osrin.net

A little while ago I wrote a piece that talked about why I believe large system integrators often fail to meet the needs of public sector customers, exploring what it takes to build skills within their own organization and help their customers make best use of new and evolving technology.

I thought it might be useful to look at the other side of that coin and consider the same issue from the perspective of a smaller systems integrator looking for ways to break into the public sector market.

Initially it is worth thinking about the segmentation of projects that are available in the public sector marketplace. I outline a few below, this is nowhere near an exhaustive list and in many cases you can choose to opt out of the complexity and simply consider the public sector to be a microcosm of the wider marketplace with some unique scaling challenges.

a. The proof of concept project. Almost every government department has one or two of these running at any given time. These types of project generally end up being established and let to smaller companies to overcome the lack of innovation found in larger SIs. They are a good opportunity for a small company to get their name known in public sector circles. Unfortunately, if the project proves to be success you will generally find yourself bidding against a larger company for the wider scale deployment.

b. The major application redesign. These are hard projects for a small company to win. Just about any government business process demands the support of a large scale computing environment. Without both specific expertise and the ability to scale across a large deployment these projects will also often fall into the hands of larger companies.

c. The technology deployment project. These types of project often come up towards the end of a major systems or business process redesign. There is rarely anything complex to these projects, you just have to have a lot of people (generally contract staff) turn up and complete repetitive deployment or training tasks across many hundreds or thousands of users. This can be good business for some smaller companies but is high volume and low margin project work, and often tendered solely on price which means you can lose a customer as quickly as you won them.

Maybe you are starting to see a theme emerge. Where large systems integrators often have an inability to innovate, smaller systems integrators will have a similar inability to scale.

The obvious answer for your company appears to be to partner with a larger one, at least as you build a set of capabilities that that will allow you to win and deliver these complex government contracts on your own. Few small companies appear to manage these types of partnership well or manage to make the evolution into being a larger and successful service provider.

There are no magic bullets, but there are a couple of things that I think are key to engaging and growing in public sector markets.

1. In the early days partnership often is essential, make it as equal as you can. The balance of any partnership is often judged by the financial size of the contract and who carries the ultimate liability for delivery, from a purely legal point of view this makes sense and will obviously often put the larger partner in a position of power. Your challenge as a small systems integrator is to ensure that there is a clear understanding in the partnership of the benefits that are brought by your ability to innovate and be agile, you need to be able to measure the output from your efforts across the entire project and to be able to clearly represent those benefits back to the program leadership team. (of which you have to be a part!).

2. That ability to innovate will always be important, even when you are the big guy. I don’t know what the point is when larger systems integrators start to fail to realize the importance of innovating around how they deliver service and how they adopt and sell new and emerging technologies, but most do appear to lose sight of this at some stage. The history of our industry is littered with examples (I’ll share a few over a beer or two if you’re short of ideas!). There are examples of a handful of successful service based companies that have managed to hang onto this part of their business, and it continues to feed the rest of their organization – for many years both IBM and HP have been a pretty good examples of this.

As a side note it has been fascinating to watch IBM outsource some of their required software innovation to the open source community in recent years, it is a tidy way for them to externalize part of their business without losing it completely and an interesting departure from the way they have traditionally operated. A company the size of IBM has some pretty unique dynamics around their size and scale that probably makes this move possible for them. Regardless, it remains important to recognize that innovation in the software that they use will ultimately drive their services business and their continued growth and profitability.

The bottom line for a smaller systems integrator is that you are unlikely to start winning public sector business overnight, and  initially you are unlikely to win it on your own. When you do start to win public sector contracts the rewards are significant, at that point it is easy to lose sight of who your are or what your business is doing.

If you can hold your focus, scale at a speed you can cope with and find ways to continue to innovate (with or without your partners) at a pace that is ahead of your larger competitors then you are on a road that will eventually lead to the success that you are looking for.

There is a whole story to tell here around how I believe Microsoft’s business model is helping our 1m+ partners around the world do exactly this as they solve customer problems using our platform as a source of both software and innovation– but I’ll leave that for another article, this one is probably long enough already!