In the first feature in the Vertical Horizon series we are taking a look at the Public Sector market and how it has been impacted by trends like Digital Transformation. With change comes opportunity, the opportunity for the Channel needs to be carefully articulated so they can continue to leverage the right technology to keep the sector progressing at the speed it demands. Editor, David Dungay, spoke to key Channel players to find out how they are tackling the market.
We are living in uncertain times as we look to negotiate our economic relationship with the rest of Europe in the wake of Brexit. Even with the seemingly nail pace of decision making at the Brexit table the transformation of our public sector continues apace. Matt Hancock, Minister of State for Digital stated back in 2015 his aim to increase government engagement, and spending, with the SME and is aiming for 33% of business to run through the Channel by 2020. Whilst it is not clear if Brexit will serve as a distraction to this goal there is still money up for grabs for those partners willing to jump through the necessary hoops.
Digitalisation is key
According to a survey conducted by Fujitsu last year ageing technology is holding back the efforts of the public sector who are desperately trying to leverage the benefits of digitisation. The survey found that more than half of public sector executives (55 percent) believe their organisation will no longer exist in its current form in just four years from now, and some 82 percent recognise that fundamental change is inevitable, as digitalisation drives sweeping changes to business practices across all sectors.
So where is the disruption coming from exactly, and big a challenge is it really?
Justin Harling, MD of infrastructure reseller CAE Technologies, commented “Digital disruption at the moment in Public Sector is a call to action that is generating a lot of conversation but often without definitive action. Digital as a topic has been on the government agenda for some time but for institutions trying to translate sweeping policy statements into practical action is a significant challenge.
At the moment we are doing significant amounts of work ensuring that the right platform exists for digital transformation. Fundamentally if you haven’t got reliable, scalable and secure connectivity any attempt to do more with technology is going to be pre-disposed to fail. The first goal is to be digital ready.”
Paul Burn, Nimans’ Chief Purchasing Officer added “Digital disruption in the public sector is being driven heavily by Microsoft and their Teams technology. Their influence and focus is massive in this arena but it’s not all about them as other big players are also competing for market share. Another driver across the whole of public sector is reducing costs based on one device rather than having a handset and a headset.”
Rob Leggett, Exertis Sales Director, Wireless and Mobility said, “The disruption is coming from several different areas. Firstly, emerging technologies such as VR/AR, IoT and AI, alongside data analytics and the cloud are having an impact across the public sector. Secondly, digital transformation of public services with the need to save costs, yet do more with less is forcing all verticals within the public sector to look at technology solutions. Thirdly, in a digital age, it is also being driven by the public, demanding easier communication and consumption of content with local and government authorities.”
Since Matt Hancock’s comments to engage with the SME community more the online Digital Marketplace, the directory for IT suppliers, now includes over 2,500 firms, 88% of which are SME’s. The Crown Commercial Service (CCS) procurement frameworks reported that SME spend leaped from £702m in 2015/2016 to £879m in 2016/2017. The G-Cloud framework now includes 2,847 suppliers, the majority are SMEs, which would indicate things are moving in the right direction… or are they?
The Government has managed to create an environment where they have the pick of thousands of suppliers willing to work on two year contracts. However, the surge in SME engagement has created a swathe of innovation and has opened the door for new competition… and lots of it!
One of the biggest problems for an SME is simply finding the opportunities. There are billions of pounds up for grabs… but where is it?
The Cabinet Office SME Panel comprises of business experts from a wide variety of industry sectors. Their role is to explain to Government what makes it difficult for SME’s to win public sector contracts and what can be changed to make it easier.
The problem is that over time each public sector body has developed their own procurement portal. There are probably 3-400 different portals in the UK. In the old days the only way to receive tender notifications was to register on as many portals as you could find. Apart from the real problem of finding the portals, as there is no easy list to access, you also ended up with a huge list of usernames and passwords.
Ian Fishwick, CEO of Adept, is also the Chair of the Contracts Finder Working Group. “Our ideal world is to have a single website where all public sector tenders are available. We will never achieve that nirvana for all sorts of reasons but we have made massive strides forward in 2017 by working closely with Crown Commercial Service, central governments’ procurement arm.
Almost all central government departments, local councils, NHS bodies, emergency services organisations and universities are now registered on the Contracts Finder website. All tender opportunities above a certain size (the value varies by organization) are now advertised on Contracts Finder.”
We are constantly hearing about the changing nature of purchasing behaviours in various markets, but how are they changing in the public sector?
Rob Leggett said, “Alongside other vertical markets, the “everything as a service” model is equally prevalent in the public sector. The movement to subscription based monthly payments for software, hardware and support is growing. The opportunity to only use and buy services as you need them is compelling for a sector where public money needs to be spent wisely.
In the education sector, the purchasing behaviour can be influenced by government policy. Invariably, larger scale infrastructure projects involving hundreds of schools are likely to be managed by larger resellers. Individual school procurement can be managed by smaller local resellers. With the advent of multi-academy trusts, educational establishments often group together with secondary schools and their feeder primary schools tendering for technology projects. Schools that operate within close proximity to one another are best able to share resources and provide in-house expertise. MATs are likely to be the dominant model for schools in the future.”
Harling added, “In education we are seeing a significant impact on how value is perceived with institutions being extremely focused on the student experience driven by the fact that there is a measurable cost to learning in the form of tuition fees. This means customers are being much more commercially driven and top of the list of requirements is not the technology or even price, but an ability to commit to long term partnership that is focused on value in areas such as innovation and employability.”
Daryl Pile, MD of Channel, Gamma said, “RM1045 has levelled the playing field a great deal. It is still quite exclusive resulting in a lack of choice for public sector organisations. Gamma are working hard with the channel to use their distinct capabilities and expertise to introduce them to the bids we respond to as a team. It means that through Gamma and its 1000 channel partners we have a great chance of delivering the best value and right solution for a public sector organisation.”
Digital Transformation is clearly impacting the public sector, as it is in every other vertical, DevOps is also starting to have an impact. Claranet reported recently that 18% of public sector organisations have adopted a DevOps approach in order to bring services to life more quickly and reliably and address user’s needs. Will this change continue to grow? Unquestionably, but there are some challenges the Channel will need to accept. One of these is the skill sets of in-house staff.
Alex Hilton, Chief Executive of CIF, commented on research findings from 2017, “Working with the technology that underpins digital transformation, such as on-demand cloud computing services, requires a different skill set from the traditional, proprietary IT technology of the past. Historically, many government departments and agencies have outsourced their ICT services to system integrators (SIs), in some instances believing they had also outsourced the risk by doing so. This reliance on SIs, combined with the cutbacks imposed by years of austerity, has left many public sector organisations without the necessary skills and staff in-house to confidently adapt to new approaches to ICT such as the cloud.”
Pile added, “The difference in public sector is that lead times from bid to provision and payment can be much longer. Partners will also need to invest in a great deal of time to make sure they adhere to the large quantities of service agreements and framework standards – which will include a lot of director level time in preparation so you must have the stamina from the outset.”
Leggett commented, “Whilst the public sector can be a lucrative market, the procurement process can be complicated with a good deal of legislation and tendering can be time consuming. Over the last few years the government has tried to make the procurement process easier and more transparent and has set targets to enable smaller companies to bid for public sector contracts with the objective of one third of all central government spending to go to SMEs by 2020. However, for infrequent bidders, it can still be challenging.”
Specialist or Generalist?
Winning government contracts is difficult, no matter how you look at it. However, in a world where convergence is king are the specialist or generalist winning?
Pile said, “You can be either but it is difficult to be both. Many organisations need a core supplier for their comms infrastructure – so SIP and Connectivity. The key to public sector is being their supplier for their entire core services, which will allow them to spend more operational time selecting the services such as contact centres and CRM platforms from providers who specialise in these services.”
Harling commented “It has become increasingly important to specialise. Partly because of the sheer scale of the public sector landscape but more importantly so that you apply a detailed knowledge of what challenges different institutions are facing. Education, Health and Blue Light all have imperatives to change, where technology can have a significant impact, but the outcomes, operating environments, and budget pressures are very different.”
Burn added “I think with the way technology is moving you could cope really well as a generalist. But the specialist side is the network knowledge as it’s vital to deliver a high customer experience especially when users are talking through a computer. Gone are the days of pure public sector specialists when you knew there were three buying points throughout the year. The Public sector industry has moved away from that following a government directive that over 25% of the work going through has got to be issued to smaller companies. More is being offered locally which increases success for resellers.”
Fishwick added, “The Civil service has to be seen to not favour individual companies. Understandably they therefore do not like to listen to pleas from individual businesses as it may look like favouritism. As Commercial Director of Innopsis I speak on behalf of the vast bulk of the businesses in our sector that work in the Public Sector. If a trade association raises an issue with a public sector body they are much more likely to listen. So, if you want your voice to be heard you need to talk to us.”
If you have the stomach for it, the public sector can be a very lucrative place to operate. The conditions have been established for partners to succeed, or at least have a better chance at winning contracts, in this space. However, the move to DevOps and internal skill barriers could present a number of headaches for partners.
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