Its time to bust the myth about SMEs and the perception of risk

Written by Toby Gavin

It is TechUK’s SME week– whereby the association will be examining the role of SMEs delivering government transformation. SMEs have been at the heart of our Government’s transformation programmes for at least 5 years. In 2015, Matt Hancock, Minister of State for Digital, announced a target of spending a third of all procurement pounds with SMEs by 2020.

That is an ambitious and challenging target especially when you look at the latest spend figures for G-Cloud showing that 53% of total spending through that framework has been with large suppliers – an almost 10% increase on previous figures from CCS released in January. Some commentators express slightly more worrying concern that Government is returning to the days of the oligopoly signalled by several significant departments signing mega deals with Microsoft, Amazon, Google and the like – which is not particularly SME friendly.

In this article from Liz Vega, CEO of Informed Solutions and released as part of TechUK’s SME week, she argues: “It’s about time to bust the myths about SMEs”. That myth, it seems, is the assumed perception of increased risk of project failure when working with SMEs. However, in my view, there is not really anything substantive to suggest that departments view SMEs as risky; nor is there any real empirical evidence, the evidence put forward appears to be anecdotal.

In fact, Mantis has recently undertaken a piece of work looking at – in part – the SME and the perception of risk by government and the wider public sector. The full whitepaper will be shared shortly, but suffice to say, our evidence shows that the public sector views SMEs as no less or more risky than large organisations. They still need evidence of capability, but they don’t deem SMEs a risk.

So, why then does the tech supplier community think a reason they are not winning business is because buyers view them as risky? In her article Liz Vega continues: “SMEs are still most frequently defined not by what they are achieving and by their capabilities, but rather by a narrative that focuses on their perceived limitations and the ‘barriers’ and ‘risks’ to doing business with them.” But are they really defined by this? Our research says not.

I am not entirely disputing Liz’s view here [She has far more experience than me in government tech pitching, tenders and has built a very successful SME tech business that boasts an enviable client list]. However, I think the issue of SMEs not winning significant government contracts extends far beyond the assumed perception of risk and should be investigated further.

Recently, I attended an Advice Cloud event – a procurement specialist helping SMEs win government contracts. At that event, I spoke to several large government departments. I asked them about SMEs and risk – their view was whilst there will always be a role for large vendors and SIs, there is a real appetite to work with the SME community – not least because ‘SMEs are where the magic happens.’  As our own survey suggested, the delegates did not see risk of project success or failure more or less when working with large or small vendors.

So, if we just park the perception of risk issue for the moment and think about what else is preventing SMEs from winning government contracts?

Yesterday I attended an event organised Public.io – a brilliant company investing in innovative start-ups looking to make society better through the use of technology. They had a great line up of speakers including Andy Street, the mayor of West Midlands; Sajid Javid, the Secretary of State for Communities and Local Government; former local government CEOs, CIOs and successful tech SMEs and start-ups. Several familiar issues continued to crop up. They were not new issues, but the same tried and tested reasons Government and suppliers had put forward for why SMEs struggle to sell to government. Given my background in running a specialist public sector comms agency, I am going to focus on those that resonate most strongly to me:

AWARENESS & COMMUNICATION- How can government work with SMEs if it doesn’t know that these SMEs exist? This is an issue that has been playing out ever since G-Cloud came into existence – with thousands of new suppliers listed – and probably before that also. Lots of start ups and SMEs were rightly excited by the prospect of a single framework whereby they could compete on a level playing field with large vendors for government business. Yet, even today, only a tiny percentage of the 2,500 or so SMEs listed on G-Cloud have made significant sales through it. Why? Many vendors made the mistake of getting onto G-Cloud and waited for business to flow – it didn’t happen. G-Cloud did not and has not replaced the need for companies to effectively market themselves to the individuals and departments they are trying to influence.  G-Cloud is not an industry awareness tool; buyers don’t go to that framework to learn about the supplier community – G-Cloud is little more than a fulfilment engine. Buyers continue to do business with suppliers they know and have a degree of empathy with.

This point can be no better highlighted by a conversation a colleague of mine recently had with a HMRC procurement specialist (yes, its anecdotal!). She stated that when they are procuring for a new solution and have shortlisted the preferred suppliers the department lead instantly scrubs off the name of vendors they have not heard of. This has very little to do with risk, but awareness.

This is a point that was reinforced by Mantis partner and the ‘god-father of G-Cloud’ Tony Singleton at the Advice Cloud event: “Be visible at the events, conferences and webinars that your targets are attending – make an effort to get to know them. Frameworks do not replace the need for good old fashioned networking, marketing and selling.”

By SMEs focusing on their own awareness and market understanding, and by getting to know their targets they immediately begin to start dissipating perception of risk and start creating a degree of empathy.

REFERENCES – One area that start-ups and SMEs do not give due attention to is on the impact of references. The public sector buys on reference. It wants to see where you have delivered successful projects before; that you know your onions when it comes to a specific project or solution.

At the Public.io event Theo Blackwell, London’s first Chief Digital Officer appointed by the Mayor of London in the summer kept reinforcing the importance of references and case studies to the attending start-ups and SMEs as a means of helping them sell.

Dan Saxby, Category Director for Digital Future Technology at the Crown Commercial Services recently stated to us: “The most successful way we’ve seen to open doors is to share stories and case studies with CCS. This generates real trust amongst customers in the delivery of their service outcomes.”

But often, given the very nature of a start up, they might not have public sector reference sites. But all is not lost. Whilst the sector wants to ideally see evidence of past department project success, demonstrating success in the private sector and how that can be applied to the public sector can be just as impactful and influential.

Mantis works with a plethora of SME tech vendors that are successful selling into the public sector. For all of them we focus on communication programmes to increase their awareness, to make sure that buyers know who they are, what they do and where they have done it before.

Whilst we often discuss the perception of risk, our evidence – some anecdotal and some empirical – does suggest that there is no less or no more perception of risk when working with SMEs.  Our advice to SMEs is not to get too bogged down with the assumed perception of risk and focus on what they can positively do to ensure they have the best chances of succeeding in what is a very competitive and potentially lucrative market.

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