Why Does Government Keep Screwing Over SMEs?

There is a worrying theme running through several of the public sector IT stories that have emerged over the past few weeks. Everywhere I look, fierce discussions are going on about the government’s apparent failure to capitalise on the agility and cost-saving potential of buying IT from small and medium-sized businesses (SMEs).

In a speech to a government procurement conference on 11 February 2011, prime minister David Cameron gave a pledge to ensure that 25 percent of all government contracts are awarded to small and medium-sized enterprises. “If we meet this goal it will mean billions of pounds worth of new business opportunities for SMEs,” he said.

The government has since downgraded that pledge to an “aspiration”. But it seems as if the tide could now be moving in the opposite direction. According to Mark Taylor, CEO of Sirius and lead for the New Suppliers to Government working group, the government is now doing less business with SMEs than a few months ago.

Government neglecting SMEs?

His suggestion is backed up by two recent events. The first was a freedom of information request by the BBC, which revealed that the government continues to spend billions on proprietary software, despite promising earlier this year that it would create a level playing field for open source software and impose compulsory open standards.

As the majority of open source companies are also SMEs, this seems to reinforce the feeling that government is neglecting its duty to foster small business innovation, and missing out on potential savings in the process.

The second event was a Westminster eForum held earlier last week on the subject of cloud computing and the so-called G-Cloud. While Martin Bellamy, director of change and ICT at the Ministry of Justice, encouraged SMEs to “come forward and be part of this,” the overriding message from attendees was that SMEs just aren’t getting a look-in.

Meanwhile, in a recent interview in the Telegraph, Crown Representative for SMEs Steven Allott said it would be two years before government stopped excluding SMEs from procurement. With the coalition one and a half years into its term already, it seems increasingly likely that this will end up, as Taylor puts it, “another sensible policy running aground on the rocks of Whitehall”.

Opposing forces

But is this apparent failure to tap into the SME market really the fault of the coalition, or is government IT just caught up in a conflict of interests?

As Taylor points out, two recent reports – Sir Philip Green’s Efficiency Review and the Consultancy and Contingent Labour Strategy – both push for consolidation within the supply chain, to achieve greater efficiency and economies of scale. These are therefore in direct conflict with the government’s stated aim to end the oligopoly of big business and open up the market to new providers.

Meanwhile, an important issue raised at the Westminster eForum was the question of security in the cloud. When it comes to the G-Cloud, protecting the confidentiality of government data is paramount, and the project simply will not work unless the technology solutions are water-tight.

By terminating contracts with large incumbents and introducing multiple small providers, you add more links to the chain, and the risk of information leaking out inevitably increases. Public sector organisations are already notorious for leaking sensitive data, through loss of devices or inadequate security measures. The additional complexity of coordinating multiple suppliers could exacerbate the problem.

Fostering innovation

While these are reasonable objections, they are not unresolvable. If the government is serious about fostering innovation in this country, it needs to start supporting small businesses and setting an example, rather than using the complexity issue as an excuse not to take action.

As Taylor (pictured) points out, there are significant advantages to levelling the playing field for SMEs, including lowering government IT costs, (the government currently spends around £20 billion every year on IT), and providing more innovative solutions that can adapt to the specific needs of government departments.

“Talking about ‘we can’t do positive discrimination’ is the best proof there is no real commitment to change, since nobody is asking for ‘positive discrimination’,” said Taylor in a blog post, “we are simply asking for the restrictive practices to stop!”

The government should be choosing solutions based on what offers the greatest benefit to the country and the economy, rather than falling back on the most convenient option. SMEs provide Britain with jobs, economic growth and innovation, and the government has a duty to set and example and support them.