729 220 1,949
Large 316 302 1,629 2,247 492 2,739
Total 542 571 2,863 3,976 712 4,688
SME% 42% 47% 43% 43% 31% 42%

The G-Cloud total spend for the 12-months to October 2018 of £1,147m is a 13% increase over the 12-months to October 2017.  Spending on DOS in the same period almost trebled with a 265% increase to £518m from the previous £142m.

 

 

Comparison to the November 2017 Forecast

In November 2017 at the CCS Tech Pillar Director’s Briefing, the Digital Future Director revealed the ambitious forecast that spend across the 4 Digital Futures platforms would reach an annual level of £2.5bn in the 12 months to June 2019. Building a model on the weighted average of the previous 3-year’s seasonal trends provided a ‘flight-path’ (the white dotted lines in the graphs above). This is to address the question: If we are going to reach this target what would progress look like. The dominant 2 platforms are G-Cloud and DOS2.

As can be seen from the combined G-Cloud & DOS chart, monthly spend has moved sideways in the 4-months to October, making the target look less likely to be achieved. The DOS component is above the projected trend and so it is in G-Cloud that growth seems to have stalled and monthly sales have somewhat plateaued.  

Exponential goes linear?

Spend through the G-Cloud and DOS frameworks in those last 4-months averaged about £147m – over the longer term, looking back to the same 4-months last year, we see a 40% growth. It’s only in the new period that we might begin to speculate that the exponential growth curve is beginning to straighten and look more linear. We shall have to wait and see where we get to around the March-madness period 2019 before formally calling time on the June target.

One feature that does appear to be establishing itself as a trend is the increasingly strong relative performance of large enterprises over SMEs.

The cumulative sales on the frameworks since 2012 (across all Lots) clearly shows the 2-speed separation in the chart to the right. 

Another view of the relative performance of the SME and enterprise sectors is found by looking at the monthly spend levels for the two segments, layering year over year (each 12-month period ending October.)

Compare monthly spend Large suppliers Vs SME – year on year to October

The comparative charts employ the same scale on the vertical axis (spend value). The growth of Large supplier spend seems to dwarf that spent with SMEs. 

The table on the right shows SME spend growth increasing at a declining rate, while spend with Large suppliers increases at an increasing rate. (hang-on in there, rates of change are important, as Newton once said!)

G-Cloud+DOS annual growth rates Large Vs SME last 3-years 

Supplier size2015/162016/172017/18
Large39%58%60%
SME55%35%23%

A bigger cow further away

(A quick plug for Steve Parks brilliant and revelatory blog on UK SME data manipulation  which will also clarify the paragraph title for those who are a little rusty on Father Ted’s lecture on perspective.)

As an SME cheerleader, I am uncomfortable with second-place in a 2-horse race. On reflection however, the spend on these frameworks to SMEs to October 2018 was over £600m and this had grown 23% from the previous year. That is outstanding in an economy for which the OBR estimates GDP growth to be 1.3% for 2018.

Spend on these frameworks to SMEs by any other measure is growing healthily. Additional good news for SMEs, there are 55 new SME entrants into the spend data in the 4-months July-October 2018, that’s an 8% increase on the number of SMEs with sales recorded in the preceding 12 months.

Undoubtedly, Large enterprise spend growth far exceeds that for SMEs. So the cow is larger and further away. More efforts could be put in to fostering the UK SME tech segment, but I doubt we will see much additional movement in this direction in the short term. We shouldn’t forget that G-Cloud and the procurement process it embraces have improved market access for SMEs. Competition is a fact of life and to some degree we are witnessing the super-tankers in the pond altering course as Large enterprises have:

  • Woken up to the potential of Digital Marketplace
  • Invested in services designed for public sector
  • Aggressively directed marketing and pricing initiatives at the opportunity
  • Been able to exploit their scale and elastic supply capacity

Meanwhile, a high proportion of SMEs on G-Cloud are not making the most of what they have got. I recommend taking a look at How-to-Win and give your positioning on G-Cloud a sales-busting New Year makeover:

  • Articulate your value proposition in a way meaningful to the target audience
  • Make sure your service can be found through the type of search a prospective customer will use
  • Clarify your pricing so a buyer, especially a Big Buyer, can clearly calculate TCO
  • Use the Service Definition to fully brief the audience, see the outcomes they need and differentiate your service
  • Use your marketing effort to build trust, confidence and recognition
  • Be easy for the public sector to do business with

There probably is backsliding to the comfort zone of the oligopoly in these stressful times for public servants. On a separate note, I would welcome some reference to Social Value in tech procurement which would benefit SMEs and the citizen. But there’s little we, as individual SMEs, can do about these issues in the short term. On the other hand, there is a great deal SMEs can do to improve their own success. If you want to shortcut finding out what you can do, click here for the contact page and tell me to set-up a call. I’ll soon be able to tell you if there are some quick wins to be had, without charge or obligation…

Footnotes

1. Ready for publication in December, the last month of data (November) has a significant omission from late MISO returns by suppliers. July 2018 in the August publication had £18m of spend missing (25%) and the SaaS Lot was £8m (60%) short. Using an algorithm to search and estimate missing returns, I estimate the November figures to be short in total by £23m (SaaS £9m). Previous analysis published in August ignored the July figure, now incorporated here and this analysis ignores the November data.

2. G-Cloud and DOS together form my bellwether as they account for the vast majority of spend under the 4-frameworks and a significant volume of a type of spend (services and development) has been transferred from G-Cloud to DOS since 2012, and I suspect it may be moved back from DOS to a more dynamic G-Cloud in the future.

3. G-Cloud started its first transactions in April 2012. DOS in June 2016.