Unit4 report - public sector digital change held back by budget cuts, leadership resistance and lack of skills

By Derek du Preez

December 10, 2021

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Throughout the COVID-19 pandemic we have seen some incredible examples of leadership, digital change, citizen engagement and rapid project deployment in the public sector. However, as we enter the Vaccine Economy, it doesn't appear that this is translating into fresh thinking on wide ranging transformation projects across central and local government going forward. 

According to Unit4's latest State of the Digital Nation report, which surveyed hundreds of decision makers in HR, IT and finance, across countries that include the US, Canada, the UK, Belgium, Sweden and Australia, there are still significant barriers to meaningful digital change. 

More worryingly, as public sector organizations face intense budget pressures over the coming months and years, leaders are indicating that savings are likely going to have to come from cuts to frontline services, rather than using technology to adapt service delivery. 

Almost every respondent to the survey (99 percent) saw changes to their services or targets outside of the impacts of COVID-19 over the past two years - and are most commonly being impacted by public pressure to improve spending transparency (55 percent) and to make services slicker and smarter (52 percent). However, 95 percent of respondents who have seen changes have struggled with them. 

Looking at the data, public sector workforces are evidently fearful of change. The most common adaptation challenges are a resisting leadership team (44 percent) and a resisting workforce (42 percent). Some 38 percent said that their back-office systems also do not allow for agility and adaptability. 

However, there were also variances by country. For instance, in Australia the highest barrier to change is leadership resistance (78 percent), yet in Canada the biggest challenge is that staff don't have the right skills to adapt quickly (47 percent). 

Speaking with Mark Gibbison, Global VP of Public Services at Unit4, he says that it's not unusual for government organizations to be risk averse, given the negative press that has followed technology projects in the sector. He explains: 

The world is changing as more people with private sector experience are coming into the public sector. More people are wanting to move forward, but are risk averse. Competing pressures is always something that organizations will have - do you divert your time away from frontline service delivery in order to perform this back office transformation? 

It's always balancing the pressures of frontline service delivery in the real world against back office transformation. But the benefits have been proven by some of the people who have gone there and done it. And the benefits are worth the pain. 

I think in the public sector there has been some fairly big headline news about project failures, project delays and things like that. And so therefore, the term cautious followers is probably quite realistic, people are reluctant to be at the bleeding edge, because if things do go wrong, it's it's headline news, isn't it?

The delivery gap

The researchers found that whilst 95 percent of public sector organizations have a digital transformation strategy, only 29 percent consider it to be fully implemented. And on average, organizations said that they are two and a half years away from reaching their ‘digital destination'. 

Unit4 notes that this should ring alarm bells, given that the public sector already lags behind other verticals. It adds that the gap could widen and that the ‘two and a half year target' is never reached. 

Researchers found that only 50 percent of those surveyed have deployed some cloud-based systems and only 46 percent are updating or replacing their legacy systems. The graph below indicates the limited scope of major adoption of modern digital systems: 

(Image sourced via Unit4)

The survey found that the biggest barriers to adoption are a lack of alignment between different departments/functions (50 percent); the systems are too complex/more complex than expected (48 percent); cost savings are having to be made (48 percent); staff don't have the right skills or experience (32 percent); the impact of COVID-19 (30 percent); funding has been cut (23 percent); and there is a lack of leadership (21 percent). 

Gibbison says that countries that adapt more quickly benefit from central government mandates and common identity/security standards. He explains: 

I think it's basically a mandatory drive that comes from central government. And, if you look at some of the Nordic countries, they mandate digital processes. They don't just mandate it at the central or federal government level, they mandate it across all levels of government. So, the online interaction with government extends not just from a central government perspective, but down to a local and regional government perspective, as well. 

And then, of course, things like common digital identities across all facets of government, making sure that there is a true linkage between central and local commonality.

When certain transactions are made mandatory and choice about digital identity security standards is taken away from localities, you get a single central view of how a citizen is going to interact with all levels of government. I think that's when you really start to see digital online capability move to the next level.

 Balancing the books

Whilst many public sector organizations saw funding increase during the COVID-19 pandemic, many see this as only temporary and, according to Unit4, now organizations need to work out how to manage the allocation and reporting of funds, quickly, accurately and flexibly. 

The research found that many organizations are looking to take radical steps. For instance, 95 percent are looking to make cost savings and most commonly are planning to make these cuts to citizen and community services. 

Some 35 percent of organizations said that they would look to make redundancies and 22 percent said that they would invoke pay freezes. 

However, Gibbison hopes that technology leaders recognize that the COVID-19 pandemic has provided an opportunity to show that change is possible - and he recommends that those with budgets should start small, rather than tackling everything at once. He adds: 

I think this is the first time we have seen this, where leaders surveyed were saying: we can't go on anymore, this is going to impact the frontline, we're going to have to start looking at service cuts. But I think, it's about finding the money to start the impetus. 

And we know that typical public sector organizations have capital programmes, they have capital reserves that they can tap into, and it's not a case of boiling the ocean from day one. It's a case of getting on the journey, implementing something, making savings, creating benefits, using those savings to reinvest in the phase two, phase  three phase, and then it becomes self perpetuating, really.

Commenting on the change in mindset COVID-19 has provided, Gibbison concludes:

There were previously always barriers to overcome - it was always ‘we can't go to the cloud, we can't do remote work, it just won't work, we need everybody in the office', that type of thing. I think through necessity, those objections have just been crushed. 

The people that were making those objections previously, they just had to get on and do it. And the fact that they have gone on and done it, proved that it works. If leaders in these organizations now actually act on the impetus that it's brought, then I think we can start to see some real change and some real momentum get behind digital transformation.