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Smaller OSS vendors find it difficult to break-in the procurement market



Large vendors seem reluctant in proposing Open Source solutions due to the fear that it may generate less revenue and a loss of control and/or market share and also not be aligned with their product or skill set. Whereas an OSS project is always a community based project, with or without private backing and by its nature no single corporation owns it. Therefore, the bulk of the Open Source vendors are comprised by smaller entities. They have a smaller workforce which mostly consists of developers with little experience or interest in marketing and procurement procedure. For these entities to compete in open tendering it is quite difficult.

And there are a few more other obvious difficulties that an Open Source vendor has to overcome in order to succeed.

Payment Delays

It can take anywhere between 30 days to 90 days and in some cases more so for a government agency to release money to suppliers. For example, suppliers in the Dominican Republic, Equatorial Guinea, Gabon, Guinea-Bissau, Iraq, Trinidad and Tobago, and Vanuatu must wait more than six months to receive payment from purchasing entities.

Minimum Investment

Some governments require a minimum level of investment in the local market to be considered as a valid supplier e.g. Australia’s ‘Industry Participation Plan’ bars foreign suppliers from submitting a successful bid, though this is against the international rules.

Experience

Previous experience in successfully delivering services of a similar nature is often required, a practice which discourages SMEs from applying for the tender. This will become the proverbial loophole, when a vendor is not eligible and will never become eligible because he never was eligible. But how did the other eligible companies succeeded their first time...?

Gaurantee/Insurance

Performance guarantees or bonds are key in a successful bid proposal. These bonds are provided by banks or guarantors. Guarantors generally require contractors to deposit the equivalent amount of money (or other collateral) and thus ties up contractors’ assets. SMEs simply don’t have such assets.

Standards and Certifications

Different countries have different standards; this makes it difficult for SMEs to get all such certifications. They tend to limit to a single territory. Certifications like ISO standards (International Organization for Standardization), CMMI (Capability Maturity Model Integration), ITMark (of the European Software Institute), MPS.BR (Brazilian Software Process Improvement Programme), ITIL (IT Infrastructure Library) are usually mentioned in tender documents. And yes, we believe that these are just setting a high artificial bureaucratic bar, and not convey anything about the technical merits of a solution or the capabilities of the people involved.

Information Deficit and Governmental Lack of Expertise

There is an information deficit in the tendering process. The information is not readily available, usually obfuscated by bureaucratic language and procedures and hence the process is seen with skepticism by OSS entities and left to benefit others that have the man power to even understand what and how is required. The bids are not advertised publicly, secrecy around the procurement process and lack of adequate feedback on unsuccessful bids discourages inexperienced Open Source suppliers from competing. Moreover there will always be a lack of personal and expertise in the governments around the world so in a lot of cases there is no one qualified who even exists in the structure that will benefit the product/service, a professional who can make a proper assessment, engage in clarifications during the bids and have an ongoing discussion during the implementation phase.

Inertia and fear of change

This is a human factor not easily debated but it has to be mentioned: institutions are slow movers by design and this will influence the mind-set of the employees and reflect into all their decisions and actions. This of course doesn't mean that the public sector employees are not capable of burst efforts, in fact their activity it is driven by this way of working, enforced by top to down decisions in the spirit of "we need this yesterday, because now we have the budget". But in fact this modus operandi leads to a conservative approach and lackluster decision making. A smaller OSS company cannot even be considered, when a large vendor has an established a foothold.

License Contracts

When a government is signing a contract with a proprietary software vendor, it will review and negotiate its license terms to make sure that those do not violate any of the laws of the state. This is not the case with an OSS license. The Open Source code is written by multiple contributors and may have various licenses; often times it’s difficult to know to whom to contact to amend the license terms. As Piliero Mazza says that even if the code “contains one piece of open-source code with objectionable license terms, an entire commercial software product can be unsuitable for federal government use and could potentially lead to diminishing your chances of winning a contract or losing an existing contract.” Governments approach OSS with much skepticism and caution, ironically because of their free nature.