The government’s decision to prolong the life of the 13th iteration of the G-Cloud framework is making it a commercially unviable way for small and medium-sized enterprises (SMEs) to sell cloud services to the public sector, it is claimed.
The Crown Commercial Service (CCS) confirmed in June 2023 the G-Cloud 13 framework would now expire in November 2024, rather than November 2023 as originally planned, which means suppliers cannot update their listings on the Digital Marketplace for another 12 months.
This is because, under the terms of the G-Cloud framework, suppliers are unable to update the range of services they offer, raise prices or amend their terms and conditions of doing business for as long as the current agreement remains live.
In a statement to Computer Weekly, a CCS spokesperson laid out the reasons for extending the life of the framework, and confirmed it was not possible for participants to increase their pricing.
“The extension gives CCS time to further improve the customer journey and performance of the platform before the next iteration of the agreement is delivered,” the spokesperson said.
“In line with the framework terms and conditions, suppliers have applied and signed up to a one-year plus one-year agreement. During this period, pricing cannot be increased but suppliers may reduce pricing or offer discounts. Suppliers are able to update but not materially change service definitions, which are subject to approval by CCS.”
This is not the first time CCS has extended the life of an iteration of G-Cloud, but – this time around – suppliers are feeling the effects of being unable to increase their pricing in line with inflation, which has risen due to the testing macroeconomic environment.
Speaking to Computer Weekly on condition of anonymity, a source from the G-Cloud SME community said the issue was being exacerbated by the price rises some of the hyperscale public cloud giants have rolled out in response to rising energy prices and currency fluctuations, particularly in the wake of the UK’s extrication from the European Union.
The source claimed the company they worked for had been left with a £250,000 hole to plug between what the hyperscale cloud firm it relies on is charging it and what it could charge its public sector IT clients for using its services through G-Cloud.
Many of the SMEs with cloud software offerings listed on G-Cloud rely on the likes of Microsoft and Amazon Web Services (AWS) to host their services. So, when the hyperscalers raise their prices, these SMEs have to absorb the cost until the agreement ends and the next iteration of G-Cloud begins.
“Microsoft put up its prices god knows how many times in the four years post-Brexit or post-referendum, but if you’re a G-Cloud provider, you can’t put up your prices,” the source said.
“Many representations have been made to CCS about this. Requests have been made for an inflation breakpoint [in the framework], or if it’s a third-party price rise, which the supplier has absolutely no control over, for a way to pass that on to customers, but the problem remains. And that is very anti-SME.”
The problem was laid bare in research, published by public sector IT procurement consultancy Advice Cloud on Thursday 27 July 2023, which polled G-Cloud 13 suppliers about the impact the framework’s 12-month extension was having on their business.
Of the respondents to the poll, 79% identified as SMEs, while the remaining 21% were enterprises. Just under half (48%) of participants were supplying products through the “cloud software lot”, while 37% of respondents were listed under providing “cloud support services” and 15% were in the “cloud hosting lot”, which is typically dominated by the public cloud giants.
When asked how extending G-Cloud 13 was affecting their business, 69% of respondents said negatively, with more than half (51%) stating they need to update the pricing of their services due to inflation. And 77% of the respondents that outlined their need to up their pricing were SMEs.
“For them, the extension means some contracts will become commercially unviable and some services will need to be removed from the framework [because it is no longer cost-effective to offer them],” the accompanying report from Advice Cloud stated.
Elsewhere, 49% of respondents also stated the extension was “hampering innovation” and “preventing them from meeting customer needs” because they were unable to add new services.
“Of the 31% who neither need to update pricing or add new services, 48% of them have currently made no sales, and a further 32% have contracted ‘once or twice’ [through the framework],” the report added.
G-Cloud 13 went live two months later than planned in November 2022 and was initially set to run for 12 months, which is the preferred framework length for 41.6% of respondents to the Advice Cloud poll.
In addition to this, 68% said they believed waiting two years for a framework refresh was too infrequent, although 12% said they would favour an 18-month gap between iterations “to balance the ability to update [pricing and services] with the operational burden of re-applying”.
The report’s closing summary further stated: “The majority of respondents felt that the extension would negatively affect their ability to transact with the public sector… [they] also felt that each G-Cloud iteration should be 12 months or less before a refresh, or if longer, then relax the rules on making changes.”
When Computer Weekly asked CCS for a comment on the survey’s findings and feedback from suppliers, the spokesperson said the organisation “welcomed any feedback” as it “endeavours to engage with suppliers, industry groups and customers on any significant changes” to its frameworks.
