Several reasons suggest that is advisable to shift focus in political strategies across the world from production to consumption. This involves measures that rely more on markets and less on regulation in order to realize the full potential of egovernment.

For a background see “Egovernment in Perspective”, http://www.talkstandards.com/?p=2273

Centralization

Much of the discussion about egovernment takes a production perspective. The development of services to date has relied on (internal) decisions within government agencies and the public sector. Strategies have relied heavily on centralized management and administration.

For instance, the discussion about interoperability often focuses on how ICT-systems, either within or across government agencies, should interact. The debate typically centers around two issues, (i) the possibility to integrate hardware and software from different vendors in the same system within a particular government body and (ii) the scope for exchange of information and data between separate agencies and bodies of the public sector.

These administrative and practical questions are natural and legitimate. In a political context, this translates into a strategy that is mandating certain solutions and puts the focus on regulation of outcomes.

This centralized perspective on egovernment is distinguishable from a market-perspective in at least three important ways.  First, it emphasizes control while markets involve choices. Second, it focuses on cost-reductions rather than innovation. Third, it is very influenced by legal procedures, while market interaction typically involves flexible negotiations and agreements.

Within this centralized framework, a number of policy proposals have been debated and sometimes implemented. Some of which are economically reasonable, while others seem less effective.

One important discussion relates to interoperability, i.e. the ability of ICT-systems to interact both within and across government agencies. The benefit of interoperability is that it allows greater exploitation of network benefits and scale economies. It also reduces the risk of vendor lock-in. It is today recognized that effective interaction and collaboration in some cases requires technical, organizational as well as semantic interoperability. While technical interoperability is important, it is no magic solution to interaction and collaboration.

It is worth noting that open interaction does not require a forced uniform use of technology. On the contrary, interoperability can be achieved between competing technologies, either with the use of a common interface or with the use of or translation between parallel technologies, which is a real possibility in both hardware and software. Translation and parallel use of technologies has the advantage that technology competition is promoted and long-term switching costs are reduced. It accordingly has the benefit that choice as well as innovation is stimulated.

Several political, historical, cultural and legal barriers segment the markets for provision of public services, particularly in an international perspective. Global market-based standards that facilitate interaction and technological interoperability of ICT systems are abundant. At the same time there is a lack of corresponding semantic and organizational interoperability on a global scale between public bodies and service providers in different countries.

Organizational and legal barriers that exist due to political differences across jurisdictions and countries effectively blocks the use and development of global solutions, e.g. in health, education, culture, media etc. Many of these barriers are controlled by governments and involve political priorities and decisions.

A specific issue discussed in relation to egovernment is the proper role of standards. It is often argued that the government should rely on standardization de jure, i.e. standards developed by formal standardization bodies.

There is, however, considerable competition between informal standards bodies. This results in a dynamic evolution of standards and a clear focus on value. Accordingly, the current consensus view appears to be that the public sector can benefit from a greater use of informal standardization and de facto industry-standards.

It is sometimes argued that the public sector should have specific critieria for the standardization organizations that are recognized and, further, that the government should mandate the use of specific standards. One may note in this context that, it is typically very hard to select technologies that are superior to other alternatives for all applications.  In markets with innovation and fast technological development the risk is that a list of standards is either quickly obsolete or hinders the introduction of new and superior innovations.

Related to this issue is the question of intellectual property rights. It is sometimes argued that the public sector should avoid using technologies protected by IPR or, alternatively, use its leverage to force IPR holders to license their technology royalty free.

These ideas contrast sharply with the public sector’s consumption of technologies protected by intellectual property rights; an experience which is generally good. Organizations and agencies within the public sector have not proven to lack the necessary resources to reward innovators and holders of IP.

Some commentators would also like to see open source as a preferred choice for the public sector. Experience from the private as well as the public sector suggests that effective choices are based on neutral, rather than ideological, criteria. There is a considerable scope for expanding the assessment of alternatives from in-house development to proprietary source, open source as well as software as a service. A comparison between heterogeneous alternatives requires a life-cycle, total-cost evaluation.

Decentralization

Wide access to fast broadband allows decentralized interaction. Development of network services enables citizens, employees and entrepreneurs to engage in development of and contribution to public services. It also permits development of fluid and dynamic electronic market places where transactions can take place continuously on a global level at low cost.

A market-oriented decentralized approach to egovernment differs from a centralized regulation-oriented strategy in many respects. Under a market-oriented approach, development and allocation is determined by competition between different alternatives.  This fosters innovation and differentiation while the level of control is reduced compared to a centralized approach.

Market-oriented strategies are not homogenous. Emphasis is put on different measures depending on conditions and political preferences. With this said, decentralized interaction and competition nevertheless occurs in several areas with some common features.

First, outsourcing and procurement of ICT hardware and software allow governments to buy products and services in ICT markets which are often global and competitive. Any customer, including the public sector, obtains significant benefits from the scale economies, the positive network effects and the efficiencies from international specialization in global ICT markets. In these markets, proprietary software competes with open source, unique development competes with existing products and in-house systems compete with scalable ex-house alternatives.

Second, the full value of competition in global ICT markets is intimately linked to the use of industry-developed ICT standards from informal consortia, i.e. de facto standards. The current system for industry-developed ICT standards is voluntary and informal. Different standard-setting initiatives compete and both the procedures and the outcome of the process differ. The value of a specific ICT standard and standard-setting organization is linked to the use of the developed standard in the market place. The standard-setting market is very competitive due to limited regulation, significant flexibility and a clear commercial focus.

Third, in recent years electronic markets have been developed for many applications, sometimes with international or global scale. In procurement markets, different vendors can offer services or products that jointly constitute supply, while different and separate government bodies, that jointly constitute demand, can buy offered services and goods at market prices. Electronic market places have many advantages, particularly compared to ad hoc procurement coordination between government bodies, since neither the supply nor the demand need to be static. Buyers and seller can enter and exit the market, contributing to dynamic competition and fostering innovation.

Fourth, electronic auctions are used to allocate assets or exclusive rights, such as radio spectrum, land, shares in public companies etc. One significant benefit of electronic auctions is the possibility to have multiple rounds of bidding, possibly in continuous time. A second advantage is the scope for running multiple simultaneous actions. ICT systems enable complex auctions with combinatorial bids and rules that are hard to implement in a conventional auction. This helps to explain why electronic auctions have grown increasingly popular.

Fifth, electronic systems are used to introduce choice for citizens between different service providers. This type of electronic systems already exists in some countries, e.g. for mandatory savings (pension plans), health services, insurances etc.

Sixth, decentralized user-contributions and network interaction between users have grown increasingly common in the private sector. There are, however, relatively few egovernment services that rely on contributions from and interaction between users.

Even though several promising market-based electronic services have been introduced in recent years, one needs to conclude that electronic markets are only exploited to a limited extent. This has a natural explanation. Individual government agencies lack the incentives and capabilities to introduce international, and even national, markets in most cases. Substitution between service providers requires portability and a general institutional framework that single agencies cannot provide.