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Tuesday, 12 January 2016 13:06

The Government is missing the SaaS opportunity

Posted By  John Paterson

John Paterson argues that the public sector isn’t able to take advantage of software as a services low-cost and low-risk solutions because of an archaic procurement model and a hardwired reluctance to move to new suppliers.

Complaints about the tortuous processes undertaken by government organisations when purchasing IT are far from new. Yet when today’s Software as a Service (SaaS) solutions are low cost, self-service, subscription based and rapidly deployed, the government’s year long, consultant led, hugely expensive approach looks even more archaic. Attempts to open up government spending to SMEs, including G-Cloud - have failed; it is still not worth selling to government for a contract value of less than £50,000.

Archaic Model

When it comes to software, government buyers are understandably cautious. They want not only every box ticked, but also project specific contracts and extended liability insurance. They often lack confidence and rely on expensive external consultants who, by default, will extend the software assessment and procurement process to justify their fees.

The result is not only the obvious delay and additional price. The implications are far more serious. Today’s SaaS model is predicated a low cost of sale, self-service access to products for review and then purchase, and standard contracts.  It is simply not cost effective for SaaS vendors to even tender for these projects: the sales cycle is too long, the additional costs too high. There is no point to any provider in selling to the government for any contract worth less than £50,000.

The result is that while private sector organisations can rapidly get started with innovative technologies for a fraction of the traditional price, the public sector is stuck. Constrained by both UK and EU procurement requirements, as well as purchasing naivety, government departments are unable to take advantage of this fast, low cost route to innovation. They take upwards of 18 months to make a decision, typically opt for the same set of vendors and instead of £10,000 per year for a 20 user CRM system, the government is forking out £50,000 to £100,000 up front for software that may or not survive next year’s round of budget cuts! 

Streamlined Approach

So what is the solution? Firstly, the government purchasing process needs to be streamlined.  Secondly, the level of purchasing skill and confidence needs to improve dramatically to enable government departments to leverage the benefits of self-service purchasing.

Right now, of course, neither of these things is happening. Many SME providers were excited by the introduction of the G-Cloud – and spent weeks jumping through hoops to get on the platform. The result? No business at all. The concept was great - and should have been good for government, SMEs and the taxpayer. But nothing has changed – government purchasers are still behaving in the same way: preparing long, complex tender documents and then opting for the same set of suppliers. They have no confidence in their decision making.

The result? A continued inability to exploit innovative, lower cost IT solutions. Nothing new there, of course, but in this era of low cost, low risk, subscription based applications and services, the reliance on such outdated purchasing methods is even more damaging and costly.

This chancellor continues to make incredibly tough spending cuts and government departments are facing near impossible decisions about budget allocation. Isn’t it time that investment in technology began to reflect the new low cost, low risk model SaaS enables?

About the author

John Paterson is CEO and Founder of Really Simple Systems.  John started in IT at Systems Union where he was one of the first employees, before ending up as Sales Director and then COO, via running operations in Australia and then France. After Systems Union John became a turnaround CEO, running businesses such as Oxygen Solutions (CRM) and Zeus Technology (Internet infrastructure) and then decided it was better to start his own business rather than fix other people’s, and so Really Simple Systems was born.

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