Technology's Real Value for Government
IT investments bring their own direct productivity improvements, but the big payoff is in the much larger productivity boost that digital tools can give to government services.
Most of us got into government because we wanted to add value. Unfortunately, when it comes to information technology, too often we're looking only at the beginning of the value chain, the small stuff. We clearly need to pay more attention to the downstream impacts, where the big value lies in improving services, whether it's protecting the environment, keeping communities safe or educating our children.
When we create value with IT in government, three fundamental steps are involved: We start with acquiring the digital tools of IT. We add IT staff, the people needed to select and manage those digital tools. And finally, we leverage those tools and staff to produce and improve government services, both external ones such as public safety, health care and tax administration and internal services such as human resources and financial management.
Let's look at what's involved in each of those steps.
Acquiring information technology: Governments typically spend roughly 1 percent of their funds on information technologies. In general, digital tools roughly double their productivity (bits handled per dollar spent) every few years, as we know from such long-validated observations as Moore's Law for processing and Metcalfe's Law. IT productivity and dollars spent on IT can be rather accurately measured.
IT staff: Governments spend roughly another 4 percent of their budgets--often less--on the staff to purchase these technologies, maintain them and use them to create information services. Direct productivity growth for information services is rarely measured but probably amounts to between 10 and 15 percent per year. This productivity is captured largely not by reducing costs but by making additional information available. So in combination, spending on IT and the staff to run it accounts for roughly 5 percent of government budgets.
Government services: For most governments, some 95 percent of the budget goes to the tools, goods and staff required for the non-IT elements of external and internal services. This is the "meat and potatoes" of government. But how and to what extent can better IT-enabled information improve the productivity of this work?
Research has not provided objective and precise answers. In general, however, better information feedback and analysis improves productivity by:
• Coordination at greater distances and scale. We can reach out to find the best experts and organize larger groups.
• "Ready-to-hand" guidance. We can provide the right information to the right people at the right time and place.
• Networked innovation. We can gain creativity through "out of channel" communications and crowdsourcing.
• Transparency. We can hold people more accountable for what they have done.
Of course, it's difficult to measure government productivity, primarily due to the difficulty of measuring quality. In the overall economy since 1987, however, various econometric studies have identified IT as the single most significant contributor to productivity growth. Individually studied IT-enabled projects have improved productivity by 20 to 30 percent (for example, through enterprise resource planning systems). For the next decade, an IT-enabled productivity growth of between 2 and 3 percent per year in government seems a reasonable estimate, as government has "catch up" room to take advantage of productivity moves developed elsewhere.
So where's the value and how to we get it? Applying 12.5 percent per year of IT-enabled information-services productivity growth to the 5 percent of government spending that goes to information services produces an expected government-wide productivity contribution of 0.6 percent per year. And applying 2.5 percent per year of information-enabled government-services productivity growth to the 95 percent of government spending that goes to non-IT services produces an expected government-wide productivity contribution of 2.4 percent per year.
In combination, those numbers suggest that total IT-enabled productivity growth for government could be on the order of 3 percent per year. By the end of a typical four-year administration, this would result in a productivity bonus of 30 percent (3 percent by the end of the first year, 6 percent the second year, 9 percent the third year and 12 percent the final year).
So what should we do? In general, we clearly need to pay more attention to the "business" impacts of IT-enabled information--the impacts on such government services as public safety, health care and education. The big value of information is in how it is used, not how it is produced. Here are some possibilities:
• CIOs need to focus more than ever not just on the production of information via IT and IT staff but also on how information is being used to redesign the non-IT elements of government work.
• Budget directors need to require the analysis of information-related options for better productivity. This will require multi-year, multi-program planning that will not take place unless the budget director makes it a part of the budget process.
• Program managers in particular need to give higher priority to the search for information-enabled work redesign and productivity.
Over the past 20 years, we've made real progress with IT in government. But we've mostly focused on IT for producing better information. That's important, but it's only the appetizer. Now we need to focus on using information to produce better government services. That's the meat-and-potatoes work, and we're hungry.