Web Services and Value Generation in the Public Sector Maddalena Sorrentino1 and Francesco Virili2 1
Dipartimento di Studi Sociali e Politici Università degli Studi di Milano, Italy
[email protected] 2
Dipartimento Impresa e Lavoro Università di Cassino, Italy
[email protected]
Abstract. Two basic questions are investigated in this contribution: 1) How can we explain the value generation process in the public sector? 2) What is the potential role of Web services technology in this process? Our approach has been to make use of the process theory on business value generation developed by Soh and Markus (1993), adapting the original framework of analysis to the public sector. According to these authors, IT can generate business value through a three-phase process: conversion, use and competitive deployment. We focus on the first stage of the model, where IT expenditures are converted into IT assets. The role of Web services technology in this conversion process is then depicted, evidencing some implications connected to its adoption in eGovernment (e-Gov) projects. The analysis is intentionally limited to the intraorganizational level (i. e. we do not consider inter-agency systems) and to the first phase of the value generation process. In the future it may be possible to delineate a more complete picture of the e-Gov value generation process and the potential role of the Web services technology.
1
The Value Generation Process in the Public Sector
The analysis of the role of IT in value generation in the public sector is not a totally new concept: for example, in [3], Kim Viborg Andersen has proposed the “political value chain” model, in which the classical Porterian framework of analysis is adapted to the public administration (PA) domain; a similar framework has also been used for the preliminary analysis given in [14] where the potential role of Web Services technology as a sort of “value reconfiguration catalyst” for inter-organizational activities is prefigured. The strategic and economic value of IT investments has been extensively and deeply analysed with reference to the business sector: for example, already in 1993 the collection of selected works in [4], was accompanied by a bibliography of almost 600 papers and books on the topic. One of the papers that appeared in this influential book was written by Markus and Soh, [9], and focused its attention on the “theory of
IT conversion effectiveness”, tracing down from Weill [16] and elaborations on his work [see, e.g. 17]. The main idea underlying the theory is that organizations differ in their IT conversion effectiveness, i.e. “the ability to convert expenditures into assets that provide value to the investing firm”. IT conversion effectiveness is, in turn, influenced by internal managerial processes (like, e. g., organizational commitment and experience with IT) as originally pointed out by Weill. In addition, Markus and Soh evidenced the importance of structural factors, like firm size and industry structure. The theory of IT conversion effectiveness is based on three fundamental hinges: 1) Value is not generated by IT expenditures until they are converted into IT assets; accumulated IT assets include IT applications and IT infrastructure; 2) Structural factors can influence IT conversion effectiveness; and 3) Internal management factors can influence IT conversion effectiveness as well. In a further conceptualization, Soh and Markus [12] notice how the “IT Conversion Process” is only the first of three major phases that characterize the business value generation process: the second stage is the “IT Use Process”, and the third is the “Competitive Process”, as shown in Figure 1. Not wishing to discuss this model as a whole, in the present paper we focus on the IT conversion process, re-examining the issue in the context of the public sector.
Figure 1. How IT creates business values according to Soh and Markus [12].
1.1 Effectiveness of the IT Conversion Process The three fundamental concepts underpinning the IT conversion process relate to: accumulated IT assets, structural factors and internal management influences. In what follows, we summarize each of them.
Accumulated IT Assets The central assumption here is that "It may take several years of spending to develop “productive” IT assets. Thus, we need a concept of accumulated IT assets to reflect the realized value of firms’ […] IT expenditure” ([9], p. 379). The value of IT stems from know-how, specifically from “users’ ability to operate computing equipment and software and to integrate these resources effectively into their work” (ibidem p. 380), together with other kinds of know-how, like the professional and technical competences of IT operations units and the business knowledge embedded in software applications. IT assets include applications and infrastructure. Applications are believed capable of creating direct business value ([10]; [7]) “[…] Thus the breadth and quality of a firm’s portfolio of IT applications, more easily measured than the concept of IT know-how, is a potentially useful surrogate for the value of a firm’s accumulated IT assets” ([9], p. 380). Tangible IT resources, along with the people and procedures required to manage them, are categorized as IT infrastructure. “A critical role of the IT infrastructure is to maintain existing applications and to “enable” or generate new applications in the future”. Structural Factors According to Markus and Soh, industry and firm size are the main structural factors that may affect a firm’s ability to benefit from IT investments. In particular, returns from IT spending seem to be greater in firms belonging to information-intensive industries. Another structural factor is the size of firms. The theory of economies of scale suggests that big firms have greater coordination and control needs and so may be more likely than small companies to benefit from IT. Moreover, large firms have more bargaining power in IT purchases. Internal Management Influences on IT Conversion Effectiveness In addition to accumulated IT assets and structural factors, the ability of organizations to effectively transform their IT investments into IT assets is due to four interrelated managerial processes, originally introduced by Adler [1]: (i) formulating IT strategy, (ii) selecting an appropriate organizational structure for executing IT strategy, (iii) developing the right IT applications, and (iv) managing IT application development projects effectively. 1.2
Application of the Model to the Public Sector
In short, Markus and Soh contributed to highlight, and put into a testable theory, the most important factors that might affect firms’ ability to leverage IT potential. Is it possible to apply this conceptual framework to the civil service context? The conceptualization by Soh and Markus - being of general use – does not distinguish
between public and private contexts. In principle, when applying this framework to the public sector, one should take into consideration the joint influence exerted on all three key processes (IT conversion, IT use and competitive process) by a greater number of contextual elements than are present in the private sector. A very wide and rich research agenda would be opened in this way. For example: what happens in the third stage of the value generation process? What is the process that corresponds to the “competitive process” in Figure 1? Just to take an example, most studies aimed at comparing public and private organizations fail to consider areas where government is a demand leader for IT. According to [11, p. 67] these areas include: ubiquity of services, trustworthiness, information access, and confidentiality. In other words, government-provided services have an extra-burden of guaranteeing high levels of security and privacy for constituents. More generally, the process ranging from the definition of IT needs to the evaluation and monitoring of IT systems follows a sometimes radically different path to the one that features in the private sector. One of the most important principles informing public sector activities (which, in the private sector, typically plays no role) is that of the “public interest”, which often leads to different ways of assigning tasks and responsibilities and of providing organizational control and coordination of activities, etc. We intentionally leave this issue open here as a stimulus for further work. Endeavouring to overcome the limitations of applying the Soh and Markus model in a partial manner to a public sector context, our attention in this paper is exclusively directed to the left hand side of the schema, i.e the “IT conversion process”. In the following section we draw a quick sketch of the current state of the Italian eGovernment Action Plan.
2
The Italian e-Gov Action Plan
After answering the first question by way of introducing an appropriate framework for interpreting the value generation process in the Italian public administration (PA) and focusing on a specific area of the model, we now pose our second question: What is the role of Web Services technology in this process? The Italian eGovernment Action Plan views the rapid development of eGovernment as a way to improve efficiency and quality for citizens and businesses. One of the main general objectives is that “any service should be available at need by any authorised administration, regardless of its territorial jurisdiction or localisation” ([6] p. 326). At present, most e-Gov services offer mere information to constituents. The average level of provision of fully interactive services is very low: for instance, less than 10% of the official Italian PA websites allow on-line interaction with public offices. A first step towards joining up the different parts of the Italian public sector was taken some years ago with the implementation of the Public Administration Unitary Network (the so-called RUPA). This infrastructure presently connects central and local government bodies on a nation-wide basis. Theoretically, ICT infrastructures
like RUPA should enable the adoption of e-Government initiatives. In practice, there are still significant differences among (and within) public organizations with respect to the quality of IT application portfolios currently supporting front-office and backoffice activities. These differences, in turn, imply inefficiency and poor coordination. Recently, the diffusion of practices such as application software integration and reuse has become the main objective for the Italian Ministry of Innovation. In this respect, the Action Plan has identified a cluster of technologies (i.e. Web services) as one of the technical enablers of application integration across administrations (a more in-depth evaluation of the Plan is reported in [13]). “Web services are self-contained applications capable not only of performing business activities on their own, but also possessing the ability to engage other Web services in order to complete higher-order business transactions” ([18] our emphasis). This technology is seen as a standard way (i.e. based on Internet protocols) for heterogeneous systems to exchange and manipulate information within and across distinct organizations. With it new opportunities for governments to redesign frontoffice and back-office activities could arise in a wide variety of public service domains. The Italian Action Plan explicitly recognizes that the delivery of most services goes beyond the jurisdiction of a single agency or public bureau. Furthermore, the Plan addresses its attention to the need to develop and implement information systems quickly (i.e. from an existing pool of application components) and reuse them in various different applications (e.g. the delivery of e-Gov services over the Internet). In complex and heterogeneous environments, where thousands of public agencies typically use their own IT resources (which themselves consist of disparate “islands of automation”), interoperability across platforms, applications and programming languages is a key issue. As has happened in the past with other emerging technologies such as middleware and object-oriented programming languages, Web services are the latest promise of full-fledged software applications that allow systems running in different environments to interoperate. We argue that the extent to which such a technology will be adopted by public sector bodies will depend on a number of factors contingent to the specific environment where it is implemented. More generally, implementing even a modest degreee of integration in a structure as complex as the Italian public administration is a formidable undertaking. For this reason, we espect Web service technology to be employed within government agencies rather than across them. In order to provide answers to our research questions, in the next section we consider how Web services can influence the IT conversion process in an intraorganizational domain.
3
The Role of Web Services
At present, within Italian public agencies, situations characterized by substantial innovation co-exist with situations in which progress towards innovation is still hampered by substantial obstacles. Thus, the process of the accumulation of IT assets
is still in its initial phase. Given this situation, what role could be played by Web services technology in order to improve the IT conversion effectiveness? Our line of reasoning is based on a fundamental assumption: IT conversion effectiveness is positively influenced by the degree of integration of the application portfolio. In fact, a high level of integration among software applications enhances an organization’s ability to benefit from IT investments. A full and seamless integration with “legacy systems” is a key requisite for IT investments to be efficiently converted into IT assets. At present, Web services are not the only integration technology available on the market. Moreover, they have only recently appeared. Still in their infancy, compared to technologies like XML and DCOM, they are much less well-known and far less widely accepted. While any integration technology can help organizations to benefit from their IT investments, Web services are the only one which is characterised by the strategic combination of a particular set of key features. These are: contract-based reusability [19] (typical of component-based technology, like DCOM), extensibility and the use of Internet infrastructure. The latter two (i.e. extensibility and use of Internet infrastructure) are typical of XML, but until now, no integration technology has been able to incorporate all the three mentioned features, as Web services do. As such, because of their ability to easily enable inter-application communication, ubiquitous access and incremental adoption, Web services show a great potential to help heterogeneous and distributed systems to work together. Thus, in the context of public organizations, the value of Web services could range from enabling the development of entirely new services (by exploiting preexisting software applications) to the integration and optimization of internal processes. Therefore, though the present analysis is only briefly sketched and would need further elaboration, we could argue tentatively that Web services may significantly enhance IT conversion effectiveness in the Italian PA. Precisely because it involves a maximisation of the potential for integrating software applications, it provides significant opportunities for effectively realising the process of the accumulation of IT assets. Markus and Soh’s findings also indicate that the IT conversion process is influenced by a number of internal IT management policies (see Section 1.1 above). An in-depth discussion of these interrelated assumptions is beyond the scope of this paper. The interested reader may refer to [9]. A more complete analysis of the role of Web services in the public sector would necessarily include a consideration of political, organizational and economic barriers that hinder agencies from developing interoperable systems (see [8], [2]). Given the large number of potential threats to IT conversion effectiveness, it would hardly be surprising to discover that not all public administrations were able to achieve advantages from their IT projects even by using Web services. However, it is useful to note that, as in any other emerging field, the current generation of Web services tools shows the typical problems of early software. Some issues relating to security and performances are still unsolved.
4
Final Remarks
The above considerations lead us to suggest that Web services should be adopted as the preferred technology when interoperability projects occur entirely within an agency rather than among distinct agencies. Furthermore, and following the Markus and Soh findings reported in Section 1.1, we foresee that larger agencies may be more likely than smaller ones to benefit from this kind of technology. To sum up, the theory of IT conversion effectiveness points the way to some necessary but not sufficient conditions which need to be recognised and supported in the first phase of the value generation process depicted in figure 1. A high quality application portfolio (both in quantitative and qualitative terms) is believed capable – along with IT infrastructure - of creating value from current and past IT spending. The model also indicates some managerial areas requiring active support. Our study assumes that interoperability projects could be more easily implemented within a single agency. The main conclusion from the paper is that IT conversion effectiveness is strictly related to the degree of integration of the application software portfolio. In this regard Web services, as a powerful integration technology, may play a key role in the value generation process in public administration. We should not forget that Web service is just a technology. In order to benefit from it, organizational work is absolutely essential.
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