When Government Invests in IT, Benefits to Constituents Often Exceed Internal Benefits to Government, Says Study

A recent study released by Deloitte Research offers a new approach for evaluating the return on investment (ROI) of government technology investments. According to the study, public-sector organizations should evaluate information technology (IT) investments, not only by the cost savings they generate for government, but by the financial benefits they create for citizens and businesses. This study brings a new dimension to the valuation of IT, suggesting a direct correlation between e-government and economic competitiveness.

"E-government could potentially save individuals and businesses billions of dollars by lessening the effort it takes to do everything from obtaining a building permit to registering a business," said William Eggers, a Deloitte Research director and the author of the study. "Because the regulatory environment is often a critical factor in a company’s decision on where to locate, e-government can therefore be a powerful tool for enhancing economic competitiveness."

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Conducted by the thought leadership arm of Deloitte, the research introduces a new ROI concept that Deloitte calls "Citizen Advantage." Citing state, local and federal examples, the study examines the time and effort it takes to comply with regulatory and reporting requirements — activities often equated with red tape and extraordinary burdens to businesses and citizens trying to conduct government transactions. By Web-enabling and streamlining activities such as permitting, licensing and reporting, governments can significantly ease regulatory compliance burdens, which in turn helps fuel economic competitiveness.

The Deloitte study outlines five ways that IT initiatives can ease compliance activities:

* provide information in one easy-to-access location;
* simplify and streamline reporting requirements;
* reduce the number of forms;
* make transactions (paying fees, obtaining permits) easier; and
* help businesses understand what regulations apply to them.

Together, these capabilities can save people time and positively impact a business’s bottom line. Examples of successful e-government initiatives that create Citizen Advantage include the following:

* The State of Oregon created a one-stop process for building construction approvals, saving the construction industry $100 million annually in reduced delays and permit processing costs.
* The Small Business Association’s Business Compliance One Stop Web site saves businesses about $526 million a year by helping them find, understand and comply with regulations.
* The U.S. Treasury’s Patriot Act Communication System helps protect the nation’s financial system from money laundering and terrorism activities by allowing financial institutions to quickly and securely file reports over the Internet, replacing paper-based and magnetic tape filing processes. This expedites reporting and accelerates delivery of critical information to law enforcement officials, while reducing compliance costs for financial institutions nationwide.

Deloitte developed the Citizen Advantage methodology after recognizing that most government ROI and business case methodologies fail to measure the investment’s real and quantifiable benefits to citizens and businesses. An official with the Office of Management and Budget noted that a tiny fraction of the hundreds of e-government business cases the agency reviewed this year attempted to calculate the potential benefits to businesses and citizens. The study suggests that governments need to expand the definition of information technology’s ROI to include how the investment enhances value throughout the entire value chain of a government investment.

"We believe that the success of government programs should be measured by the true advantages they create for citizens, communities and industries," said Greg Pellegrino, Deloitte Consulting’s global industry leader for the public sector. "By recognizing this and measuring Citizen Advantage, today’s government leaders have a powerful weapon to use in their fight to get strategic technology projects funded.

"In the private sector, success is measured by how business creates a competitive advantage to fuel profits and increase shareholder value — but the public sector demands a more holistic view. To be successful, governments must transform themselves into streamlined, efficient organizations; but they must also deliver extraordinary advantages to the citizens and businesses they serve through new levels of efficiency, accessibility and responsiveness."

The Deloitte study underscores the notion that "time is money," and argues that the government may need to begin addressing a growing public desire for a "time rebate" — a focus on cutting down the time it takes to comply with government regulations and complete transactions. The key is to employ technologies more widely and effectively by looking at government systems and processes from the citizen’s point of view. Deloitte, in fact, has developed a Citizen Advantage Calculator that demonstrates systematic ways to measure constituent time and resource savings.

An earlier report, "Cutting Fat, Adding Muscle," is also available.

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