Public Services

Can SMEs help meet Whitehall's Brexit and GDPR challenges?

David Bicknell Published 11 October 2017

Twin headaches of Brexit and GDPR mean Whitehall procurers are revisiting using SIs. So what is the future now for SME growth? Is it time for SMEs to put their favours about?


I had an interesting conversation the other week with a contact. He made the point that there seems to be something of a swing back to using systems integrators (SIs) across government. Whether there is hard evidence of this yet is open to question. But some argue there appears to have been a subtle change in attitude.

One reason for this, he suggested, is the certainty of having to deliver Brexit. That means the aspiration that SMEs once had of working directly with and being procured by Whitehall departments is becoming a little cloudy. Government departments absolutely have to be able to deliver on Brexit (even though the negotiations with the EU have been going far from well) and there is a perception that departments' default move will now be toward larger vendors.

A second reason is being ready and able to comply with the EU's General Data Protection Regulation (GDPR). Again, there is a perception that bigger vendors will be more able to ensure that compliance with GDPR exists. It is not necessarily the case, however, that picking large vendors equals GDPR compliance, as I'll explain later.

According to the recent techUK Smarter Services report , despite the government setting a target of spending £1 in every £3 of its procurement budget with smaller and medium-sized businesses by 2020, only 21% of civil servants believe that there is an appetite within their department or organisation to increase the involvement of SMEs in the procurement chain.

This move towards SIs has already been spotted by one SME, who told me, "It's fair to say that Brexit is driving a swing back to SIs (and in some cases a swing forward to the next generation of SIs - the US giants.) It's worth keeping to the forefront that government, when setting its aspirational SME targets, never determined whether the business passed to SMEs would be direct, or in the supply chain."

The same SME pointed out that over the last seven years, doing business with government has been made significantly easier for SMEs. G-Cloud has certainly changed the landscape. It said, "The efforts of the coalition government turned a daunting market into an easier market. Many SMEs have flourished, and in return have given government access to a wide range of innovative and cost effective products and services."

It continued, "On the face of it, nothing has changed. But despite the commitment and dedication of many who want to see SMEs succeed, things are changing. Many SMEs don't see any authentic leadership from the top of government. Dig beneath the surface of the Digital Marketplace spend figures, and it becomes clear that in some lots SMEs are losing ground to global vendors.

"Legacy contracts aren't being broken up at anything like the rate that had been promised, and tactical legacy contract extensions are the norm, which goes against stated Cabinet Office policy. Responding to government tenders is still complex, time-consuming and costly. Government is still a better place for SMEs, but momentum has been lost. SMEs, and digital technology, are the lifeblood of the UK economy. It's time government looked beyond its short term Brexit preoccupation and used its massive buying power to benefit the UK as a whole."

"We need a tech and digital champion"

Another SME painted a similar concerned picture.

"We need a tech and digital savvy political champion, with clear lines of accountability and a remit to join-up government, not re-build silos. This doesn't appear to be Hancock, or Nokes, or Green. Burying Digital and Tech in DCMS and having a bolt-on Digital Minister in the Cabinet Office isn't working.

"The focus must be on developing our digital economy and tech industry, using where possible the work of government and wider public sector as a show-case for the art of the possible. I fear that politicians and 'top officials' are spending too much time abroad crowing about how great and global we are, whilst here, things are bumping along in an increasing disjointed way. Stop going on trips to abroad and start rolling up their sleeves to sort this out."

There is also criticism of the government's Transformation Strategy, with one SME asking what has been seen since the announcement of the strategy at the beginning of the year.

"Who is setting the priorities? Who is leading the joined up thinking?" asked the SME. "There is a lot of talk about being data-driven, and there are new sharing powers. But to exploit this and revolutionise public services needs the mindset to shift wholesale from the top down. GDS should be working hand in glove with department business owners to help them design this new data-driven service architecture. What is technically possible? What is desirable? What is legal? All these need serious thought and an examination of all the constituent parts. The vision, policies, infrastructure, data, people, processes, and governance need to come together in ways that work and deliver agile and value services."

He continued, "I believe we should do all possible to boost flexibility, choice, competition and transparency in public sector buying. I think G-Cloud did more to encourage these than any other procurement initiative. The aim should be to replicate and build on what works from G-Cloud, whilst seeking to innovate and improve, for a wider marketplace that breaks down the siloes across different frameworks."

SMEs say there remains a need to educate buyers and suppliers, helping both sides understand their needs better. They argue that once a buyer is ready to buy, any mistakes in their thinking are more difficult to rectify later. This is why, they argue,there is need to have greater enterprise thinking about re-architecting services, their design and the type of tech needed to deliver this. That means, of course, that there is room for mistakes. But only "as a way to test out concepts and identify opportunities; not the expensive ones from bad or ill-informed decisions and poorly executed delivery."

One SME added, "This plays into the risk-taking. To encourage this, we need evidence that helps decision-makers to better assess and understand their exposure and risk. I feel that the best approach here is to have a sustained education programme, so people are more accustomed and comfortable about new ideas, what is possible and desirable. We then need the practical evidence from the armies of willing early adopters showing the art of the possible and what can be done and how. These, if packaged properly and promoted through the right top-down and bottom-up channels must surely move things forward. Clear vision and leadership help here too as elsewhere."

Do SIs or SMEs offer greater GDPR assurance?

SMEs recognise that there is a shift back towards SIs, because of the uncertainty surrounding Brexit (and the priority and budget).

One said, "The pressure to deliver a lot of change in a compressed timeframe will almost certainly shift attitudes back to the heavy lifters - because they still have powerful connections, and they will promise to de-risk it by putting their best people on it, having the speed to scale up. GDPR is another factor. Given that data processors are going to be in the firing line in addition to controllers, will departments prefer to back SMEs with their misperceptions that SMEs could offer less robust controls, or rather the 'trusted' hands of an SI?"

That itself is an interesting idea. I spoke to one SME who was unhappy that SIs could be viewed as being better able to provide effective support for GDPR. He argued that SMEs, simply because of their agility are better equipped to deal with GDPR than large organisations, who themselves have complex processes and who are simply going to call in the management consultancies.

One SME recently cited a situation where his organisation was hacked. It called in an ethical hacker to advise on security and a management consultancy to do a report for the authorities. It was the ethical hacker's report that provided more long term value that ultimately enabled the company to get back on its feet.

I also spoke recently to another SME that believes it has an innovative solution that can help public sector organisations get to grips with an important aspect of GDPR.

A need to be "commercially promiscuous"

In order to counter a perception that SIs might be a better procurement bet than SMEs, it has been suggested that SMEs should be prepared to work more closely with SIs. Although it might be their long-term goal to work directly with departments, it might be a time to be pragmatic and adopt a more flexible approach. In other words, don't put all their eggs in one basket, but rather "put it about a bit", and if you like, be a bit more commercially 'promiscuous' in their search for opportunities. If that means more hooking up with SIs, so be it.

It's a situation some are already recognising. One said, "I don't doubt that SMEs who want to play into the gov space will have to partner. But when you think that out of all the suppliers on G-Cloud probably near on 90% are SMEs, any noticeable shift back to SIs will leave a lot of disappointed vendors!

"On the GDPR discussion, I totally get that SMEs see the advantages of being small, but having been on the buying side, they will put on their blinkers as they look across at a multiple supplier environment they might see SMEs as the weakest link in the supply chain. The way buyers will want to mitigate this is for the SIs to front up the relationship. The downside is that the SMEs become the invisible partner and may have to sign up to potentially onerous terms. Sound familiar?"

Some SMEs are more positive about the opportunity landscape. Steve Robinson, managing director of managed service provider Littlefish said, "Clearly, we have been successful and have found that, broadly, the Government's SME agenda has worked for us.

"We have been in a privileged position in that we were aware of the overall public sector marketplace already and the process of procurement. I feel that had we been fresh and new to the market completely, potentially, we would have had a harder time of it. I think guidance for SMEs could be better, and CCS should be taking steps to address this.

"The Government wants departments to embrace SMEs, but a lot of employees in procurement, and in IT - certainly in central government departments - don't know anything better than, or anything other than, the 'usual suspects' that they always deal with, which can be a barrier. Highlighting the 'successes' that SMEs have brought to the table would certainly help the cause there.

"There are so many more suppliers out there now, and departments going out to tender are able to move away from rigid, expensive legacy outsource deals to more agile, flexible and innovative suppliers. Overall, I believe there is definitely a greater participation from SMEs, and much more choice for buyers."

Some SMEs argue that little has changed in how they work with other companies, including SIs.

One said, "To be honest, there is nothing new in the approach for us. In addition to our direct sales (almost all via G-Cloud) we have always worked through an ecosystem of partners - many of whom are in the SI category. Our business has grown significantly as a consequence.

"For cloud and the UK public sector, it's very much like an iceberg. Direct G-Cloud sales are the visible tip -(but) beneath the water there is a lot more going on, where SIs may be backing off conventional tenders (old-school or legacy) onto cloud to improve their competitive value and/or increase their profit margins.

"Having said all that, it is a worrying trend, as the approach isn't likely to do government, taxpayer, citizen or economy any good in the longer term - think industrial strategy, social value and procurement for growth!"

Whitehall's dead hand kills SMEs' success stories

Toby Gavin is managing director of a tech public relations company, Mantis, that works with several SMEs. He argues the government has created an environment that's good for government.

"It now has thousands of suppliers to choose from, all willing to work on short-term, two-year contracts. Innovation and fresh thinking is surging through. Government got what it wanted.

"What you have in return is competition, and lots of it. But you also have the scenario whereby government procurers still like to buy from firms they know. There are very few risk-takers in public sector - and taking a punt on an unknown name is a risk few are willing to take."

He suggests to SMEs, "Don't sit and wait for contracts to come to you - it will be a long wait. Don't bash the competition publicly either - although a working knowledge of what they do is useful - but instead focus on yourself and on your own business. You need to be able to turn your public sector customers into advocates for your IT products and services. And you need to demonstrate knowledge and expertise in the project you're trying to win."

However, turning public sector customers into advocates, is not easy. I am aware of at least two SMEs that are still trying to get a government department to allow them to publicise their story. If the Cabinet Office wants to see SMEs as alternative suppliers, delivering innovation, it needs to demand Whitehall departments allow success stories to emerge. Some departments are not so much dragging their feet as having feet of concrete. One located just a stone's throw from St James's Park Tube could certainly be doing more to allow SMEs to get their story out.

Time to streamline procurement frameworks

techUK's Smarter Services report has its own conclusions about the public sector's use of SMEs. It believes government should be using its procurement spend to support innovation in the private sector in its Industrial Strategy. It argues that government needs to be designing services that can take advantage of the innovative solutions Britain's tech sector is able to provide.

"While initiatives such as the Government's pledge to spend £1 in £3 of its procurement budget with SMEs are welcome, the research suggests that it has had a limited impact upon the attitudes of procurement staff within the public sector. Government should also be looking at how its procurement frameworks can be streamlined to remove the burdens that often act as a barrier to new entrants in the public sector market."

It may be that Whitehall does see SIs as a more resilient bet in the face of a Brexit that clearly government is not remotely ready for - not politically, economically, or strategically. For SMEs and others, like it or not, the Brexit winds are beginning to blow. And suppliers - of all sizes, but particularly SMEs -need to devise a strategy that gives themselves the best anchorage in the face of coming market turbulence.


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