An Advocate for the Little Guy: How CABiNET has provided an Important Voice for High-Tech SMEs in Canada (CABiNET Profile)

Posted on October 27, 2008

0


“Shared Services is different from the diametrically opposite model of Outsourcing which is where an external third party is paid to provide a service that was previously internal to the buying organization, typically leading to redundancies and re-organization.  There is an on-going debate about the advantages of Shared Services over outsourcing.  It is sometimes assumed that a joint venture between a government department and a commercial organization is an example of Shared Services but in fact they are quite different.  The joint venture involves the creation of a separate legal commercial entity (jointly owned) which provides profit to its shareholders.  It is difficult to see what is being shared rather than bought.  Such joint ventures are really a form of outsourcing.”

From the Yes Virginia! A Profile In Excellence White Paper (by Jon Hansen, November 2008)

It would be an extremely simple task to define the CABiNET “business network” solely by its exhaustive efforts in challenging the Government of Canada’s (GoC) shared services strategy on behalf of the Small-Medium Enetrprise (SME) high tech sector .  After all this has been and continues to be a focal point of the organization’s collective consciousness since the GoC first presented the idea of a shared services platform in which Public Works and Government Services Canada (PWGSC) stated its intention to “bundle” IT professional services contracts to the likely exclusion of all vendors save for a select three or four multi-national corporations.     

It would also be an equally convenient exercise to point out the long, and detailed history of failed public sector initiatives based on the premise of shared services.  This includes a 2007 report in which it was estimated that 85% of all IT-based e-government programs worldwide (of which procurement reform is becoming an increasingly important element), fail to achieve the expected results.  Or the mixed and at times contradictory “savings” associated with much heralded, over-arching programs such as the UK initiative based upon the Gershon Review.        

I could even make reference to the rate at which government contract awards at all levels are being challenged (if not in numbers, most certainly in intensity), as demonstrated by the recent FACIL suit against the Quebec Government contesting the Province’s procurement practice relative to software acquisition.     

However while thought provoking and even controversial, these examples would create a distraction that would incorrectly confine the CABiNET value proposition to a specific, and relatively narrow scope of service.  A definition that would be both inaccurate and misleading in terms of the “network’s” true value to its growing membership.    

A Domestic Cluster of Superior Skill Sets

Formed in 1994, the CABiNET association of “independent information systems consulting firms” is comprised of 25 Ottawa-based companies with access to over 2000 “IT resources.”

Through the establishment of project-specific consortiums, comprised primarily by CABiNET member companies, these consortiums have collectively and collaboratively enabled the SME IT community to pursue and win numerous government contracts that would have normally been awarded to the large, multi-national integrators.  

In this regard, CABiNET is in and of itself the classic definition of a regionalized domestic cluster.  Like the Associated Manufacturing Marketing Group (AMMG) that was featured in a recent Procurement Insights article, CABiNET can also be considered a joint “venture.”  But instead of being a consortium of manufacturing firms, CABiNET is made up of twenty-five well-established IT consulting firms who through private funding (re member fees, etc.) are focused on developing new business opportunities through a cooperative partnership approach in the Capital region.

And as indicated in the AMMG article, clusters of this nature are not new.  In fact, the majority of domestic clusters are regionalized in their make-up and area of service.  The challenge of course is directly tied to scalability, as the traditional framework of regionalized clusters have been built around a “centrally resident and somewhat monolithic enterprise client” such as the Government of Canada.

This of course raises a question of model sustainability, in that a cluster’s on-going viability is largely dependent upon the buying proclivities of the central enterprise it has been established to service.

In the case of the AMMG example, its formation was the result of an increasingly challenged New Brunswick economy that created a vacuum relative to “supplying” a central enterprise client.  In the New Brunswick scenario, “you have a group of companies that have core competencies that rank amongst the best in the world,” but lack the “necessary regionalized client base that is essential to ensuring the collective long-term viability of the sector.”

The reasons for the decline or absence of a central, regionalized client or clients in the case of AMMG has everything to do with an increasingly sluggish economy resulting in a diminished demand.

In the case of CABiNET, the threat has little to do with the same economic imperatives of a contracting market, and more to do with a shift in policy on the part of the GoC hierarchy.  A policy, which based on extensive research and case study analyses, has no real chance of succeeding.  At least not by the known and accepted scorecards in which similar undertakings have been embarked upon and ultimately measured.

Government Policy and the Economic Impact of Domestic Clusters 

Understanding the principles around which clusters, and in particular the CABiNET “cluster” have been created, we can then begin to understand the association’s importance to the SME high tech community.  We can also start to see why current GoC “bundling” policies are being met with a great deal of resistance, as they in effect euthanize an important knowledge-based industry in the Ottawa region as well as across Canada. 

In the following excerpt from my soon to be released (November 1st, 2008) white paper titled “Yes Virginia! A Profile In Excellence”, I delve into the very subject of how government policy impacts domestic clusters.

“From a domestic engagement perspective, public sector procurement practices are leading to an erosion of the overall supply base.  This escalating level of erosion and its negative impact on innovation was initially presented as part of an October 2002 U.S. report by the Executive Office of the President.

Specifically, the practice of contract bundling which resulted in a steadily decreasing number of Small-Medium enterprises receiving federal contracts was seen as a direct threat to the nation’s pool of “innovation and creativity.”  This of course has paved the way for newer legislation which has resulted in agencies such as NASA unbundling contracts in an effort to make business more manageable for small enterprises, or groups of small enterprises.

In turn, the strength of the supply base domestically (of which innovation is a key tenet), lays the foundation for a sound national economy by equipping suppliers to compete more effectively in the emerging global economy.

In fact, a 2006 presentation by the Foundation for Advanced Studies on International Development (FASID) asserted that globalization will ultimately “reduce the number of industrial clusters in the world in each industry.”  FASID concluded that “in an era of globalization, only efficient clusters can survive.”

Therefore, the inability to build strong clusters of innovation domestically will directly threaten a nation’s long-term viability to compete globally in key industries.”  (Note: Refer to the Web Resources section at the conclusion of this post for additional information on the Yes Virginia white paper.)

What this means is that current GoC policy appears to be in conflict with the emerging “best practice” policies of those governments that have recognized the tremdous value of a strong SME sector relative to innovative breakthroughs and the economic vitality of their domestic economies.

As a result, domestic cluster survival within Canada faces a serious threat that for the most part is self-inflicted by what many consider to be a myopic, overly simplistic view of government strategizing.

A prime example of which is based on CABiNET’s assertion that the GoC’s shared services model will “exclude” SMEs (or SME clusters) from “bidding directly on contracts tendered by PWGSC” in the area of IT professional services.         

Why CABiNET?

For those of you who are part of my regular readership, you already know that an important tenet of the Procurement Insights Sponsorship Program (which includes these profiles) is my total commitment to neutrality.  And as such I will continue to leave the assessment surrounding the viability of the CABiNET value proposition entirely in your hands, (as always, I will direct you to the Link To Our Sponsors section of the PI Blog to investigate the CABiNET membership benefits in greater detail, and at your own convenience).

The real issue concerning the why CABiNET question comes down to the pressing need for providing SMEs in the high tech sector with a collective voice that has meaning as well as relevance.  

CABiNET leadership has suggested that while the GoC shared services platform has many detractors, including other high tech associations such as CITPA and CATA, they are the only network whose origins are truly based upon the cluster principle.  A principle that is uniquely suited to understanding and responding to the real needs of the SME community in which there is a single, unifying purpose . . . the collective sustainability and scalability of high tech small business in Ottawa as well as across the country.

Or to put it in a different light, if the GoC’s shared services policies are fully implemented, and SMEs are effectively cut-out of the picture, the CABiNET cluster will suffer immediate and significant financial hardship.  It is unlikely that big associations like CATA (who count amongst their membership the very titans who are likely to win contracts under the new GoC program) would feel the same financial impact.

In short, there is a great and meaningful difference when one is playing for their livelihood.  And dependent on your specific interests, it is a difference between being “the agenda”, or simply being a part of a agenda.

Web Resources:

(NOTE: advanced copies of the Yes Virginia white paper have sold internationally at the regular price of $300 US.  For the purpose of this post, you can obtain your copy of the paper for $75 by sending an e-mail to jenncameron@sympatico.ca with “YES CABINET” in the subject line.)

Use the following link to learn more about our Sponsorship Program; https://procureinsights.wordpress.com/pi-sponsorship-opportunities/

The Procurement Insights Blog reaches 300,000 syndicated subscribers each month worldwide, and is currently available in English, Chinese, Portugues, Russian, Spanish and Finnish with new language versions being added in the near future.

Posted in: Sponsor Profile