Executive Summary
- Size matters to some buyers
- Use our G-Cloud Spend Data tool to find out who
- Covid pandemic makes time comparisons tricky
- Evidence that Large suppliers got more spend in the pandemic
- Matching Spend Data to G-Cloud supplier lists needs care
- Data analysed across micro, small, medium and large suppliers
- Visualising Spend to SMEs by Customer Group
- Drill down to find Micro-SME-friendly Customer Groups
Drilling into G-Cloud’s ‘SME-friendly’ Customers
G-Cloud 14 has now been awarded and it’s fair to assume many new SME suppliers are going to be keen to get selling. I represented a micro-SME SaaS supplier a while ago and in one Supplier Engagement event, precursor to a major digital transformation procurement, I asked the Chair if they would consider buying Cloud Software from a micro supplier (i.e. less than 10 employees)[1]. “No”, was the short answer.
It maybe an unenlightened approach, but it was my choice to not waste my time evangelising the benefits of SME resourcing to this ‘closed door’. I would rather push on an open door and happily we had significant contracts on G-Cloud with major central government customers to develop.
There are tools available to help identify SME-friendly prospects, you can start with our G-Cloud Spend Data tool. The object of this article is to start this journey for you.
[1] The UK government definition of SMEs encompasses micro (less than 10 employees and an annual turnover under €2 million), small (less than 50 employees and an annual turnover under €10 million) and medium-sized (less than 250 employees and an annual turnover under €50 million) businesses. [Source: “Small and medium-sized enterprises action plan 2020 to 2022”
Analysing G-Cloud Spend by Supplier Size
The latest Spend Data available at the time of writing includes transactions up to and including September 2024. I want to look not only at spending in a recent period up to this date, but also how it has changed over a recent comparable period. I have elected to take as my primary period the 23-month life of G-Cloud 13, that is from November 2022 when that iteration went ‘live’. It’s important to recognise that transactions recorded in that period are not just from suppliers on G-Cloud 13 but will include ongoing call-off contracts from earlier iterations of G-Cloud.
To find an earlier sample of data to compare the trending nature of Spend by supplier size I have taken the 23 months from the month that G-Cloud 12 went live: July 2020, to May 2022.
It would be handy if we could assume that nothing else of significance was going on between these two periods so we can draw reliable conclusions about the propensity of departments to buy from SMEs and how this is evolving over time – but sadly we live in the real world.
There was no Ceteris Paribus in the 23 months from July 2020. Covid and the social, economic and political upheaval of the period did impact spending on Cloud Services. ‘Test & Trace’ seems at least in part to have been a G-Cloud procurement. £170m was spent with Deloitte in that 23 months compared with £54m in the previous 23 months and £79m in the 23 months to September 2024. This is an example of increased spend with Large Enterprises in the pandemic, and it is not unique.
I can understand the Department of Health and Social Care turning expressly to a Large Enterprise in the extreme circumstances of the time for access to deep resources and expertise (at a high price).
Extrapolating this single example and hypothesising it may have been a trend in the pandemic, might suggest that spending to SMEs as a proportion of overall spend will increase in the later November2022 to September 2024 period, as these exceptional drivers to large suppliers drop out of the procurement landscape. We will see if there is any evidence to support that theory below:
Total Spend on G-Cloud to Sept 2024
| Large | Large | SMEs | SMEs | Total | |
|---|---|---|---|---|---|
| 23-month Period: | £M | % | £M | % | £M |
| July 2020 - May 2022 | 3,145 | 61% | 2,024 | 39% | 5,169 |
| November 2022 - September 2024 | 3,286 | 58% | 2,414 | 42% | 5,700 |
| Increase from early to late period | 4% | 19% | 10% |
Spend on SMEs as a proportion of total spend has increased 19% in the later period whereas spend to Large Enterprises only increased 4%. This could be explained by:
- The exceptional procurements of the pandemic era dropping out,
- A renewed zeal to drive more business to SMEs (one of the founding principles of G-Cloud), or
- A random movement caused by, for example, new frameworks and procurement channels competing with G-Cloud in the later period which have attracted more business with Large Enterprises.
Unscientifically, I would suggest the answer is a combination of 1 & 3, but it is beyond the scope of this article to pursue the question for a proof, even if one might be easily available, which I doubt.
Drill down through SMEs and then take a close look at Micro-SMEs.
I have access to G-Cloud supplier listings covering the two periods classifying the suppliers into micro, small and medium cohorts. For a variety of reasons, I cannot make a perfect reconciliation between the supplier names on the Spend Data and these lists of SME constituents. Suppliers may change their names (e.g. when taken over) but the most frequent cause is that in the returns which form the input to the Spend Data (Monthly MI returns), the supplier completing them often uses a different name from that used when applying to join G-Cloud. For example, ‘Abacus Bravo Collective (U.K.) Limited’ in the G-Cloud application may become ‘ABC Ltd’ in the MI report. Names can be represented differently between different frameworks too.
To get the best match I can between the lists I have developed a name-cleaning algorithm which I apply to both lists. (E.g. it removes all versions of ‘Limited’, ‘LTD’, capitalises all names, removes odd characters and spacing, etc.) it has now grown to 140 separate cleaning steps.
For the early data in the 23 months from July 2020 we find a match for 93% of the 2,165 distinct supplier names on the Spend Report. For the later period to September 2024 the match is very similar at 94%. For the purposes of identifying the amount of spend the public sector customers direct towards micro suppliers this is adequate for purpose. But the missing 7% and 6% of spend we can not allocate to the new size classifications means that there is a small difference in the total spend allocated to Large and SME in the table in the previous section.
Spend in the two periods analysed by SME sub-class
The tables that follow show the Spend by Customer Group (MoD, HMRC, etc.) across the supplier component sub-classes of SME (medium, small, micro). To focus on the major players, we only show Customer Groups with over £50m of total spend in the latter period (to September 2024).
Well, that’s the data. It would be useful to have some visualisations to get a feeling for trends. This is certainly possible at the higher level, looking at SME spending in aggregate:
The search for SME-friendly Customer Groups
Part 1: SMEs as a whole
Key
MoD – Ministry of Defence
Health – Health
H.O. – Home Office
DWP – Department for Work And Pensions
L.G. – Local Government
HMRC – HM Revenue & Customs
MoJ – Ministry of Justice
DHS – Department of Health and Social Care
D.A. – Devolved Administrations
Dfor T – Department for Transport
C.O. – Cabinet Office
Education – Education
Bluelight – Bluelight
Nfor PrP – Not for Profit
DEFRA – Department for Environment, Food & Rural Affairs
DBiz&T – Department for Business & Trade
Deng – Department for Energy Security & Net Zero
FC&DO – Foreign, Commonwealth and Development Office
MoHC&LG – Ministry of Housing, Communities and Local Government
HMT – HM Treasury
DCMS – Department for Culture, Media & Sport
For each of the Customer Groups, the position in the matrix on the horizontal axis shows the proportion of their total spend in the period ending September 2024 that has been directed towards SME suppliers. HMRC spent the least in proportionate terms (16%) but as the 6th highest spender on G-Cloud, at £56.1m there are 6 Customer Groups that spent less. Health spent the largest proportion of total spend (72%) or £389m on roughly 450 suppliers fairly equally divided between Software and Support.
The vertical axis shows for each Customer Group whether they increased or decreased their proportionate spend to SMEs between the two periods under review. So HMRC in the earlier period spent 26% of total on SME suppliers but only 16% in the later period (patronising roughly 50 SMEs, predominantly in the Support Lot). This is represented as a -39% proportionate decline in SME spend (26%-16%)/26% (allowing for rounding errors). Only 8 Customer Groups increased their proportionate spend to SMEs. The Department of Health and Social Care showed the biggest proportionate increase (62%) to over 200 SME suppliers with roughly 1/3rd Software and 2/3rd Support.
At this, the SME level, the top right-hand quadrant seems to indicate the more SME-friendly customers, those with a higher share of spend going to the SME sector and this share increasing over the roughly 4-years under scrutiny. To provide an example of how we can drill down further, we are now going to look at the toughest supplier cohort, Micro-SMEs.
Part 2: Are Any Customer Groups Micro-SME-friendly?
The visualisation used to look at all SMEs is not so helpful looking at the smaller components as the data is so sparse. For Micro-SMEs the vertical axis showing the change in Spend between the two periods would need to accommodate vast proportionate changes (+400% to -100%) and on the horizontal axis the proportion of Spend going to Micro-SMEs would go from 1% (HMRC) to 13% (MoD).
So, we need to take an alternative approach to discover if there appear to be Micro-SME-friendly Customer Groups. We will establish some conditions that subjectively seem to illustrate that a Customer Group supports Micro-SMEs and then by digging down into the data, see how many Customers achieve these conditions.
Having worked with a Micro-SME, I know from personal experience that there are Customers who provide a reliable, long-term G-Cloud revenue stream and based on this experience I advocate that a Customer Group is likely to be Micro-SME-friendly if:
- They spent more than £10m with Micro-SMEs in the 23 months to September 2024, and
- They spent at least £100,000 on multiple, defined as being more than 10, Micro-SMEs in that period.
Of the 32 constituents of the Customer Groups, 12 achieve these criteria and they do include my old customers:
| Customer Group | Micro-SME Suppliers (Distinct Count) | Spend (£M) |
|---|---|---|
| Ministry of Defence | 43 | 74.4 |
| Health | 138 | 67.6 |
| Department for Work and Pensions | 25 | 48.8 |
| Department of Health and Social Care | 43 | 34.0 |
| Home Office | 30 | 25.0 |
| Cabinet Office | 38 | 22.8 |
| Devolved Administrations | 110 | 17.9 |
| Department for Environment, Food & Rural Affairs | 23 | 15.4 |
| Local Government | 98 | 14.7 |
| Not for Profit | 35 | 13.1 |
| Ministry of Justice | 22 | 11.2 |
| Bluelight | 35 | 10.4 |
So, these become the primary contenders for Micro-SME-friendly Customer Groups.
Concluding Remarks
This is not the end of the story. Not even for Micro-SMEs. We can perform similar analysis for the small and medium cohorts of SMEs and these will be different, as supplier size grows, it becomes much easier to overcome buyers’ concerns over stability, longevity, resource adequacy and risk. Neither should we stop at the Customer Group level, but drill down into the individual customers within those groups to find individual prospects that appear to be prepared to buy from your size of supplier.
Being apparently SME-friendly is a useful indicator of where an SME might spend marketing resources. There are, of course, far more relevant and significant dimensions to the search for prospects, not least of which is matching your product or service to an expressed need. But it is useful to know when you are pushing at an ‘open door’ for your size of company.
