Public Services > Central Government

Memset founder: "the G-Cloud dream is dying"

David Bicknell Published 16 June 2016

Kate Craig-Wood complains of "pitiful return" via G-Cloud and says the company has had no business from the framework since 2013


Cloud hosting provider Memset has questioned whether it is worth continuing to remain on the G-Cloud framework.

A strongly-worded blog post written by the company's co-founder and managing director Kate Craig-Wood entitled "G-Cloud - the dream is dying", describes her disenchantment with the framework. Her concerns include regrets at the investments made in a data centre, security and compliance, as well as on a Public Services Network (PSN)-protected connection.

Craig-Wood said the company had spent £2m on a high-security data centre, that was "specced out to IL4 in preparation for data aggregation - a subsequently abandoned requirement; £300,000 and £200,000 a year "enhancing and upgrading our security and compliance stance for IL3, again a requirement subsequently relaxed"; and £250K and £120K a year on "a PSN-Protected connection which has only just started working and nobody seems to actually use."

Craig-Wood said, "These investments, while affordable, have stolen investment from other areas of our business. Our growth over the last few years has slowed as a result. Our faith in the G-Cloud dream has caused us to innovate less and create fewer jobs."

She went on, "At the same time we are seeing an utterly pitiful return via G-Cloud - about £100,000 a year. We do have a fair bit of other government business now, but not via G-Cloud and still only 6% of our revenue overall, nowhere near enough to make it a profitable venture.

"Perhaps the most galling fact of all is that we have had no new business from G-Cloud since 2013. With the eighth iteration of the framework due next week, we're actually asking ourselves, whether it is worth it at all."

Craig-Wood questioned the company's sales approach, whether infrastructure as a service is too complicated for middle management, and the way government buys, saying "the whole point of G-Cloud was to break away from the hideousness of old boys' networks and closed procurement systems."

She asked herself, "What are we doing wrong?"

Her comments about the company's approach are illuminating on whether small and medium-sized enterprises (SME) are investing enough effort into their sales techniques once they are on the framework.

Craig-Wood said, "We don't really do pro-active selling, just lead conversion. We are a technically-oriented, cost-focused cloud/hosting business.

We don't have padding in our prices to afford armies of salespeople running around, nor deep-pocketed backers willing to allow us to make losses. We briefly tried to hire some 'traditional' salespeople, but their tactics were incompatible with our high integrity and our technical, introverted culture was at odds with their own.

More to the point, a big part of the point of G-Cloud was to get away from an onerous, expensive sales/procurement process with buyers able to self-service with minimal interaction - because we are all basically selling the same stuff."

Questioning what is wrong with the G-Cloud and the Digital Marketplace, Craig-Wood said, "It does require buyers to change their behaviour in order for the new model to work. They haven't and hence it doesn't. Without wishing to "put all the blame" onto the customer this is probably the biggest factor in the failure of the G-Cloud dream.

"The Digital Marketplace is also broken. Most buyers only go there once they have already worked out what they want to buy and from whom - perhaps in part because it is so hard to actually find what you're looking for."

Craig-Wood's statement over Memset's woes brought into focus how the company has fared against its G-Cloud competitors, and how well or otherwise they have invested in sales and marketing.

Jessica Figueras, chief analyst at public sector analysis group Kable, said, "It's no secret that some suppliers have not benefited commercially from G-Cloud - in fact, around half of all G-Cloud suppliers have not made a single sale. Memset ranks at 19 out of 60 in IaaS sales, which is not that bad by comparison. One wonders what their expectations were.

"Memset's better performing competitors are a diverse bunch: Skyscape, Eduserv, CGI, Datrix, Carrenza and Amazon, to name but a few. This suggests that both large and small vendors can be successful , if they are prepared to invest appropriately in sales and marketing.

"Too many suppliers continue to see Digital Marketplace as a channel to market. It is not: it is a procurement vehicle. Simply getting a listing and expecting leads to arrive on their own is asking for trouble, particularly for a vendor that has made a significant capital investment in technology."
Figueras' analysis of IaaS spend shows Skyscape at the top with sales of £29.7m, followed by InTechnology, at £10.9m and then Eduserv at £10.2m, followed by SCC, Fordway, Computacenter, CSA, MDS Technologies and CGI.

Memset's IaaS sales are £466,352, just behind Arcus Global, Adapt, Amazon Web Services and Carrenza.

One of the big winners from using G-Cloud is collaboration software specialist Kahootz. Its sales and marketing director John Glover said, "Even though we have increased levels of business via the G-Cloud I can empathise with some of Kate's experiences. We too, are a company that is primarily made up of staff from a technical and customer service and support background which is a characteristic found in many SMEs and is a trait our growing G-Cloud user base really appreciate and value. Yes we need to become street smart, but do SMEs have to change company culture to really succeed? Let's hope not!

"Her point regarding the change from the old IL accreditation process and lack of PSN adoption is valid in part. To be 'market ready' for the demands of potential buyers and for SaaS suppliers, such as Kahootz, IaaS providers had to be pro-active with their investments in buildings, hardware, connectivity and accreditations. Not for the faint hearted! Doing this in an evolving market where the Cabinet Office were also encouraging a move away from 'special for government IT' was always going to be problematic for proprietary networks such as the PSN. As an example, now that the UK MOD have accredited Kahootz, a public cloud service, to store and share OFFICIAL information (which encompasses 85% of their data) where is our business case for an investment in a PSN solution that, by design, would limit who our public sector clients could collaborate with? "

"Like us, Memset, adhere to the spirit and vision of the G-Cloud as set out by Chris Chant. Why? Because of the promise of the G-Cloud to potentially be a transformational game changer that challenges the status quo and creates opportunities for new players. For the G-Cloud to succeed, both buyers and sellers need to work in partnership to be innovative and disruptive. Unfortunately, as Kate has found, quite a few public sector buyers avoid the G-Cloud and still prefer the traditional ways of doing things which makes more agile pioneers, such as Memset, feel exposed and disenchanted. Let's hope Kate's dying wish stimulates the debate as to the future of the G-Cloud."

Chris Proctor, chief executive officer with fellow G-Cloud supplier Oneserve, said that he had been aware of conversations about similar issues to those raised in the blog post among the wider supplier community.

Proctor noted that these discussions were partly focused on whether the framework effectively supported its initial aims of giving central and local government authorities access to smaller software providers and their services to open up the public sector technology market.

"Our frustration is that this is G-Cloud is not working fundamentally," he said.

From the perspective of OneServe's own operations, Proctor argued that another pertinent issue was in the disparity between sales to central government as opposed to local authorities, and an ongoing lack of engagement by a majority of councils.

Based on the latest G-Cloud figures published in May, 76% of total spend through the framework went to central government organisations as of March 2016.

With the exception of authorities such as Bristol, which had undertaken large scale purchases through G-Cloud, he said that many local authorities preferred to undertake their own procurements and avoid using the framework.

Oneserve's CEO added that with commitments made by the Cabinet Office in April to look at significant reforms to a future 9th iteration of G-Cloud in order to better meet users need, a clear review of the framework's key aims and features was long overdue.

Proctor questioned whether a single public sector framework serving central and local government bodies was an effective solution, as opposed separate agreements that can meet their individual needs.

He asked," Is G-cloud supporting central government? Yes. Is it allowing access to smaller organisations? Ish."

While accepting that the nature of a free market dictates different companies would have varying levels of success through a procurement agreement, Proctor said there were issues over the resources of smaller enterprises to compete fairly via the agreement.

Organisations able to stack up key words that will favour products within G-Cloud's search functions and better able to fill in and provide detailed product information were restricting efforts to engage a wider number of suppliers on equal footing, he said, adding that some companies were playing "fast and loose" with product descriptions.

Proctor also questioned whether G-Cloud, which is housed on the Digital Marketplace platform, was effectively meeting diverse public sector needs efficiently, while allowing fledgling suppliers and companies following the rules to prosper.

He said that ultimately, a number of the names of key stakeholders in public sector IT in the era before G-Cloud were still very much involved in the market after the framework had been launched.

From Oneserve's prospective, Proctor said the company would seek to be a part of government frameworks like G-Cloud to ensure access to established public sector customer bases, whether they worked or not.

Between the initial version of G-Cloud in 2012 up to the current 7th iteration that was presently in place, he claimed there had inevitably been improvements over time to address supplier and customers' needs, yet the speed of these changes in a changing market was seen as insufficient.

Arguably, too many companies on G-Cloud have seen marketing as a nuisance, and not a necessity. Lindsay Smith, principal of G-CloudSales UK, highlighting the success of companies like Skyscape and Kahootz in using G-Cloud, pointed out that tech companies need to see marketing as a value creator.

"Kate is doing us all a favour by thinking out loud. There is a glass ceiling every tech company has to break through to find success. Particularly when what you sell is so commoditised Simon Hansford from Skyscape uses water as the metaphor to describe his product. It's easy to suggest that they employ lots of former government people. But look at how brilliantly they have embraced many different facets of marketing. Distribution: getting lots of successful SaaS businesses on their platform and then making them successful with bags of content, marketing.

"The successful companies are stealing a march by learning (re-learning) what marketing does and how it works in this new world."

Additional reporting by Neil Merrett

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