The rise of 'Cisco government'

by Frances Cairncross

May 7, 2001 —

What, a century from now, will seem the most important effect of the Internet? The answer, surely, will be its impact on services. The Internet will transform their efficiency and reliability in the way that, in the early 20th century, electricity and mass production transformed manufacturing. The biggest single producer of services, almost everywhere, is government. So the Internet's greatest impact eventually could be on what we now regard as public services.

You can already see this happening, as governments around the world begin to deliver online services to their "customers." Online, you can acquire a liquor license in Australia's New South Wales and a marriage license in Douglas County, Nev. One of the pioneers of online tax collection, the Chilean Internal Taxation Service, has found big improvements in transaction time and accuracy. Purchasing, too, is moving online. Massachusetts has a venture called Emall that claims to cut purchasing costs by 60% to 80%. Western Australia's Government Electronic Market expects to cut the average cost of making simple purchases from between $75 and $100 to less than $10 per transaction.

However, when companies start to integrate the Internet into their operations, they are often surprised to find that it is not just a matter of installing a new delivery channel. To get the most from the technology, they need to adopt new ways of doing things and new internal organization. Erik Brynjolfsson of MIT's Sloan School of Management has shown that the companies that gain the most from adopting information technology are those with relatively flat hierarchies and flexible and highly educated staff who are good at taking responsibility and working in teams.

Could it be that what holds for companies also holds for government? Will the Internet surreptitiously create pressures for restructuring and for breaking down old barriers between departments and agencies? In Britain, Tony Blair's government thinks so. It has a top-level program to encourage what it calls "joined-up thinking" and sees the Internet as a way to link knowledge and policy programs in different departments. Already it is running into the very problems that companies face when they try to present a single face to the customer: turf wars between departments and a reluctance to share knowledge.

In time, though, the Internet will help transform the nature of government, turning it from producer into regulator. Just as Cisco organizes its production largely through factories that it doesn't own, governments will provide public services through a variety of for-profit and not-for-profit suppliers, some domestic and some based abroad. Like Cisco, governments will set quality standards and will encourage competitive bidding. They will use the 'Net to monitor and analyze the output of suppliers, which may provide education, policing, tax collection or defense. Government's role will be strategic and regulatory. The result will be more-efficient public services that concentrate on meeting the consumer's needs. You might call it "Cisco government."

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