While recent figures have shown spending through the Digital Marketplace has topped £1bn, the slower take-up in local government means that many SME's are struggling to gain traction in their local markets.
Commenting on the growing problem, Kevin Timms, COO and Co-Founder of Streamwire said: "Local authorities have tended to shy away from working with smaller suppliers as the perception was that the risks of working with them were greater than the tried and tested large brand names in IT service delivery. Years of over-priced and delayed IT programmes, combined with the advent of cloud and the government's drive to reduce spending, have come together to push a change in attitude, particularly in central government. However, this change is not being seen at the local level in any great volume.
"A lot of progress could be made quite quickly if local authority IT leaders moved in larger numbers to use the G-Cloud and used SME service providers to provide their agile IT support."
Small service providers by their nature have to be innovative if they are to survive, as they have to be very flexible to win opportunities and work around their larger competitors. However, there is often a chicken and egg situation. Local authorities want to innovate but also want to see several examples of where innovation has worked well in the past for organisations like theirs. Unfortunately, many SME's may not be able to show the success of what they champion at a scale that a local authority is looking for.
Traditionally, some local authorities have sought to bridge the challenge between wanting the innovation and flexibility of smaller providers with the stability of having a single large supplier by establishing a system of Prime Contractors. The risk is contracted out while capturing the gain from accessing SMEs. The reality has always been that this approach still blocks flexibility because it drives a wedge between the agile supplier and the customer with the SME often gets a bad deal.
Kevin continues: "The Cloud has made it far easier for SMEs to scale up their services to meet the needs of local government and this has massively helped change the balance between risk and reward from using smaller, more agile suppliers. Unfortunately, because the uptake of G-cloud services has been lower in local government, SMEs are yet to break this market open in anything like the way it has in central government. As local authorities continue to find new ways to reduce cost and improve service delivery, the only option will be to transform procurement and choose SMEs who are willing to go the extra mile."