By Suzannah.Brecknell

16 Aug 2011

The coalition wants to buy a quarter of its goods and services from small and medium-sized companies. Suzannah Brecknell listened in at a discussion on how departments can achieve this aim in the field of IT.


Nearly two thirds of new jobs in the last five years were created by SMEs, which employ 40 per cent of the workforce: no wonder the coalition wants to support this sector, and has promised to award a quarter of all government contracts (by value) to SMEs. But working with SMEs doesn’t just bring economic benefits. Panellists at a CSL discussion on how departments could meet this target in the field of IT also argued that SMEs can provide more innovative solutions, and better value, than larger companies.

Stephen Allott, crown commercial representative for SMEs, kicked off the discussion by outlining what government is doing to make it easier for small companies to compete in government procurement processes – including removing the need for pre-qualification questionnaires on tenders below £100,000, and the creation of an e-marketplace where departments can search for SME suppliers.

Other panellists welcomed the commitment to reforming procurement processes, but questioned some of the details of government plans. Garth Pickup, CEO of specialist IT provider Solidsoft, questioned the value of an e-marketplace for SME procurement, saying he’d “value a face-to-face meeting more than the right to put myself on a portal”. John Coulthard, head of public sector at Microsoft, said that it might be better to engage with SMEs through existing well-used websites rather than creating new government portals.

The next stage for his team, said Allott, is to help departments consider how they might be more open towards SMEs at the earliest stages of procurement.Creating smaller contracts; looking for existing products rather than commissioning bespoke new ones; and early market involvement could all help SMEs compete on more tenders, he said.

Pickup agreed that SMEs should be brought in earlier in specification processes so that departments can benefit from their innovative ideas, but also argued for direct engagement rather than the use of subcontracting through a large prime contractor. “If you are effectively putting a buffer zone between yourself and an SME,” he said, “then you are going to stifle some of the innovation and risk-taking that an SME is prepared to take on your behalf.”

His remarks point to one of the most fundamental challenges to working with SMEs in the field of IT. Most departments are working with legacy systems run by large Systems Integrators (SI), which makes it hard for many small companies to find a good role. Unfortunately Allott, questioned by an audience member, said hthat e didn’t think government would be able to make a complete transition from the SI model to smaller companies: “We are where we are,” he said. Coulthard challenged this position, pointing out the potential of cloud computing to allow smaller companies to partner up on a common cloud-based platform without the need for an SI to facilitate.

For Pickup, however, the government’s dependence on SIs reveals a more fundamental issue. Awarding large contracts to prime suppliers “because you’ve got a constrained ability to deal with a number of suppliers” says more about the shape of your organisation than it does about the supply chain, he said. He also suggested that departments have an aversion to new suppliers or ideas, thanks to an ingrained risk-aversion. Allott agreed: government must take a more realistic view of risk, he said. After all, the risks of working with SMEs are often theoretical, while the cost of working with a larger company could be significantly higher. “How much more would you pay for a project to eliminate this theoretical risk?” he asked. “Three or four times? Is that a reasonable use of taxpayers’ money?”

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