Putting citizens online, not in line

Although governments hardly stand at the forefront of Internet innovation, their use of the Net to deliver services has experienced something like a quiet explosion over the past five years.

During that time, more than 500 electronic-government initiatives have been launched around the world--up from three in 1996. In many cases, the early results have been promising. A few years ago, for example, obtaining an import or export license in Singapore required applicants to fill out 21 different forms and then wait 15 to 20 days for 23 government agencies to process the request. But since the government launched TradeNet, applicants have had to submit only one online form, and they receive a license as soon as 15 seconds later.

To gain a better understanding of e-government's potential, we examined major initiatives around the world and undertook a significant amount of research. We found that the real value of e-government derives less from simply placing public services online than from the ability to force an agency to rethink, reorganize and streamline their delivery before doing so, much as the redesign of core processes in the 1980s transformed many businesses. And it isn't just the Internet-savvy industrialized nations that can benefit; e-government programs can introduce world-class technology players to developing economies.

Better, cheaper government
When citizens and businesses get online instead of waiting in line, they can obtain faster, more convenient access to government services, and with fewer errors. Singapore's eCitizen portal, for example, allows people to access all government services from a single Web site. Moving? Just type in your address once, and it is automatically sent to all government agencies, such as the post office and the police department. Starting a small business? With just a few clicks, you can apply to Singapore's Ministry of Law for a patent and to the country's Trade Development Board for an import license, and you can post job vacancies with the Ministry of Manpower. While Singapore is perhaps furthest ahead in the e-government game, the United Kingdom, the U.S. state of Washington, and many other places are close behind.

Our experience suggests that just 15 percent of e-government's benefits stem from technology; the rest come from streamlining the delivery of services. The two together can produce dramatic cost savings per transaction. In Arizona, processing a vehicle registration renewal online costs the state only $1.60, while the cost is $6.60 for customers who renew in person. And the Web site hasn't cost taxpayers anything: It was created and is maintained by IBM, which receives 2 percent of the fee for each online renewal. These fees save the state's Motor Vehicle Division nearly $2 million a year, and the amount could easily double or triple as more people choose to renew their licenses on the Web.

The U.S. Internal Revenue Service can process an electronic tax return for just 40 cents, while a paper return costs the IRS $1.60. On average, 40 percent of the expenditures of state governments in the United States pay for the delivery of services, so the potential savings are enormous.

The savings come mostly from using a rule-based decision engine to issue permits or to perform other tasks automatically, provided the user meets specific requirements. Singapore's TradeNet, for example, can issue no less than 95 percent of its import-export licenses automatically, allowing the government to reduce the size of its work force or to enhance service by redirecting employees to more valuable activities.

Additional cost savings come from capturing information more accurately. Electronic filing with the IRS, for instance, eliminates the need to scan handwritten tax forms, thus reducing the incidence of data errors and audits. Receiving tax and other payments online allows the government to invest the funds immediately. Paper and document storage costs fall dramatically.

E-government can cut procurement expenditures as well. Federal, state and local governments in the United States spend a total of $568 billion annually on materials and services. By aggregating procurement and putting it online, private companies have found that they can cut costs by as much as 20 percent to 25 percent. If the U.S. government achieved commensurate economies, it could save $100 billion or more. This tantalizing prize explains why several e-government efforts have focused first on procurement and only later on interactions with the public. Ultimately, going online promotes better public decision-making and more responsive government.

In some countries, e-government can also spark the growth of the New Economy because governments that are committed to putting their services online must build a public infrastructure, create a regulatory and legal framework for online transactions, and promote Internet penetration. Local high-tech ventures depend on all of these factors.

Getting to E
Once a government has decided to reinvent itself online, it faces a continuum of options. At one end of the spectrum, it merely puts existing government services on the Internet; at the other, it creates a megaportal that offers both government and commercial services. Which option makes sense depends on how committed public officials are to overhauling government, on their vision of e-government, and on their ability to execute.

Putting services online
The least costly form of e-government, and the easiest to carry out, is to put existing services online. Led by individual departments, these efforts require little or no cross-department cooperation and only a moderate redesign of processes. Such services might include obtaining a work permit, renewing a vehicle registration or filing a tax return.

Online delivery typically reduces costs by 20 percent to 25 percent and improves the quality of service and convenience for customers. Most e-government efforts in the United States, for example, fall into this category.

Because these efforts are relatively straightforward, many government departments--at little or no cost to taxpayers--outsource the entire task of building and maintaining their Web sites to private companies. Governments can pay companies a percentage of the value of online transactions (as Arizona's Motor Vehicle Division does) or a combination of fixed and variable fees; either way, it is important that companies receive financial incentives to increase online usage. If the department decides to build the online application itself, this typically costs $30 million to $45 million, which covers building the portal as well as automating the service-delivery process.

But simply transferring existing services to the Internet leaves significant value untapped. Government functions remain in their silos, leaving the burden of integrating services to consumers. Citizens would be better served if, for example, they could simultaneously take care of two related chores, such as renewing their vehicle registration and paying their outstanding parking tickets.

Where interdepartmental politics and lack of leadership make more sophisticated online integration impossible, Web sites for individual departments represent a step forward. Departments don't have to take on the enormous task of redesigning the delivery of their services and coordinating the functions of different agencies; many can achieve quick wins on their own. This observation may hold especially true for functions, such as tax payments, that are largely independent of other government services.