Selling into the UK IT market

Introduction

This is a guide for overseas IT providers who want to understand the UK market for IT goods and services. It's provided free and "as is".

The UK market is somewhat unusual and has many quirks and foibles. It differs enormously, for example, from the US market - whilst there is great potential for overseas IT providers in the UK, it's not an easy environment to find sales opportunities in. Hopefully this guide will simplify the process - although, of course, I can't guarantee you results.

I intend to show you

• what works
• what doesn't work
• peculiarities of different vertical markets
• public vs private sector
• contact strategies

I'm very happy to connect with C level contacts only on Linkedin if you'd like to ask any simple questions as a result of this. Sorry - no connection requests from BDM or similar contacts, please.

I get enough of those already. About 30 a day.

The author

Linkedin profile here.

I'm a UK ex IT professional who spent 10 years working on mission critical systems for "household name" companies in the UK and Germany. I converted to IT sales in 2006 and spent 16 years selling a variety of IT systems and applications, working with some of the biggest system providers in the UK.

I've sold most types of applications - from simple spot solutions to major ERP systems - to a variety of B2B decision makers, ranging from SME owners to the CTO's of major companies.

I've also had extensive experience of selling to decision makers in other countries, both in Europe and the US. The differences between the UK and some foreign countries are, believe me, quite pronounced.

"Magical thinking"

I'm going to preface this by saying - a lot of this guide is "what not to do." This may come across as "negative".

Two things.

One. You're completely free to avoid any advice here if you find you don't agree with it, or want to try a different approach. Two. Getting sales is not easy. The sad fact of the matter is that it's very easy to listen to people who just say "yes" to you and go off on a fruitless wild goose chase.

Getting sales is about taking a realistic view of what's possible. Yes, you can chase moonbeams all day - you may be lucky, you may not. Most likely you won't. There are only so many hours in the day, time is money, if you have the time and resources to chase "long shots", then please feel absolutely free.

In the interim, if you're still reading - here's an honest and realistic appraisal of the difficulties of selling into the UK market.

There are more "don'ts" than "do's".

Let's start by looking what overseas IT provider companies typically do when they want to generate UK business.

Premise "IT development services in my country are much cheaper than in the UK. Therefore it's an attractive proposition to have software developed here than in the UK. " - this then becomes "We can get a ￡100,000 deal as the UK is a rich country - we can get some overseas development managers through Linkedin and they can find work for us if we pay them a high commission rate."

Reality There is absolutely zero realistic chance of that working.

If you spend some time researching what your competitor companies are doing, they invariably - 100% - take the same approach.

Just because everyone takes a similar approach - either approach "development partners" in the UK who can farm out some work to them - or employ external BDMs to find them work on a commission basis - doesn't mean that the approach works. It merely means that everyone, as is usual in business, is copying everyone else, without much thought.

Does it work ? Well. Why are you reading this article ?

Because it doesn't.

Sales strategies

Using external BDMs

One almost universal approach used by overseas IT development companies is "employ a BDM or sales contact in the UK and offer them commission."

Just by way of example, I received this message a few minutes ago.

"As fellow members of the same LinkedIn group, I want to extend a limited-time offer for potential partnership opportunities with our IT development firm based in <location>.

Our average project cost is $120,000, and as a partner, you can earn 15-20% commission, which amounts to $18,000 to $24,000 in additional revenue for your business.

Our team is dedicated to delivering projects on time and within budget, and we pride ourselves on providing top-quality software development services.

This offer won't last forever, so if you're interested, please schedule a meeting using this link......... "

Let me explain why this method doesn't work.

One The chances of a BDM stumbling across a $120k deal in the UK market is remote. $40k yes, $120k no. That's "large corporate project". To get a deal like that requires major effort on the part of the BDM, with no realistic chance of success.

Two The commission rates there are very high. They'll be payable on "closed business". The business deal will never close. Absolutely no UK company is going to award a $120k deal to an outsourced foreign company - in this case "in India" - with no references, no transparency and no legal redress. It will absolutely not happen.

Three If you do employ a BDM to generate business for you, they're going to be extremely stupid if they don't offer leads like this to every single one of their contacts out there. You're not actually buying an exclusive lead here. No one is going to risk that happening. If I generated an opportunity for a $120k deal and 20% commission,

I'm not going to potentially throw it away by betting on one horse. I'm going to naturally offer it to half a dozen potentially interested companies out there and you'll find yourself in competition with all of them. Due to the nature of sales, you won't even know about it, they're hardly likely to tell you.

Four The price will naturally drop and that $120k deal will be whittled down to $60k, or whatever the bare minimum is for the job. This usually, but not always, means a bare minimum standard of effort will go into developing an application. (Basically, the end client will settle for a cost/risk ratio he feels happy with.)

I've got a separate article written for Indian companies wanting to expand into the UK market, incidentally. Worth a read ? Find it here.

Five "Time limited offer". Or what ? Excuse me whilst I laugh into my cornflakes.

Generating your own sales

Believe it or not, this is probably the best approach you can take - with a caveat. I'll mention that later.

If you have an outbound sales team, you've probably noticed that outbound sales is extremely inefficient and expensive.

I mentioned earlier that I'd produced an article written for Indian companies who wanted to expand into the UK market.

Understanding the UK market

Now that you hopefully have a better comprehension of sales strategy, let's have a more detailed look at the UK market - your target audience. We'll subdivide this into Public, Private and Third sector.

The UK Public Sector

Public sector is anything which is owned by the UK state or taxpayer. This is, potentially, the realm of some very big deals, of course.

Please stop reading now if you're not a huge multinational company without a UK presence and impressive track record of project delivery. Which you're not.

Having had years of selling into the UK Public Sector market, I can honestly tell you that you have a mountain to climb if you want to generate sales from it. The UK is well known for being a bureaucratic nightmare: you might have to expend literally months of effort to fulfil all kinds of preconditions if (thousand to one) you are lucky enough to get a foot in the door.

Again, you may want to chase moonbeams. Caught any recently ?

Don't let me stop you if you're determined to try. (Alternatively, you might more wisely chase private sector targets which are somewhat more likely to succeed.)

The UK Public Sector consists of roughly 6 million employees. (UK working population in 2022 is about 3 million people. )

Public sector organisations include Government (both national and local) - there's a Government Department list here which covers the UK Civil Service - Higher Education facilities, such as Universities and colleges, Fire and Rescue services, the UK Police Force, the BBC, as a State funded broadcaster, and, most prominently in the public mind, the National Health Service or NHS.

These are just examples, there are plenty more. All these Public Sector organisations are funded by the public through taxation - a Government department (see list above) will oversee their operation and there will be a Government minister (or senior civil servant) with responsibility for them. The minister will have not have direct control over them - but he holds the purse strings.

The UK taxpayer - who, at the end of the day, funds all this, has a relatively light tax burden compared to some countries, such as Denmark. However, as a result of low taxation, the pot is quite empty for a lot of UK Public Sector organisations. The incumbent Conservative government have been in power since 2010, and are "committed to low taxation", which, as a result, has resulted in substantial underfunding of the Public sector. Organisations will occasionally be invited to bid for funding, so the money will occasionally be available for projects - with IT modernisation projects in high demand.

However, let's now examine how Government rules effectively preclude overseas companies from effectively targeting the UK Public Sector.....

Tenders

UK Public Sector organisations advertise projects using a tender system. Back in the Good Old Days, any work which cost ￡30,000 + ($36,000) used to have to be advertised on a tender system such as Proactis. The rules have somewhat changed, and Government high value tenders with a value of over ￡118,000 ($143,000 ) are now advertised on the Government sponsored Find A Tender scheme.

Whilst, in practice, these tender sites are free to join and theoretically open to any supplier, anywhere, in practice, they're pretty much a waste of time.

What invariably happens is that anyone who posts a project on them already has a very good idea of which organisation is going to supply them with those goods or services. Government rules state that they have to publish a tender on an approved site for a number of days, obtain (at least) three quotes, determine which is best value for money - this is public money, after all - and then officially name a supplier.

Of course, they don't. The likelihood is that the tender has been published just to go through the motions.

Theoretically, it might be worth pursuing "suitable" tenders, as public funding here is very low, with the result that most tenders are practically impossible to service at UK development rates. Overseas IT providers, with lower development costs could, in theory, provide a better service.

Practically, the unsurmountable hurdle is that an overseas IT provider is unlikely to be able to pass all the due diligence tests which a UK tender will demand. You'd probably need a UK based financial guarantor, just for starters.

Also - prepare for a bureaucratic nightmare of paperwork. Tenders usually involve endless reams of paperwork to complete, forms to fill in - with a low chance of success - and are usually issued by organisations who are technically incompetent.

I've seen UK tenders for mobile apps which - having been issued by a Council, have to follow Council guidelines on subjects like disability. " A version of the app is also required for our blind users" was one stand out line.

Another tender required a provider to travel on a bi weekly basis to Bristol (170 miles / 270 km away) to attend in person meetings. The rail fare alone for the three hour journey would be ￡200 ($240) and essentially take up senior staff for two days per week, making the process unworkable and unprofitable.

Some larger UK companies will have a team dedicated to monitoring Government tenders. In the case of a small organisation, especially an overseas one, tender sites are basically not worth your time and attention. Unless you want to be frustrated to death.

Bureaucratic nightmare

If you are lucky enough to secure some form of Public Sector contract, your fun is only just beginning.

As an example. I used to work for a UK IT company which was a main supplier to the NHS. The UK IT company - a famous one - had an external development agency based in Chennai, India.

However. UK privacy laws meant that the Indian developers were banned from accessing any system which exposed patient data. What were they developing ? A patient record system. The paperwork was unbelievable, with 700 page legal contracts - a team in the UK was employed merely to check legal compliance - the whole project was essentially unworkable and a paperwork nightmare.

Not that that's a primary concern for anyone reading this article, of course. Unless you're a massive, connected provider in your own country - in which case, you wouldn't be reading this article, would you ?

Conclusions - UK Public Sector

Well, you may be getting the idea that I don't recommend targeting the UK Public Sector. By all means do, perhaps you'll be lucky, but given that the UK Private Sector is an easier target market, why go for the difficult shot ?

More on the infinite monkey theorem here. Don't let me disturb your dreams: if you absolutely must, you absolutely must.

But can I remind you that effective selling is not about being "positive" but being "realistic", as companies don't have endless amounts of time, resources... and luck ?

The UK Private Sector

Now we're on to the proper stuff.

The UK Private Sector is - any company which is privately owned, and not funded by the UK Government or taxpayer. In other words, anything run for a profit. (This distinguishes it from the Third Sector, or "not for profit" organisations. More later.)

Demographics

The Private Sector contributes about 63.5% of UK GDP. Napoleon referred to the UK as "a nation of shopkeepers", and, indeed, there are 3.1 million sole traders in Great Britain. This comprises about 56% of the Private Sector.

Obviously, if you're selling IT services into the UK Private Sector, there is no market for selling to sole traders.

There are 2.1 million actively trading companies in the UK (37%) and 353,000 partnerships (6%).

The UK Government produces endless statistics about the economy, and a full breakdown of the UK Private Sector can be found here.

Registration

Quite handily, the UK being a bureaucracy, the Government requires all companies and directors to be registered - you can check the declared finances and status of registered companies and directors using the Companies House website.

The Companies House website requires a degree of interpretation to make sense of - the UK is a very easy environment to set a company up in, but the information on Companies House doesn't necessarily give you an accurate picture of company finances. You can, however, find red flags, such as companies being struck off for not providing tax returns in time. You can also get an indication of how large or small a company is, which is obviously very important when you're geographically separated and trying to do due diligence.

Due diligence

A note about due diligence. Since the UK has a registration system for companies, you can fairly bet that any UK company you want to do business with will expect that the same resources are available in your country and will check your status before proceeding. If you're in a country which doesn't provide such transparency over your business records, the references of UK/EU customers you've worked with becomes an essential.

Private industry is also concerned with legal issues when working with overseas companies - the UK has a well developed escrow service which you may want to look into.

Startups and entrepreneurs

The UK is a highly innovative country - I remember reading that 49% of the world's patents since 1945 had emanated from the UK.

The theory has it that a startup company will have access to funding or grants (see below) and therefore be a suitable target for IT sales. When you examine the figures, about a sixth of UK companies are, indeed, startups.

However. Of these 620,000 startups, 490,000 will fail - in other words, a near 80% failure rate. This is most likely due to the inability to secure capital or funding - more of which below. Whilst setting up a company in the UK is easy, most are going to be small and will invariably not survive, so perhaps the "startup market" is not so attractive as you may initially think. There is also no clear definition of what a startup company is - some will have been trading for years but still be in a startup phase.

The theory that "startups are a good target for IT sales" is debatable. Any company with money to spare is a suitable target for IT sales, really, and it can be argued that a small company has other priorities than to invest in expensive software purchases. Yes, they may need a website or a mobile app. By the same token, a larger and more established company may have a better budget available, or require legacy apps to be replaced or modernised.

I'll cover entrepreneurs below in a moment.

Grants and funding

Following on from the above. The UK Government tries to encourage innovation via Innovation Grants. UK individuals and companies are encourage to submit applications for grants on subjects which the UK Government believe are growth areas for the economy, or of interest.

For example, an innovation grant may be issued to a number of companies involved in environmental sustainability. There will be a pot of money which is, eventually, and after much bureaucracy, divided up amongst winning applicants. These will be UK based companies and individuals. Unfortunately, the grant process can take a considerable time - I've seen up to 12 months in delays - and since a pot of money is divided up, the amount the winner receives is not necessarily the amount they expected or needed to be awarded.

In practice, although individuals can apply for an Innovation Grant, it's almost unheard of for a grant to be issued to anything other than a company. For example, a Government grant for smart medical packaging would possibly be awarded to a specialist Pharma company who'd done the research and had a track record in the industry. An individual would lack the suitable skills or resources to bring the project to fruition and therefore wouldn't be awarded a grant.

The final nail in the coffin, however, if you're watching the Government site above to see who's been awarded a grant, and therefore needs IT development services, is that the conditions of the grant mean that only UK development firms can be used - no overseas ones.

To return to entrepreneurs.

The UK has a high number of "entrepreneurs" who try to secure funding for projects. However. There is no definition of an entrepreneur, and most are individuals pitching to investors or venture capitalists to obtain funding. Whilst the UK contains a great number of investors, most are (a) London based (b) don't part with money easily and (c) have generally been scared by contractions in the world IT market. Whilst there will, indeed, be some successful entrepreneurs out there, you'll undoubtedly meet many deluded individuals with "an idea", no money and working from a back bedroom. As you undoubtedly have found out.

SMEs and larger companies

Let's start with some statistics.

In 2022:

• there were 5.47 million small businesses (with 0 to 49 employees), 99.2% of the total business population
• there were 35,900 medium-sized businesses (with 50 to 249 employees), 0.7% of the total business population
• a further 7,700 businesses were large businesses (with 250 or more employees), 0.1% of the total business population

As you can see, a "large business" in the UK is "250 employees or more". The UK isn't like the US, with numbers of dominant huge businesses. The ones which exist here are - to a large extent, foreign owned, or, if not, London centric. Decisions about purchasing systems - IT or otherwise, are invariably made at Head Office, which will either be in London or overseas.

I won't go into a detailed breakdown here, as the sector is so large as to confound any generic conclusions, but in general, the UK suffers from a huge lack of skilled workers. This means that all internal IT departments are highly pressured.

Whilst there is supposed to be a movement towards "digital transformation", in actual fact, this is barely happening. Most companies are struggling, due to Brexit, the work from home effects of the pandemic and erosion of public confidence due to a cost of living crisis, to modernise their IT infrastructure.

It's worth approaching companies to find out where their future ambitions and plans lie in respect of digital transformation, but wheels turn slowly with major IT projects.

Remember that any IT Director in the UK will have a wish list. That list is revised at the End of Financial Year (either January or April) - budgets are then available and planned purchases are made. As well as the shopping list of "must haves" there's also the consideration, apart from system cost, of user buy in, training and 101 other factors which slow the purchasing or commissioning process up. This is, of course, especially true where major system purchases are involved.

A typical deal here in the UK would be about $20k for a small system, $40k for a medium sized one and $100k+ for a huge system. A lot of outsourced firms believe they'll be able to sign a $100k deal with no references, transparency or any real work. Well. Only in your dreams.

Before I (very briefly) move on to the UK Third Sector, I'll mention two things which work with US sales but don't work with UK ones.

One. In the US, if you can put a business case together showing that the adoption of a system will save money, cheques will be written. This is not the case in the UK, where the system is more formal and a CFO will rule the proceedings. The CFO will sign off a budget to the CTO when he's good and ready, usually at Financial Year End - see above. This means there are long planning phases in the purchasing cycle. The intention to purchase is usually determined way in advance of anything happening, and UK companies will usually sort out a list of preferred suppliers in advance and engage in "what if" discussions with them - just to see what would happen if they decided to adopt a system, and also pressure potential suppliers to see what price reductions could be achieved. Sneaky.

Two. One theory I've seen a lot of is that software systems can be sold "on the basis of an efficiency saving". Not in my experience. The initial sticking point of price and budget will always take preference over "but we could save you $500,000 a year." That's probably the case, but the initial purchase price will usually preclude a sale. See point one, just above.

The UK Third Sector

Otherwise known as Not for Profit, or NFP's. I don't need to tell you that charities and not for profits are your last resort for selling IT systems to. So I'll quickly tidy this up.

The Charities commission website - a free site which details the finances of charities - comes up with some surprising results. For example, the Donkey Sanctuary, a charity to look after donkeys (unsurprisingly) has ￡63 million in income, with ￡42 million in outgoing expenditure.

What can I do for you ?

Or, "in conclusion." I hope you've found this overview useful. It's provided as is and free of charge for anyone who wants an overview of the UK industry, and how to potentially sell IT systems into it.

You might have noticed that I haven't mentioned sales tactics. This is because this is a generic article - it's much too complicated to go into in detail.

I've published a number of articles here on Linkedin which you may find useful.

https://www.dhirubhai.net/pulse/how-sell-uk-market-dave-francis/ - aimed at Ukrainian outsourced IT providers

https://www.dhirubhai.net/pulse/ukrainian-companies-how-get-uk-development-partners-dave-francis/ - again, aimed at Ukrainian companies wishing to find collaborative IT partners in the UK

https://www.dhirubhai.net/pulse/indian-companies-how-sell-uk-market-dave-francis/ - aimed at Indian IT companies wanting to sell into the UK market.

All these articles are generic. I'm going to say that I am not a consultant and really don't have time to be one. I'm happy to help with basic questions but only for C level contacts. This is because actual change and results come from Board level decisions and actions. Please do NOT contact me if you're a BDM. I used to get hundreds of BDM requests for co-operation a week. Not going to happen.

Happy to help you informally, but if you want to take my time up, that's going to be difficult.

My Linkedin profile is here if you want to come and say hello. Hope you found this useful and informative - good luck out there !