Our Strategic Adviser Lindsay returns to break down how the Digital Marketplace has been for suppliers up to September 2021 and explain the spend data of G-Cloud and DOS.

Summary

• Strong spend growth year-on-year continues
• September quarter up 25%
• Professional Services 71% of marketplace spend
• Health sector high spenders (unsurprisingly)
• Software spend +54% 9-months to September
• Health spend £42m with Deloitte for software
• Opportunity is being delivered for SMEs

Digital Marketplace Spend Data to September 2021

Crown Commercial Service (CCS) have published the data for spending going through G-Cloud and DOS on the Digital Marketplace up to the end of September 2021. Some would note that the data also incorporates spend for October, but late returns make the last month’s data unpredictably inaccurate. E.G. the restatement error for September 2021 between the data sets published in October and then adjusted in November was 11%. I estimate the October 2021 spend data may be adjusted upwards by 50% when we see data published in December.

Overview – September Quarter

Overall, for G-Cloud and DOS combined, the strong rise in spending over the previous calendar year continues, but at a slightly lower rate than in the first half. The first half achieved a 41% increase over 2020, distorted no doubt by spending in that period being hampered by the lockdowns and other restrictions to normal activity levels starting in March 2020. Spending in the September 2021 quarter was 25% above the same quarter in the previous year.

Segment Reviews

Spend by Segment

Segment 9-months to September	2021 £m	2020 £m	Increase %
Professional Services	1,951	1,487	31%
Software	588	383	54%
Hosting	192	150	28%
9-month total	2,731	2,020	35%

Professional Services

Constituting 71% of spend on the Digital Marketplace, professional services still dominate although down from 74% last year following a more than 50% increase in spend on Cloud Software.

Professional Services (combining DOS with Lot 3 Cloud Support of G-Cloud), while still an increase, year-on-year, in the September quarter seems to show a marked dampening as 2020 spend in that quarter strengthened over its first half. But in real terms average spend of £205m per month in the September 2021 quarter was only 8% lower than the average of £222m per month in the first half.

Professional Services spend in the first 9-months of 2021 was just short of £2Bn (£1,951m) compared to £1,487m in the same period in 2020. Of this £463m (31%) increase, £170m (37%) was accounted for by the Health Sector (DHSC & Health), almost as much as the next 3 departments ranked by absolute increase in spending added together (MoD £70m, HMRC £66m, Home Office £44m).

Software

Accounting for 22% of the overall spend in the marketplace in the first 9-months, Software grew strongly by 54% to £588m.

Spend with SMEs was less than the 61% increase to Enterprise vendors but still grew by 44% to £221m from £154m*.

Health Sector was again the largest spend and the largest increase year-on-year accounting for £158m in total (27% of all spending on Software) an increase of £87m, more than doubling (120%) year-on-year which represents 42% of the overall increase in Software spend.

The Health Sector spent £42m with Deloitte LLP, an increase of £37m and an amount roughly equivalent to spending on the next 7 enterprise vendors combined.

[* Note: I have noticed possible anomalies in the September 2021 month’s SME Software spend data that may overstate the spend by £10m. I have written to CCS and the supplier but have not received a response. It is frequently the case that spend figures get adjusted in subsequent data-sets.]

Hosting

Cloud Hosting is an awkward segment to analyse. Some software vendors include their Cloud infrastructure provider cost as part of the SaaS subscription and so this remains part of the Software spend. In addition, there are competing channels to G-Cloud for delivering infrastructure and so the statistic that reflects a fairly constant spend, as was the case between 2018 and 2020, followed by a spike in 2021 may not tell us much about the public sector consumption of Hosting services – in fact it is likely to be misleading as we aren’t looking at the whole picture.

Hosting accounts for 7% of the spend on the Digital Marketplace and with an average monthly spend in the first 9-months of 2021 over £21m, it is showing an increase of 28% year-on-year. But for the reasons noted above caution needs to be exercised in interpreting this apparent increase.

Total sales in the first 9-months of 2021 were £192m, up £42m (28%) – The increase in spend with AWS (£39m) and Accenture (£11m), the two leading suppliers, explains more than this growth by themselves. Third placed supplier, UKCloud stayed fairly constant at £8.8m over the two comparable periods.

Of the major spending departments Health Sector and Home Office both increased their spend by roughly 60% and HMRC by 40% while DWP reduced spend, on the G-Cloud platform, by 35%.

You can read Lindsay’s companion piece to this report HERE.