ICTs have obtained an increasingly central role in municipal organisations. One of the central questions that urban managers ask themselves is whether to outsource certain or all ICT functions to external private partners –that may have a lead in technical abilities and competences- , and what to keep “in-house” from a strategic control perspective. This paper deals with the strategic management ICT in the cities of Barcelona, Cape Town, Johannesburg, Manchester, The Hague and Venice. This set of cases is interesting, because it contains a wide variation in the way the cities organised their strategic ICT management internally and in terms of outsourcing relationships and strategic partnerships with private actors.
ICT management in a number of case cities
Cities are aware that the strategic value of ICT for their organisation is growing. At the same time, the technological complexity and volatility in ICT are growing as well. Cities need at least a minimum level of private sector expertise to make their ICT systems work; at the same time, they need some minimum of expertise “in-house”, as ICT systems are increasingly at the heart of the municipal organisation.
Barcelona is a good example of a city that has kept most of its IT in-house. The city relies heavily on a municipal information technology centre that ranks among the best of its kind in Europe. The Municipal Institute for Informatics (IMI) has to negotiate contracts with each of the municipal departments. These are complex negotiations, because the partners have to find a balance between the clients’ priorities as represented by the departmental managers, and the general interests of the city, as represented by the director of the General Services department. But they share a common understanding of the public interest. By consequence, although municipal departments are free to choose other ICT service providers, IMI has a “de facto” monopoly: almost every IT system and application must fit in the highly integrated infrastructure of equipment, software and information. The city government of Barcelona decided that maintaining this centralised ICT-strategy and centrally managed facilities is a prerequisite for integrated attention to the citizens as well as for territorial and functional decentralisation.
In Venice, the situation is slightly different There, individual city departments can and do buy applications from external ICT companies. The city of Venice has founded “Venis Spa.”, a public company that is in charge of integrating the various information systems utilised by the Municipal Administration and delivering services. Until a couple of years ago, they were the only provider, with total responsibility for the city’s ICT services. Now they are responsible only for system management and integration. For new systems and projects they have to compete with the market. In this transition, Venis had to change its mission. In the city of The Hague, there is no integrator, and every single city department buys its own applications in the market. Until now, the level of co-ordination is low. As we have seen, the city of The Hague already outsourced its municipal computer centre in the early 1990s, and the municipal departments developed their own systems in a rather uncoordinated way. All ICT project proposals have to be developed through the municipal departments. They appear to have some trouble to align the technological issues involved, both at the level of interacting technologies (enabling e.g. the integration of services) and at the level of the requirements of introducing the new technological regime (staffing, knowledge, resources).
The city of Johannesburg outsourced its entire ICT operations in 2000. Outsourcing was considered the best way to acquire the technological expertise needed to develop responsive government and good quality public service delivery. The financial position of the city was in bad shape, ICT management was underperforming, there were hundreds of ICT costs centres spread throughout the administration, the level of internal ICT services was poor, and there was an apparent lack of skills for the delivery and use of desktop and LAN services. Outsourcing to the Sebedisana consortium (created for the occasion) was the quickest and the easiest way to obtain the required expertise.
Manchester City Council was aware that implementing e-government requires both new organisational concepts and integration of ICT systems. Such complex operations need specific know-how that was not available within the organisation. The City Council chose to enter into a strategic partnership with ICL/Deloitte&Touche, which proposed a combination of business process reengineering with rearrangement of ICT systems. As a next step, the city has not just simply contracted out the job, but it engaged in a strategic partnership in which the risks and benefits are distributed between the city and the consortium. Both parties find it hard to give substance to a real “strategic partnership”, and the partnership arrangement does not preclude the Council from partnering with other private sector suppliers as appropriate. In the process, the relation between the consortium, the central ICT unit and the ICT units in the municipal departments is troublesome at times. In some instances the departments work together with the consortium without consulting or involving the central ICT unit.
Cape Town chose the public option. In 2000 the city found itself with a multitude of ICT systems, very much like Johannesburg. Every district and almost every department had its own hardware, networks and applications. This situation seriously hampered the management of the city. Both the city manager and the central ICT department were strongly convinced that a new, integrated information management system needed to be put in place in order to streamline information flows and integrate all the different systems. It was decided to put an integrative Enterprise Resource Planning (ERP) system in place, which would meet these requirements. The city decided a collaborative partnership with Accenture. Like in Manchester the process of implementing the system went hand in hand with a reorganisation.
In sum, the differences are large. City vary from having a strong centralised ICT management (Barcelona, Venice) to very decentralised ones (The Hague), and, in terms of relations with the private sector, from far reaching forms of outsourcing (Johannesburg), moderate partnership models (Cape Town, Manchester) to an in-house orientation (Barcelona).
In this analytical part, we will make an attempt to judge the benefits and drawbacks of the various policy types along the four criteria: 1) the degree of strategic control of the urban management over the ICT functions; 2) the readiness for system integration in the municipality; 3) the degree in which cities restructured their back office organisation and 4) the risk of “lock-in” into a supplier’s system. In figure 1, the cities are ranked according to their scores. Below, we will elaborate on the scores in this figure.
Figure 1 Comparison of the case cities on four criteria
Degree of strategic control
If it is true that ICT is becoming more strategic for cities, then cities should be at least at a strategic level to influence and steer the ICT developments at a strategic level. Barcelona obtained the highest score. Strategic ICT management is organised centrally, and at a high level in the organisation. The various urban departments are clearly subordinate to central strategic objectives and decisions. Venice also scores high in this criterion. Its centralised ICT integration unit makes it easy to establish links with the city management, and limits the power of the individual city departments to go their own way. In The Hague, Capetown and Manchester, the level of strategic control over ICT system is more limited. In these cities, the municipal departments have a more independent role, which loosens the grip of central management. Also, these cities are engaging in strategic partnerships with consortia of ICT companies and consultants, that have a lead in terms of know how and technological expertise. Johannesburg has been struggling to implement the strategic responsibility at an appropriate level:
The external technology partner has actually been leading the way to e-government as Johannesburg’s knowledge partner in the outsourcing contract.
Readiness for system integration
Our second criterion to analyse the cases is to what extent the ICT arrangement provides a readiness for system integration. Barcelona is again the best placed city: its central IT management unit makes sure that all the systems can talk to each other. The freedom of individual departments to go their own way is extremely limited. Venice also obtains a high value. Venis ltd, the public integrator of ICT systems, takes up it role relatively successfully. However, individual department have recently increased their level of freedom to purchase their own ICT solution form the market. This somewhat reduces the integrative capacity of Venis. In the cities of Capetown and Manchester, a private consortium is set to integrate the huge number of ICT systems in the municipal organisation. Given the technological and organisational capabilities of these consortia, this is likely to succeed, but we have to be careful to draw to quick conclusions, as at the time of writing, the cities were still in the process of negotiating the details of the strategic partnerships. In Manchester, the relation between the consortium, the central IT unit and the IT groups in the other Council departments is troublesome at times, which is not conducive to an optimal system integration. Also, in some instances the departments work together with the consortium without consulting or involving the central IT unit. Capetown obtains a lower score than Manchester because its relatively unfavorable starting position. The current “Unicity” of Cape Town was established in 2000 as a consolidation of 7 municipalities. This legacy is reflected in the current IT context in the city. The city finds itself using a multitude of IT systems: every municipality, and almost each department, has its own hardware, networks and applications. Some estimate that a total of 270 (!) systems are currently in place. Systems do not communicate well, so the information provision does not meet the demands of even basic management standards. In The Hague, the readiness for systems integration is weak, basically because there is no system integrator with formal power or competence. There are substantial initiatives, however, to improve this situation.
Restructuring the back office
To what extent have cities restructured their back-office? This criterion is relevant as the value of using ICTs for an organisation strongly relates to its ability to reorganise work processes and to move to more horizontal or network type of configurations. One of the most eye-catching phenomena in the way Barcelona organises its services to the citizens, is the integrated approach towards telephony, internet and district offices. Integrated attention to the citizens is one of the spearheads of the Barcelona approach to the inhabitants of the city. All relations between the city and the citizens are taken care of on an exclusive basis by a “one stop shop” service. This service, Barcelona Informacio (BI), is a relatively autonomous institute that reports to the director of General Services. It is strongly supported by the executive city management and the political leaders of the city government. The back-office is organised in such a way that it supports the integrated attention to the citizens. There is no need for direct contact between the main city departments and the citizens – with the exception of specialised services. However, the integration of services that need input from different government levels is often hampered by an insufficient level of standardisation and data harmonisation at the national level. Manchester and Capetown have engaged in strategic partnerships that aim to both integrate ICT systems and rearrange the back office, but, as said, they have only just begun.
The city of Manchester should have all its service delivery on-line by 2005, in line with government targets for all public bodies in the UK. The Council is working hard to achieve this. Online service delivery is part of a broader strategy to improve the service performance of the Council. The city has decided not to do everything at once –it lacks the resources to do so anyway- but to focus on services where the marginal returns in terms of benefits for the citizens are the greatest. The city Council is aware that implementing E-government requires both new organisational concepts and integration of IT systems, for which it needs specific know-how that was not available within the organisation.
Capetown introduces ICT systems not as an aim in itself, neither to automate existing processes, but rather to re-engineer local government to improve its performance and lower its costs. The implementation of an ERP (Enterprise Resource Planning system) is currently taking place. The city management recognised the need for simultaneous e-government efforts in a very early stage (2000). Currently, systems and processes that will support e-government are being introduced side by side with the citywide transformation process. The momentum of change is optimally used to upgrade the cities’ IT capacities.
In Johannesburg, the turn-around of the back-office – implementing ICT as an enabler of renewing municipal business – is a point of concern. However, existing personal linkages between municipal departments and the outsourcing company have been of particular interest. Before the outsourcing took place, many employees of the external supplier used to work for the municipal departments and enterprises. They knew the business and the people in the customer organisation, and after their transfer to the ICT supplier, they acquired the new skills needed for the implementation of back-office systems and procedures for e-government. These personal linkages at operational level were complemented by good relations between the city and the outsourcing company at strategic management level. Meanwhile, virtually all departments and municipal enterprises have appointed a Chief Information Officer (CIO) and the management of information has moved out of the back offices into the Office of the City Manager. The Hague has opted for an organisational model in which the internal departments of the municipality remain intact. A “virtual organisational layer” is being created to increase transparency and demand-orientation. Despite these efforts, public online service delivery suffers from departmental thinking. On the department level, however, this can lead to good results. The tax department for instance has develop a now widely used service that enables to assess the property of your home and that of similar objects and check whether the property tax was well calculated.
Risk of lock-in
When dealing with private firms to find ICT solutions, there is a risk that private companies, with their headstart in technical competence, take the lead in systems development or take too big a slice of the cake. A city may become “locked in” to the chosen system, which puts the city in a weak bargaining position vis-à-vis the technology supplier and makes it dependent on the vendor for a long time at high costs. Cities are more likely to become locked-in to the systems of private suppliers when 1) they don’t have strategic ICT competences in the organisation and 2) when they outsource substantial parts of their ICT to a single supplier. Johannesburg, from this perspective, receives the lowest score. It outsourced much of its strategic ICT to one single company, and kept virtually no strategic ICT competence in-house. In the other cities, lock-in risks are much lower. In Barcelona and Venice, with a strong public sector say in the purchase of systems from suppliers, the risks are the lowest. Capettown and Manchester take a middle position: they have to be careful not to be locked in by the mighty consortia they work with, and make sure that solutions are vendor-independent on the long run. In The Hague, lock-in situation may occur, but only at the departmental level.
Overseeing this, our conclusion is that Barcelona’s model is the best placed to reap the benefits of the new ICTs. In fact, in this city the number and quality of electronic services is high. The city of Venice is second. This city has also integrative capacities, but lacks the rigorous organisational restructuring and scores lower on central control as well. The results for the partnership models (Capetown, Manchester, and in the future also The Hague) will depend on the way the partnerships will work out: this is not always clear, as the cities have just entered this partnership model. The lowest cores are for The Hague, that lacks an integrating unit, and Johannesburg, that has lost strategic control over its ICT management. It should be noted that The Hague nevertheless manages to deliver electronic services on the sectoral level.
The examples from our case studies in e-government yield policy lessons for other cities that struggle with the problem of aligning information and communication technologies with local government organisations and technology partnerships. Some of the main recommendations are: The city should have a clear vision of the value of ICT. It is not “just a tool” or a cost centre but a key asset for municipal service provision, electronic government, workflow management and enterprise resources planning. ICT implementations have become a strategic issue. It touches the core business of the city, and it exerts substantial influence over the quality of service delivery.
Our case studies reveal that cities have difficulties in finding the right partnership model. Key issues are how to share risks and returns amongst the partners, how to keep control of the change process, and how to avoid lock-in into a certain system or supplier. And last but not least, the commercial consortia are not always aware of political and bureaucratic peculiarities and sensibilities of the municipal organisation.
Good working relations between the service provider(s) and the municipal departments should be encouraged. The municipal departments have the best knowledge of the business of service delivery. However, a main threat to e-government and the integrated information architecture may arise when departments act on their own and involve business consultants for supposedly departmental issues. In many cases these consultants expose a rather biased view of the departmental interest and their own scope of experience, paying too little attention to the corporate municipal perspective. And in those cases where the ICT-facilities have been outsourced they may lend too much of an ear to the outsourced unit and its mother company. Only a strong corporate level of ICT-expertise in the municipal organisation can deal with such threats.
The city needs an expert strategic unit for ICT at corporate level. Such a unit should be powerful by virtue of its political backing, and influential by virtue of its professional authority towards the municipal departments.
All in all, outsourcing and other forms of strategic technology partnership are key issues for the delivery of e-government. Further research is needed to deepen our understanding of the opportunities and the risks that are at stake, as well as the strong points and the weaknesses of the different partnership and ownership models.