Last week, Matt Stokes published an interview with Citizenlab from Belgium - an SME that has grown and had success in the monolithic local government software sector.

They did this by understanding that SMEs can’t expect local government to integrate with them - they need to fit in with local government. How can more SMEs get involved in the sector?

Here are four questions - why, when, who, where - and insights to help

Why? To save money

Be aware that local government have had their budgets cut by 50 per cent and their eyes are now watering with the squeeze. There is only one thing they care about. They have capital but not revenue. If your business model is to have an ongoing revenue stream through services, then you need to have a proven business case for your product to show that it will produce more than that level of cashable savings. I.e. they can reduce staffing by x many, or stop paying out x amount in fraudulent payments. In most cases they are making people redundant and your product is replacing them.

Put a spreadsheet together so that they can plug in their figures. Ideally your product should have an impact on their statutory performance indicators. This would be very compelling.

When? At the time they are redesigning that service

You also need to know that it’s all about timing. Selling to Local government is like dating - if they are fully committed to their current relationship they are unlikely to be looking for a new partner.

So you need to do some research: Most councils now operate a sophisticated outcomes based budgeting approach to savings. They have published a savings programme over three to five years which will show you when they are reviewing and changing their service models to make savings.

Here is an example from Rochdale Council.

The year before the savings bite, they will be redesigning their services and they may want you to run a pilot. They want to talk to you at the time they are analysing their service in detail and making changes. This is the equivalent of stages 1 and 2 of the innovation spiral.

"Do they have a problem that you can help to solve?" is a better approach than "do you have a technology they could retrofit into their process?"

If you have an innovative solution for child and adolescent mental health, for example, then you are going to need to start engaging with the business lead for that service in 2017/8. If you approach them in 2016/17 they are unlikely to be ready or receptive.

Alternatively, if a service was restructured in 2016, like the Youth Offending Service,  they are probably bedding down the changes - they are in phases five and six of the spiral.

You will be wasting their time and yours. Although they will probably be polite and encouraging you won’t make any sales. There are hopefully similar parallels with dating.

Who will pay?

You may think it is the Head of Procurement or the Head of IT services who decides on new systems. In fact, the only people who will be able to judge whether your idea helps with their redesigned service is the subject matter expert. So start there.

Councils have 500 or more lines of business in the UK, so you need to navigate and build relationships with the business area which relates to your product.

Follow the money - the budget to pay for your new tool will only be released through service savings. There has to be an invest to save case. IT usually don’t pay for anything except corporate infrastructure systems.

How do you to find the business lead for the service you wish to sell to? Get on LinkedIn - which is where most local government people are - and search by council name.

Where can you add value?

If you are an SME, some approaches have more potential than others:

1.  It is not credible to look at replacing very big systems or corporate tools with new SME products because of the risk. (e.g. you would never replace a corporate finance system or MS 365 with something bleeding edge).
2. The education system supplier Arbor, a company supported by Nesta, uses an approach to compete with big suppliers module by module. This is increasingly viable using ‘low code’ tools.
3. Other SMEs may be best to follow the example of Egress, moving into a completely new area of need rather than replacing something already in existence (e.g. Secure emailing for third parties).
4. There are a number of innovative suppliers working on technology for clients to use in social care that do not have any impact on corporate infrastructure. These can be deployed quickly, and the client for these is social care management. This is an area ripe for proof of concept work - with small client samples, and tools tailored to individual client needs. And it’s one of the areas with the most potential social impact.

Please do comment or ask questions below or contact me on Twitter