Many councils across the country are struggling to get small and medium sized businesses to understand that they could be severely affected by the introduction of electronic services by the end of this year.
Local authorities have been instructed by the Office of the Deputy Prime Minister (ODPM) to make their purchasing more efficient by introducing e-procurement systems which means their suppliers will have to dispense with traditional trading methods and be able to accept and process orders over the web. However, with the deadline fast approaching, there are reports of large swathes of SMEs across the country who appear to be burying their heads in the sand as they are showing no signs of complying with the councils' electronic trading requirements. The possible consequences are that the offending SMEs could end up losing business to larger companies who have invested in the necessary electronic trading systems.
In order to wake SMEs up to the risks of the status quo, a number of councils such as the London Borough of Newham are launching "kickstart" initiatives which are committed to making the transition easier for SMEs.
"Most SMEs don't understand what e-procurement means," says Graham Pilkington, project manager for Newham Kickstart. "If they are not geared up for it, it's going to be like not having a telephone. SMEs are terrible strategists. They are too close to what they are doing. They should be proactive. They should put pressure on their local authorities and say we are here and we are a vital part of the local economy."
In order to make it easier and cost-effective for SMEs to trade electronically with the London Borough of Newham, there are plans to launch a dedicated East London Online portal which will be linked to the council's buying systems. Members of the council's kickstart initiative are now trying to persuade SMEs to sign up. So far about 30 have come forward.
Andrew Pratt, managing director of Frank R Pratt, an east London-based timber merchant, has decided to participate in the initiative. "I think it's an opportunity which we have to grasp and make as much of as we can," he says. "The council is trying to get as many of the local businesses on board as it can. It's going to be a fairly steep learning curve for all of us. It cements our relationship with Newham council and shows we're forward-thinking and we don't want to be left behind.
"The response they have had so far has been fairly limited because people are fairly scared about what it entails. But without it, you could be left behind. You could end up not trading with large established customers."
Through the east London portal, SMEs get their own e-commerce websites. Under the scheme, companies can pay about £240 a year and get 2000 products listed for selling. They can also use electronic invoicing functions which integrate with Newham council's back office systems. "We have to be careful we don't exclude local companies. You could end up with a situation where large contracted companies are the only ones who can afford to carry out the work," says Chris Hoar, commercial director of @UKplc, the company which is building and running the portal. "The councils want to make sure the local community does not suffer. They want the local businesses to get a slice of the cake," he says.
Other councils across the country, such as Bristol City Council, have also launched a similar kickstart initiative and discussions are reported to be under way to extend the scheme to councils in the north of the country. "When we did our supplier analysis we found that 80% of our business is done with SMEs. Our concern was that we did not exclude smaller businesses from trading online with us," explains Russell Darling, account services manager for Bristol City Council. Chambers of Commerce and Business Link, as well as Bristol University and other public sector educational bodies, are supporting the initiative across the south-west region. So far, about 200 SMEs have been signed up to a dedicated Bristol ebusiness portal. There are thousands who have still failed to participate but Darling is confident that momentum is building and believes more SMEs will join in the near future. He stresses that the main appeal of joining the Kickstart portal is suppliers will get paid faster by public sector bodies in the region. "The information passes through the trading portal straight into our back office systems."
Council officers who are backing kickstart initiatives argue that SMEs have the chance to develop new markets for their products and services. If they join the online portal in their region not only can they trade with councils and other public sector bodies but they can also trade amongst themselves.
Colin Whitehouse, chair of the local government national e-Procurement project, admits that some councils have been more proactive than others when it comes to making electronic trading accessible to SMEs. He points out that every council should have a "selling to the council guide" on its website.
In the run-up to the government's end of year deadline for the introduction of e-services, Whitehouse strongly believes that SMEs should now take up the available opportunities to improve their business processes. "Electronic trading with the public sector is about improving the internal capabilities of SMEs. If they have the ability to submit invoices electronically then they will get paid quicker. It improves their cashflow. If they can provide their catalogues into an online marketplace it shows them to a wider audience which could bring them more business."
· Weblinks
