Start-up insights: The challenging task of trying to sell to the Canadian Government
In this age of constant technological advancement, it is not unreasonable to think that governments should lead by example in adopting the best domestic innovations. Yet, governments can be one of the most challenging clients to obtain, especially for a scrappy Software-as-a-Service (SaaS) startup with an innovative solution.
Successful government deployments provide a large boost for all companies, SaaS ones included, creating significant monetary and brand/reference value. Being able to include the local, regional or national government as a reference customer increases the ability of a company to win more national and international business, boosting export numbers and helping grow the Canadian economy.
A partnership of this sort seems natural, but there can be challenges. For example, the procurement process for government bodies is often long and complex, requiring overhead that would be problematic to many small to medium sized businesses. The regulations and policies that are involved are often out of sync with the disruptive, rapidly changing technology industry. The sales, approval and implementation processes often involve many different teams and stakeholders, increasing the decision-making time and the effort required to secure a win on the part of the SaaS company.
Becoming an approved vendor for the government also means meeting some rigorous requirements, many of which a smaller SaaS company may not be able to meet – for example, providing significant financial records, or proving past government sales success. This biases the government to reduce risk and give new contracts to existing, approved suppliers, the same companies they’ve typically always worked with. It leaves little room for innovation or change within the system, despite the performance, efficiency, economic or other gains that might be made. New companies with superior solutions have a hard time getting in, while older companies (often foreign tech conglomerates) continue building out complex, expensive solutions that don’t always meet the mark.
Another problem stems from the fact that governments must deal with complicated matters in many cases. They must provide comprehensive services, and ensure full public engagement and accessibility, in the most private and secure means possible. This all-encompassing mandate often results in very large projects that are difficult to scope accurately, making it difficult for smaller companies to have the scalability and resources to fulfill the terms and conditions required.
So the question remains: How can government and technology companies of all sizes work together more effectively, using an evolved set of processes that mitigate risk and ensure satisfaction for the customer, and equal, realistic opportunity for the product/service provider?
Updating outdated policies and processes
Currently many of the government rules and regulations in place were created and implemented before the technologies of today became so ubiquitous. In almost every case all goods and services purchased by the government of Canada must go through a competitive procurement process that has various caveats depending on the type of product being purchased, the monetary worth of the contract, and other standing offers or supply arrangements that may be involved.
This process is meant to ensure that the government only purchases “what they need at the best value”. In practice, though, the process is often overwhelming and unclear, especially from the perspective of a bootstrapped startup who may have no such prior experience. And the procurement process is just the first step when wanting to sell to the government. Those interested should also register as a supplier, and then promote themselves to find and bid on opportunities.
Many small and medium sized companies don’t have the resources to compete in this way. And on the government side, officials and policy makers don’t necessarily have the understanding of the technology market and its players to guide the framework in a better direction. Both sides would benefit from a close look at where to make the procurement process less onerous, where to appoint leaders that can facilitate and drive change, where to train staff on new solutions and tools, and more.
Fortunately, government is already taking this step by hiring tech leaders like Alex Benay, Chief Information Officer for the Government of Canada and long-time advocate of a closer relationship between government and innovative tech solutions. Benay is also one of the biggest critics of the way government and the tech industry currently interact, pushing for a government that not only understands the benefits of embracing modern tech solutions, but also actively works towards purchasing and promoting them.
Hiring more tech-savvy leaders, as well as ensuring that current government staff are able to learn and use new solutions, can go a long way in changing the landscape of how government choose a product. Ongoing consultation with private sector tech leaders is also key, especially when starting to deal with more complex technical automation and artificial intelligence. A great example of this is the CIO Strategy Council which is made up of a group of public and private Chief Information Officers from across the country. In an age where services can be purchased in a few clicks using a credit card, and cancelled just as quickly, changing the procurement process to reflect a more flexible and agile approach would help continue to improve the partnership between government bodies and Canadian tech companies.
Reconciling constant change with transparent initiatives
Another challenge that has hindered the relationship between government and the tech industry is summed up in one word: pace. Keeping up with the pace of change is difficult in an industry like tech where disruption is an ideal, especially when the body that’s trying to keep up with this pace is, by definition, a bureaucratic slow-moving machine.
Governments need to consider so many factors when making decisions that each one can involve multiple teams and stakeholders. As change and innovation continues, developing policies that balance current and future requirements is incredibly challenging.
“The biggest challenge we have is keeping up with the pace of change. The world is moving to a world of platforms where 10 people can launch a company like AirBnB and completely disrupt the whole industry. These are fast-changing times and government doesn’t move that quickly.” – Alex Benay
This difference in pace can create a significant disconnect between the constantly changing tech sector and the slow-to-adapt government. A good way to reconcile the two is through proactive and transparent communication. Streamlining and openly advertising requests for proposal (RFPs) and procurement processes will help more companies pitch their product or service to government. Creating a transparent process that is more flexible will help government buy and implement solutions faster. And adopting a practice of hiring IT experts to consult on and guide policy direction is key in keeping up with the rate of change more effectively.
The Canadian government’s Build in Canada Innovation Program, the Developers Exchange, and the Open Government initiatives are some of the efforts being made to facilitate a more engaging and accessible relationship between government, business, and the general public. Benay helped bring about the Open by Default initiative, part of Open Government, in an effort to make government information more accessible in a wider variety of formats. These formats are set to include modern avenues like social media and will provide information in a format of choice, making the information easier to obtain and use. In the case of a SaaS startup wanting to sell to government, Open by Default could help them find out about and apply for a bid via Twitter, for example. (Of course, these initiatives take all necessary security and privacy measures into account when delivering the requested information.)
However, even these efforts are often not enough to clear up the murky waters of selling to government. Not having a solid understanding of the various steps of procurement, approval, and implementation means that companies that might have the perfect solution often don’t have the capacity to pursue the process from start to finish. A lot of the lack of clarity actually comes from the difficulty in defining the end goal, especially for government projects that are often elaborate and complex.
Massive projects require massive solutions… or do they?
The scope and scale of many government endeavours is large and often focuses on a multi-year plan to implement. This is a major hurdle for both the software solution(s) used and the governmental body.
“In today’s world, instead of spending a few years trying to define our requirements, a few years trying to procure something and then three, four or five years deploying it, maybe we can accelerate the pace of change in government if we engage differently with the outside world and procure differently.” -Alex Benay
Changing how projects are defined and breaking them up into smaller projects could help find multiple solutions to cover scope and scale, as opposed to trying to find the perfect one or even a couple of bigger solutions that attempt to solve all aspects at once. By redefining requirements, timelines, and end goals, the government can have a clearer path to completion of a project. As well, by breaking up bigger projects into smaller steps and actively advertising the needs of those smaller steps, governments can cast a wider net when searching for the right solution. More companies will be encouraged to bid on an opportunity, problems to solve will become clearer, solutions will be found and implemented at a faster rate, and governments can achieve more of their goals in a shorter amount of time.
In fact, this is exactly what SaaS companies are encouraging as they transform the more traditional marketplace. Trying a service out for a month is easy, setup tends to be quick, and integrations to other useful services are common. Using open standards and microservices only increases the agility and flexibility of a solution and makes it particularly attractive as an option for a government’s needs. In the current tech market, modular solutions that work together often work best and having government apply that same philosophy to their own projects can facilitate the relationship between both sectors.
Stepping outside of the comfort zone, one step at a time
Nonetheless, government still tends to rely on companies they have worked with previously when looking for new functionality or seeking a new solution. Often, these companies are (foreign, usually American) tech titans. While a long-standing relationship can sometimes be one of trust and understanding, not stepping out of the comfort zone means there is limited room for flexibility, agility, or change. It also sends billions of dollars out of the country, even though Canadian companies might be able to fill this gap with smaller, more focused, and more affordable local solutions.
The key here is to shift away from “grandfathered in” solutions by breaking up projects and looking at smaller home-grown tech solutions that can be implemented at a faster rate. In the era of cloud computing where so many businesses run on a monthly subscription model, government can afford to try new solutions to find the best fit for any given problem. A by-product of leading by example with a more active attempt to find and use Canadian products and services will have its own ripple effect throughout the Canadian economy. SaaS companies will increase their sales, especially when having a reference customer like the Canadian government, and growing companies mean a growing economy, further benefiting government, industry, and citizens.
Of course, responsibility for shifting the current framework is not only in the government’s court. It’s important for tech leaders and innovative companies to be a part of the conversation in an effort to update processes and policies of procurement. For SaaS companies looking to sell to government in the current landscape, they must be prepared to play within the rules that exist. Do the research needed to understand a procurement process for the various levels of government, know the requirements that the software must meet, and know where the solution fits within the bigger picture. At every opportunity, engage government to show that we have talent at home, that we’re capable of solving problems using our own tools, and that there is still a long way to go before the internal changes that need to be made occur to make this process easier, faster, and more accessible.
Modern government uses modern solutions
Unfortunately, change is never easy, especially when it needs to occur on a massive, highly regulated scale. Besides being slower to change, governments have a responsibility to their citizens to protect their information while still being accessible and representative. Ensuring privacy is protected is a major factor in government, especially when looking at tech solutions that may be exposed to security vulnerabilities. Accounting for potential problems with automation, consistency, and the use of artificial intelligence in some aspect of governance is important as well. There are a lot of things to take into account and it’s easy to understand why the current landscape is the way that it is.
Nonetheless, watching Facebook CEO, Mark Zuckerberg, testify before US Congress this past April was a painful example of a seemingly massive disconnect between the people in charge of leading a country and the leaders of the tech sector. With more government involvement in how industry giants like Facebook, Google, Amazon, and others operate, companies will be required to meet the strictest of standards overall, but especially when trying to become a government-approved vendor. And Canada should use this example as a lesson to move forward by working more closely with the tech industry today.
The modern computing era allows for and even facilitates safe, secure innovation in every field. Embracing and guiding the development of the sector, as well as playing an active role in the inevitable partnership between tech, the Internet of Things, and government is the logical next step of a modern country that’s connected to the modern world. Committing to improving and strengthening this partnership will benefit both government, industry, and the citizens that live between both.
A mutually beneficial partnership
As the Canadian tech sector continues to expand, innovate, and grow, it’s critical for government of all sizes, municipal, provincial/territorial, and federal, to support it, ideally by setting a great example and actually buying and using Canadian software solutions to solve public sector problems.
Hiring top talent to guide policy direction, overhauling outdated processes, breaking up large projects, and redefining the way solutions are bought, implemented, and used are just a few of the ways government and the tech industry can cooperate to build a better future for Canada. Being open to change, flexible enough to adapt to it, and agile enough to make quick moves is something that the government should actively strive towards. With the help of government technology leaders and through initiatives like the Build in Canada Innovation Program, the Developers Exchange, and Open by Default, we are definitely heading in the right direction, but we’re not there yet.
Any help in simplifying and streamlining the procurement process is welcomed by Canadian companies that would love to partner with government. Our Alacrity Canada team is ready to provide input and guidance along the way to ensure that change towards a better partnership comes even sooner.
Want to see more articles like this? Sign up for our newsletter.
- Global Partners
- Market Insight
- Portfolio Company
- Venture Capital
10 Valuable Lessons from our Between 2 Term Sheets Podcast – Part 1
The Between 2 Term Sheets (B2TS) podcast brings listeners behind closed doors into conversations between investors that typically stay private. Produced by Alacrity Canada, B2TS…