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Why is digital transformation in the public sector going backwards?

from  October 3, 2023 | 4 min read

Our most recent State of the Digital Nation research reveals a worrying trend: digital transformation is slowly regressing in the public sector across the globe, with strategies still around 2- 3 years to complete. But there are still some positives, with confidence improving especially in terms of completion deadlines for back-office transformations. In this article, we’ll explore both the global trends and some of their most important drivers.

Public sector digital transformation is stagnating

Surveyed public sector organizations are less likely to report that they have a fully implemented digital transformation strategy compared to the survey in 2021. More organizations now fall into either the partially implemented or minimally implemented segment. 

This starts to showcase exactly what the impact could be to organizations having to make cost savings or shift priorities – digital transformation is slowing – and perhaps taking a back seatAlternatively, it could be argued that digital transformation accelerated beyond the norm during the pandemic, and this is now regressing to the mean naturally post-pandemic.

Out of all three respondent types, (IT, HR and finance) it is the IT decision makers who are least optimistic about transformation success. Given they are likely the group who will be implementing the digital transformation strategy, it is likely this average is based on reality, while for Finance DMs and HR DMs, this average is based on expectation. IT, Finance and HR should be communicating on areas like digital transformation, in order for expectations to be aligned and any friction on this topic to be limited.

Public sector digital transformation progress in detail

Digital transformation has slowed down compared to 2021, with a reduction of 8% in fully implemented strategies and increase of 9% in minimally implemented transformations.

The majority of respondents say it will take 2 – 3 years for their transformation strategy to be completed. This is more or less what they said two years ago – indicating that the pace of progress has significantly slowed.

Prospects vary quite widely between different regions. Sweden has the largest number of respondents (58%) who say their transformation initiatives will take 2–3 years to complete. Meanwhile, Canada is much more optimistic, with the majority claiming they can get the job done in just 12-18 months. The UK sit between these extremes with 32% saying it’ll take 18-24 months, and the Dutch are the most optimistic, with 6% of organizations in the Netherlands confident they’ll complete their digital transformation inside the next year.



Confidence is improving in specific areas

Despite the slowdown, there is greater confidence that back-office transformation projects will be delivered on time and on budget.

All in all, there’s been a 10% increase in the confidence that projects to transform the back-office will be delivered on time, and a 3% boost to confidence that projects will be delivered on budget. This is likely because outdated back-office systems are cited by 32% of respondents as a major impediment to the success of transformation projects as a whole, with organizations realizing this is a critical area to get right to ensure success.

HR leaders (63%) are more confident that back-office transformation projects will be delivered on time compared to Finance (48%) and IT (45%). But interestingly, Finance (55%) are much more confident that projects will be delivered within budget compared to HR (41%) and IT (35%). Finance (55%) also more confident on achieving level of interoperability compared to HR (44%) and IT (37%.) It’s difficult to tell if this is down to wishful thinking, or if Finance is aware of something their colleagues aren’t.

But why?

The report gives many reasons for the slowdown, but three issues stand out globally:

  • Changing priorities. With budgets shrinking and conditions unpredictable, it’s been a tough time for organizations trying to pursue a coherent transformation strategy. The need to quickly respond to changes in the operating landscape is putting much of the public sector the back foot – even when delaying transformation weakens their ability to respond effectively to these conditions.
  • Resistance to change. Both leadership and ordinary staff exhibit considerable resistance to change, with 32% of survey respondents highlighting each. It’s likely that this is partly due to a lack of alignment, and partly due to digital transformation being seen as yet another obstacle, challenge, or uncertainty being piled atop an already difficult working environment.
  • Inflexible back-office systems. Ironically, the very thing which digital transformation is designed to address can often make it more difficult to achieve. If you’re still processing your finances, HR, and operational tasks via Excel spreadsheets across a variety of disjointed systems, it’ll be nearly impossible to implement citizen-facing transformation initiatives.

These three factors indicate a clear course for public sector organizations looking to overcome the hump: begin by prioritizing the back office to rationalize workflows, alleviate burdens on your people, and help guide the organization through the digital transformation journey without it becoming just another thing to worry about.

Ready to learn more?

For a full appraisal of everything covered in this article – and to learn more about how your peers interpret and respond to their own digital transformation challenges – download our full 2023 public sector State of the Digital Nation Report here.

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