As the government’s 2015 SME (direct and indirect) spending target of 25 per cent fast approaches, reports suggest that it’s on track. However, to really help drive the innovation economy, the government still needs to boost direct spend to SMEs. Yes, direct SME spend may have increased from just 6.5 percent in 2009/10 to 10.5 percent in 2012/2013, but it’s still a drop in the ocean overall. For years, the complex bidding process has proved prohibitively expensive for SMEs, and many government departments have been tied into decade-long IT contracts.

So what is being done to level the playing field? Well, there’s a light at the end of the government contract tunnel. At the beginning of the year, the government published a set of rules that sought to reduce the iron grip that the big integrators and tech goliaths have on public sector IT contracts and create real competition in the market. These included the fact that existing contracts would no longer be automatically renewed. In addition, the Cabinet Office stated that “no IT contract will be allowed over £100 million in value” unless there was an “exceptional reason”. Consequently, 2015 will see a series of large ICT contracts come up for grabs. Contracts with a number of the tech goliaths are being broken down into bite-size chunks that are far more palatable for SMEs, thus opening up the procurement process. For example, the Department of Energy & Climate Change’s contract with Fujitsu expired in April 2014 and the Cabinet Office’s Fujitsu Flex contract, which was signed in 2007 and expires in January 2015, is not due to be renewed.

Big Ben
© iStock/Chris Schmidt

This is good news not just for SMEs, but public sector as a whole. With technology now moving so rapidly, large contracts that lock public sector organisations into agreements for more than five years can result in them being stuck with stagnant systems that fail to respond to the needs of today’s workforce.

Then there’s the G-Cloud, which continues to try and make life easier for suppliers and buyers when it comes to purchasing new technology.  The October 2014 figures reveal that £184 million of the £364 million in sales via the Framework, so around 53 percent, have gone to SMEs.

Clearly, there is some headway being made and there are numerous government initiatives, such as the Future Fifty and Business is GREAT, aimed at supporting the UK’s rising stars. However, let’s not forget that central government alone spends around £7 billion a year on IT and on page 16 of the Cabinet Office report Making Government business more accessible to SMEs: Two Years On, it states: “our ambition is that at least 50 percent of spend on new government IT flows to SMEs directly.” Now, yes this is undoubtedly an ambitious goal and now rarely mentioned, but even if government increased direct spend to SMEs by just a few per cent, it could prove transformative for small businesses. This means companies would get the Holy Grail contracts that would enable them to take their organisations to the next level. In addition, public sector organisations will gain access to innovative, agile technology that is both cost effective and drives efficiencies. Investing more in UK businesses is the simplest way to drive innovation and increase UK entrepreneurialism.