Dear Tim,

Thank you for joining me last week at the Intellect-sponsored session on Procuring to the Government Cloud – Challenges faced by SaaS, PaaS and IaaS SMEs. The SaaS Group that arranged the session is proving to be a focus for determined action to promote the UK SaaS community; to a significant degree, that community is made up of young and innovative small enterprises.

I had to leave just before the session ended but as I slipped out, you asked me to put a few thoughts down to help you in the internal government debate.

There is a large SME community in the UK tech space. Estimates by Regent Associates in 2005, drawing on their own work and on the work of Ovum and Experian, reckoned that there were about 75,000 UK technology companies with annual revenues above £1m: 93 per cent (say 70,000) were in the range below £100m, and about 75 per cent (at least 50,000) of these were in software and services. For all the impact of the recession in the five years since, I doubt that current numbers are so very different.

On all evidence I come across, this is a lively and innovative corner of the UK economy. I come across these firms at Intellect, and through my work advising Quickstart Global (which enables small enterprises to expand using its own overseas operations) I became aware of many more of these ventures. At a recent Intellect board meeting, we heard the Cambridge entrepreneur Hermann Hauser articulate his frustration that the UK is so rich in these tech ventures but does not match the success of the USA in nurturing their further growth into global firms.

A lot of the innovative capabilities that these companies are nurturing could have real and positive impact on how the government does its business. At last week’s meeting you heard Chris Chant, as leader of the government’s G-Cloud app store initiative, tell several stories of tech SMEs at work on quite major initiatives. But it was also important for you to hear, as a senior government CIO, the barriers that UK SMEs have faced in attempting to win business: the procurement process is biased against the small enterprise.

Successive governments have pledged to remedy this situation. The preferred line of attack has been to encourage larger suppliers to be more proactive in bringing SMEs on board as subcontractors. One can see the logic (we still have the big boys to sue if necessary) but the flaw in the model is that it envelops the smaller enterprise and denies them that operational intimacy with government operations that they need if they are to really deliver.

My judgement is that, in the emerging era of the cloud, this can all be changed. The cloud is about the emergence of a marketplace in discrete technology services – and as I have written in earlier notes to you, thinking has to shift from ‘technology stacks’ to ‘service stacks’. In the ‘service stacks’, consider the arrival in the marketplace of platforms in the Cloud – for here will be the answer.

Consider Apple’s iPhone Apps platform, so successful in enabling small and innovative companies to create apps for the iPhone family that the rest of the mobile market is now following suit. The FT reported that mobile operators now expect revenue from apps sales to exceed revenue from voice services (which in 2010 accounts for 70 per cent of their income) by 2013. Quite a turnaround.

So here is a promising model. The G-Cloud ‘apps store’ could be based on a robust cloud platform open for innovative tech firms to colonise and present their wares as apps sourced as services on demand and paid for as used.

The wider demonstration of this capability in the cloud is from, which sells itself as a cloud platform for business apps that “allows you to build apps five times faster at half the cost” and “deploy apps easily to anyone, anywhere”. Your government CIO colleagues who were on the US West Coast Leading Edge Forum study tour last autumn will remember visiting Their prime market at that point was in the rapid development of web services, and we heard some impressive stories.

The issue of European procurement rules would need to be addressed. For a start, procurements of less than €95,000 can go ahead unhindered, and for a demonstration run of a ‘new app’ procured as a service and paid for as used, that gives some significant room for manoeuvre. Next, the government can competitively procure through a framework with an associated set of rules that allow a defined set of smaller tech firms to register. The key is that the registration process has to be clear, simple and not expensive, and only needs to be done once.

Such an approach could rapidly and directly enfranchise tech SMEs to the government’s mutual benefit: the wider market opportunity for SMEs would allow government operations to access innovative capabilities in their search for lower costs, higher efficiency and greater effectiveness. A win-win situation.

Best wishes, Richard

About the author

Richard Sykes was vice president of IT at ICI in the 1990s and is now a consultant