Selling to the Public Sector from the NZ owned Digital and Technology perspective

chair@nzrise.org.nzNews1 Comment

NZRise members have recently been enthusiastically discussing “10 of my secrets on how to sell to the UK Public Sector” by Mary McKenna, a Tech Entrepreneur and Investor from Ireland.

The article resonates strongly with New Zealand owned Digital and Technology businesses as the advice could be equally be written from a NZ owned SME’s perspective. Mary starts with a question we often ask ourselves

“Why do I even want to sell my products or services into the public sector”?

The short answer is because they are the largest local procurer of digital services and products. NZ companies have few other chances to prove their worth in this country. As a monopoly buyer and governor of our economic conditions the Public Sector has a strong role to play in supporting our fast growing Digital and Technology industry.

“If you aren’t already part of the discussion, it’s extremely unlikely you are going to win as this isn’t a level playing field”.

Many NZRise members however, have answered this question by no longer trying to engage with local Public Sector agencies, giving up as a result of cost, indecision and a (perceived) un-level playing field.

Mary McKenna describes the UK playing field as heavily weighted in the favour of the largest businesses in our sector, describing the “big boys” as “comfortable, well established, making a fortune, well set up to respond to tenders and indeed at the table (or at least in the room) when the specifications are being drawn up”.

The UK National Audit Office figures confirming that 51% of their IT spend goes to just 5 suppliers – we note the New Zealand Government do not provide this same level of transparency on expenditure.

Where this article resonates the most is through her 10 Tips themselves:

  1. Know thy customer
  • NZ SME’s find the need to cultivate networks, relationships and find coaches within every Public Sector agency they wish to engage with expensive and challenging without the resources “big boys” hold.
  • We also find it frustrating our seemingly transparent Government procurement framework still requires such a need “to be known” resulting in newer businesses and startups often completely ignored by the Public Sector.
  1. Procurement
  • Mary’s article also reflects the NZ experience here.
  • In a recent poll NZRise found that NZ SME’s spend on average $23,500 per Request for Proposal (RFP) response – with some companies reporting they responded to over 50 RFP’s in the 2016 calendar year. The NZ Public Sector should consider the cost to the NZ economy of continuing with a tendering system that would appear to both favour and reward incumbency.
  1. Beware Early Success
  • NZ owned startups have reported rejections from agencies after 1 or 2 early successes being told they “don’t have enough Public Sector reference sites”, an impossible situation for startups trying to establish themselves in our own market (many of whom are well established offshore in other Public Sectors).
  1. Host your own niche events
  • As Mary points out this is both hard and expensive for SME’s.  In 2016 NZRise complained to the Wellington Regional Economic Development Agency who were actively promoting events on behalf of a massively capitalised multi-national yet local Wellington owned businesses weren’t proactively offered the same free event marketing services.
  1. Working Capital
  • The role local and central government agencies play in supporting NZ Owned Digital and Technology companies is providing support as Reference Customers, and working capital as Fee Paying Customers.
  • Software companies also frequently report questions from foreign Public Sector agencies as to why the NZ equivalent agency is not a customer.
  1. Avoid Competitions
  • Remember “Open Door to Innovation” anyone? Open Door to Innovation resulted in extensive effort on the part of the private sector, offering innovative solutions and ideas with none converted to fee earning projects and a nervous private sector reluctant to engage in these competition like processes.
  1. Make it easy for customer to buy from you
  • On this point NZRise members agree and are actively working on mechanisms to provide consistent, streamlined processes for NZ’s public and private sector to purchase from us exposing service catalogues and price books along with terms and conditions to meet agency requirements.
  • We have also been actively supporting Government initiatives in this space which are (while slow moving) attempting to provide consistency of procurement practises across the Public Sector.
  1. Fix your marketing
  • The Market Measures Report released by Concentrate in 2016 noted significant investment and return on investment differences between NZ And other markets. This is worthy reading when considering marketing changes, access to the report is free for NZRise Members.
  1. Don’t give free trials
  • One of the strengths of a fast paced Digital and Technology industry is the ability to provision trials so a customer can (and should) try before they buy, so to this end NZRise members disagree with Mary’s statement.
  • We are concerned (anecdotally) it would seem NZ Public Sector agency teams use Free Trials as a means of circumnavigating their own procurement processes, asking for a free trial then converting this to a limited trial before purchasing more licenses in increments.
  1. Word of Mouth
  • To quote Mary again “government is like a networked village and everyone knows each other”. From the SME perspective it would appear to be the case here, if a business isn’t “known” the cost to become known can be prohibitive again favouring incumbency.
  • To another of Mary’s points NZRise has been asking NZ Government agencies (MBIE and DIA) for more transparency on “big boy” projects that fail. From the outside it appears there is a repetitive cycle of buying from a small list of organisations and repeatedly paying for project failure driving more risk adverse procurement decisions (favouring those larger companies again).
  • Equally tenders are often structured so that only the biggest of biggest Tech companies are able to meet the defined pre requisites, yet it would appear it is these same companies who lead some of the most spectacular project failures.

“Let’s put all that to one side for a moment and assume there’s enough loose change left around the edges of the public sector to make it worthwhile for the SME to have a go.”

We would like to thank Mary for this article. It is reassuring to find we here in NZ are not alone in experiencing this Public Sector procurement behaviour but it is also disappointing to see the same processes and behaviours occurring in the United Kingdom.

The Public Sector has a role to play in providing a platform for NZ owned companies becoming successful on the world stage, our resonation with Mary’s 10 tips sadly highlighting the position we are in is in-fact quite the opposite.

NZRise members do understand the legislative and trade agreement constraints necessitating no preferential purchasing from NZ owned companies – yet observe often the process of honouring these precludes those same companies from selling to the NZ Public Sector. We note there are successful digital economies where active government support for Small and Medium Enterprise (SME’s) occurs within the constraints Free Trade Agreements dictate.

As the discussion continues on Public Sector engagement challenges NZRise members suggest both the UK and NZ Governments should take a fresh look at Public Sector procurement strategies and purchasing decisions. It is in all of our interests to work collaboratively towards a solution where SME’s, startups and the “big boys” can all operate, resulting in a thriving sector both domestically and on a world stage.

Victoria MacLennan on behalf of NZRise

One Comment on ““Selling to the Public Sector from the NZ owned Digital and Technology perspective”

  1. Mary McKenna

    Thank you so much for writing this piece Victoria & highlighting the challenges that appear to face SMEs globally when selling into both local & central government. My blog has definitely struck a chord with many people (as can be seen from the content of the comments on there) & many others have sent me notes stating that similar occurs with charities and the National Health Service.

    I must admit I had assumed that you guys would have had public sector procurement nailed long ago. It’s a massive missed opportunity on the part of administrations everywhere when they fail to include startups and SMEs as part of their “business as usual” ecosystem – they’re missing out on tons of innovation and they’re paying through the nose to those “big boys” I mentioned instead of obtaining great value for money.

    It’s great to have this sort of dialogue between the UK & New Zealand so thank you again for finding my piece & connecting. Let’s continue our conversation!

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