Across Europe, digital SMEs, businesses whose core products or services are fundamentally enabled by digital technology, such as innovative online application providers, digital service platforms, or tech-enabled retailers, are driving innovation in AI, cloud computing and cybersecurity. However, one of the continent’s largest markets remains untapped for them: public procurement. New research shows that unlocking access for these firms to Europe’s €2 trillion public procurement market could generate €117 billion in gross value added (GVA) and create 1.8 million SME jobs as they expand their operations to serve public sector needs.
Despite their potential, many digital SMEs remain on the sidelines of public procurement; 43% never participate in public procurement, almost half have dropped out of a bid mid-tender, and only 12% report high returns.
The untapped potential
European public procurement is an important contributor to Europe’s economy, accounting for around 14% of EU GDP. Yet, for many digital SMEs this market remains untapped due to excessive complexity, high costs, inconsistent application of rules, and fragmented systems.
Our research shows that if all EU Member States could match the best outcomes from digital SME public procurement, Europe could unlock a staggering €117 billion in gross value added (GVA) and create millions of jobs across these small businesses. This represents not just an economic opportunity but a chance to accelerate Europe's digital transformation and improve public services through innovation.
What needs to change
Digital SMEs identify four factors that cause them to deprioritise procurement:
- Complexity: 74% of surveyed firms say procedures are too complex, with 31% calling them very complex. This complexity deters participation and causes many to drop out mid-tender.
- Cost: high upfront costs and time investments discourage many SMEs from even attempting to bid. On average, each bid requires 42 hours of staff time – a full working week per year for active bidders.
- Inconsistent rules: over a third of SMEs report that procurement rules are applied inconsistently between public sector buyers, creating confusion and additional costs.
- Fragmented systems: 48% of digital SMEs must navigate multiple portals with different login requirements, making it difficult to find and pursue opportunities.
A four-stage plan for empowerment
To unlock the full potential of digital SMEs in public procurement, we propose a four-stage plan to make Europe’s procurement system digital-ready:
- Pre-market engagement: build mutual understanding between buyers and suppliers through structured consultation frameworks, training programs for public buyers, and plain-language guidance for SMEs.
- Listing and discovery: create a single EU-wide digital procurement gateway with harmonised standards and open, fully featured APIs to make opportunities more visible and accessible.
- Bidding and evaluation: streamline the process with standardised templates, shorter award times, and AI-assisted evaluation to reduce administrative burdens and focus on value.
- Contracting and growth: implement e-invoicing systems for prompt payment, use cloud-based contract management tools, and encourage joint bidding to help SMEs scale up.
Implementing these proposals could transform public procurement into an engine of innovation and growth. Digital SMEs will find it easier to submit their proposals and see better returns on their investments when bidding. Public buyers would gain access to a wider pool of innovative solutions, improving the efficiency and effectiveness of public services.
The path forward
The challenges facing digital SMEs in public procurement are not insurmountable. Many of the proposed solutions, such as digital platforms, standardised processes, and AI-assisted evaluation, align with Europe's broader digital agenda and simplification efforts.
As Europe seeks to strengthen its competitiveness and digital sovereignty, modernising public procurement could unlock new opportunities for innovation, efficiency and public value,
Arnaud David, Director European Affairs, Public Policy at AWS, said: “The task ahead is clear: Europe's digital SMEs are ready to deliver innovation, and it's time to modernise our procurement systems to effectively engage with them. Our study shows that by embracing reform and digital transformation in public procurement, Europe can unlock billions in economic value and create over a million jobs while accelerating the region’s journey towards a more innovative, competitive, and digitally empowered future. At AWS, we’re committed to supporting both SMEs and public sector organisations in making this vision a reality.”
Read the full report for more insights and practical steps to make Europe’s procurement systems digital-first here.
