13 Mar 2017

SME view: Across the barricades

Following the Government and MOD drive to include more SME businesses in the defence supply chain, we spoke to several members of the community to hear their ideas, issues, challenges and benefits of working within this key supply chain.

Our first interview sees us speak with Steve Kingan, Chairman of tech SME Nexor. The Company’s roots are in high-grade messaging applications, with its technology bringing a new paradigm in functionality and interoperability to open systems security. Nexor products have been adopted around the globe in significant mission critical communications projects.

Nexor provided the reference platform for the US DoD Defence Messaging System, establishing their technology as the benchmark in the military messaging space. Since then, Nexor’s secure messaging technology has been widely deployed the “Five Eyes” and NATO communities.

The Company now focuses on secure information exchange and cross-domain applications to meet the evolving needs of the government, defence and critical national infrastructure sectors. As of today, several hundred guards and gateways based on Nexor technology have been deployed throughout the allied defence and security community.

Steve is highly active in the technology industry community, considering his membership and engagement at techUK a priority. He is currently a member of the Defence Suppliers Forum SME and a member of the Defence & Security Board. He was presented with an Outstanding Achievement award in 2009 for his work as the founding Chair of the Security & Resilience Working Group.

 

What do you think the MOD & Primes can do to improve SME engagement in defence? Especially with an increase in the spend target to 33% with SMEs.

I attended an SME briefing for the National Cyber Security Centre (NCSC) recently – nine small companies and several long-term suppliers. We got a very good overview of the new NCSC organisation and structure, and the issues it is faced with in protecting the UK. We met the exports team, MOD innovation team, Cabinet Office innovation team etc, so Government is beginning to open up its doors to more than just Primes.

I don’t agree with SMEs who expect to be treated differently from the big companies – the hoops are there to be jumped through for a reason. It is possible for any company to achieve accreditation, so they can too. I want a level playing field and the same access to the customer as the Primes.

I despair when I see SMEs asking to have standards lowered, I don’t think the tax payer should get less than value for money just to incorporate these businesses into the supply chain.

However, saying that, I think there can be a naïve assumption that the Primes have an altruistic approach to SMEs. Their bottom line is actually with their shareholders, so they have no responsibility to use a third party business unless it directly benefits them. I have no problem with this as the more forward looking Primes do realise that SMEs who are agile and innovative can bring value and opportunities on-board.

I genuinely think we are witnessing a sea-change in government procurement, it’s not happening as quickly as some of the SMEs would like – but this is government, it moves a lot slower than an SME which moves in weeks. If you want to be in this sector you have to understand it’s going to be different – it has taken me many years to come to terms with this!

In cyber security for example, the threats to Government are measured in weeks/hours and Government will have to respond to this challenge. This is where I see this NCSC group becoming will be hugely powerful and go a long way to bringing that balance.

 

What do you think government can do to improve communication to the supply chain?

Most people will say the biggest problem in communicating with SMEs is getting them down to network meetings to meet the customers. There are 800+ members of techUK and I know from when I chaired the Defence & Security SME group, you struggle to get people to come to events.

I don’t understand this. We have been members of techUK for 25 years, 15 years ago we assessed our membership and decided we weren’t getting full value out of it, so we decided to commit fully by going to groups, being on panels – and it paid dividends.

It is a long haul, but as a consequence I am fairly well known at MOD, GCHQ etc, Mike Stone and I know each other, because I took the time and effort to engage with techUK.

Engagement days are key. What are you doing if you are too busy to meet a customer or a prospect? It strikes me as peculiar.

It can be an attitude of small business that “I am small so, I will stay small”. But being a small business to me means that I am more agile, I can out manoeuvre my competitors, be quicker, smarter and more focussed than big company competition.

We have a direct relationship with NATO – that’s because we go out and do things in a way that big companies can’t. We are more agile and more entrepreneurial.

When I worked at ICL it felt like it was a series of small business units aggregated under a common logo – which is how most big businesses work – so I don’t see a difference between an SME and a large conglomerate.

People are starting to see that SMEs, in terms of their specialism, are usually about the same size as the large company’s equivalent specialist section. So I don’t see a size difference between an SME and a large conglomerate.

So then it becomes about the risk factor of dealing with someone with half a million in equity as opposed to those with billions. But big businesses can go bust, we’ve seen it recently – BHS, even banks! The difference between a small company and a big company is that you can see problems in a smaller enterprise more easily.

Unfortunately, across all sectors, procurement buyers aren’t specialised and you cannot make the right decision by just using an inflexible process – there has to be a level of skill in making these decisions.

The SME champions in government departments need to try and educate their procurement departments that small does not necessarily mean risk.

Also, when you look at it, a smaller company cannot afford to make mistakes, and will do everything to preserve their reputation. That is where the value for money is bolstered.

 

What do you see as the main barriers that SMEs can climb themselves?

I used to chair SME panel at techUK and there would be people at that who pretended to be an SME and a lot of SMEs saying they have the best system but MOD are not interested.

They don’t realise that MOD has a series of programmes – you need to understand what the customer wants to do, and when.

Some SMEs don’t like PQQ’s they find them difficult – but that is the whole point surely!

I’m currently putting together a set of commercial terms for a consortium of small businesses to work as a conglomerate for government business. So we will have two or three specialist companies working together as a consortium, providing a business unit of 70/80 people. I see this as a great model for the way small companies can work together to take over the contract management from Primes.

 

What is your opinion on Britain leaving the EU?

I have attended a roundtable on this recently, there are implications on the viability of the UK defence business and exporting. However, Nexor has a direct relationship with NATO that shouldn’t be affected by our exit.

I imagine most businesses will get around it by opening subsidiaries in European countries to get around the bureaucracy, and with the pound dropping our exports look more enticing.

My bigger worry is what the Trump administration is pushing on NATO spend. He is expecting all the nations to commit to the 2% GDP spend, and at the minute America is bailing out those that don’t.

If he pulls out and pulls the American money out – I don’t see the other countries necessarily plugging the gap.

 

Defence supply is a massive opportunity for SMEs and with Government opening up and encouraging further innovation in the sector, it is time to strike while the iron is hot. The process may be more involved, but the rewards can be very worthwhile.

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