Is DOS right for SMEs?
DOS4 (Digital Outcomes & Specialists) is just around the corner so we sat down with Strategic Adviser Lindsay Smith to shed more light on what is, after all, a relative newcomer to the Digital Marketplace.
Before we start, you’re pretty well known for numerical analysis of Digital Marketplace, why do you think this sort of thing is worthwhile?
Well, it really gives you insight into the structure and behaviour of the market and you can easily translate that into marketing action to improve your performance.
Let me illustrate that with an example. There are almost 3,000 suppliers on DOS3, 94% of which are SMEs, and in the 12 months to March ’19 about £660m was spent. That’s £220,000 each! So for an SME it’s a no-brainer, get stuck-in and wait for the money to roll-in…
But dig a little bit deeper and you find that of the 2,775 SMEs on DOS only 281, that’s 10%, made any sales in the same 12 months and only 100 got their ‘fair share’ of £220,000 or above.
So, are you saying DOS is the wrong place for an SME?
Absolutely not. DOS is the right place for a thinking SME. The data is there for you to ask questions, find answers and act deliberately. Find the successful SMEs, maybe with sales over £100,000, who are in a similar line of business. Then research them, see how they market themselves, which events they attend, trade association events, networking. There’s a lot of market intelligence on websites, in case-studies and blogs and most SMEs I know are only too glad to pass on tips and ideas if approached in the right way.
In terms of overall size, G-Cloud was £1.3bn compared to DOS £0.7bn in the 12 months to March ’19.
But essentially G-Cloud and DOS are very different markets with different services, aren’t they?
There’s actually a big overlap! 62% of G-Cloud spend is on Lot 3, the professional services category. A lot of that seems to have migrated from G-Cloud to DOS over the last 24-months and I think a lot that remains on G-Cloud should actually be moved to DOS with the more appropriate contract. But while it’s there, it provides a bonus for your ‘thinking-SME’.
Many of those successful suppliers in which a thinking-SME should be paying attention are on both frameworks, and there’s more data published on G-Cloud about pricing and the general offering, so you can get more insight into who is winning and with what.
Outcomes, specialists, user research studios and user research participants all go through DOS, they are quite different. Where does the money go and in particular, where are SMEs seeing the best opportunities?
I’ve actually got a table for that, looking at those 12-months to March ’19. That probably shows the answer most clearly.
OK, why don’t you take me through that?
Research participants and studios are not material to the overall picture, and so do you mind if we leave those to one side?
- SMEs while 94% by number account for 30% by value overall
- Outcomes generally are a more important spending segment than specialists
- SMEs are winning proportionately more in specialists although in £-terms outcomes is a bigger segment for them
That’s a huge imbalance towards the 6% large enterprises. Has DOS always been like that? What do you think is the dynamic we are witnessing here?
The previous 12-months, on significantly smaller overall numbers had a 32%/68% total split SME to Large, so this isn’t anomalous from that perspective. There are a number of factors at play:
- It’s a 130% increase in demand over last year, Large enterprises are better able to deliver resources, SMEs can be sclerotic in ramping-up people and when at capacity may just not bid.
- There’s Brexit uncertainty and March is the end of the budget year. Departments may ‘bank’ unused budget with suppliers and are more likely to do that with a Large multi-discipline practice
- Some of the opportunities are very large and the departments may not have the skills, resource or courage to manage a portfolio of SMEs and not want to break the job down.
What are the types of services being bought and is there any distinction between SME and Large enterprise suppliers?
For DOS3 there is a fairly clear distinction between Specialists and Outcomes. The former are specific people roles and cover the entire IT domain: programme managers, cyber security specialists, developers, IT managers and so on. Single person roles tend to go to SMEs with teams going to Larger Enterprises. A lot of the requirements have a dual role to transfer knowledge or new concepts into the customer department.
The outcomes opportunity specifications are very difficult to categorise usefully. The awarded opportunities are retained on the DOS (Outcomes) opportunities website – so may be searched. Some are very general (HMRC let a £20m contract for 2-years of unspecified outcomes covering many types of role and size of team) others are very specific (e.g. updating an app, a website or integrating proprietary applications). A firm considering applying could search this database of awarded contracts and check that there are relevant opportunities to their particular skills.
Thank you Lindsay, to draw this to a conclusion, have you seen anything in the data that you find particularly relevant to an SME wanting to be a ‘thinking-SME’, and making a success on the framework?
Yes, I think there is something useful here and it brings together the numbers we’ve been looking at and a conversation I had recently with Harry Metcalfe, CEO of dxw digital which is a very successful SME on the framework. One of the areas in which dxw clearly excels is management of the bid and tender process; the important concept here is ‘process’.
It is vital to refine and continuously improve bidding for relevant opportunities. Harry’s team believe a full tender response costs about £10,000.
Now we can see from the data that 362 opportunities were awarded to SMEs in the year to March ’19 (this doesn’t count those cancelled or delayed). On those 362 awarded contracts nearly 9,000 tender responses were started and 5,500 were completed. That’s 15 complete responses to every win. I estimate that figure is closer to 25 if you count the tenders that get cancelled or go nowhere. So if everyone has a process as smooth as dxw there’s still £250,000 of bidding costs being spent on every opportunity. Now if we go right back to how we started this conversation, if the ‘notional average’ income for participating for a year on DOS is £220,000 it’s clear that you have to be a lot better than average at picking and winning your targets. But that’s what being a ‘thinking-SME’ is all about.