Public Management Information Systems Financing and Management Monday, September 1, 2014

1. Public Management Information SystemsFinancing and ManagementMonday, September 1, 2014 Hun Myoung Park, Ph.D. Public Management & Policy Analysis ProgramGraduate School of International Relations

2. Information Systems Failure 1 • Large-scale IT projects are prone to fail • Low “take-up rate” or adoption rate • 60% of all e-government initiatives failed (Gartner Group, 2002) • Due to sunk cost, failed projects are not easy to be canceled. • In both the public and private sectors • Not only in developing counters but also in developed countries like U.S.

3. Information Systems Failure 2 • Large and complex tasks • Less commitment of stakeholders • Lack of support for end users • Lack of planning, vision • Adopting cutting edge technology Technology or service provision approach • Short time horizon and turbulent environments

4. Success Factors 1 • Incremental approach to consider a variety of stakeholders • Phased implementation and parallel implementation are preferred • Task-technology fit rather than cutting-edge technology • User friendliness, client-oriented approach rather than technology or service provision approach

5. Success Factors 2 • Participation in system analysis & design stages • Users’ motivation, commitment, communication • Continuing education and training • Leadership and management supports • Goal clarity, organizational culture, project management

6. Success Factors 3 • IT expertise and managerial skills • Standardization and data sharing • Process and software reengineering: “process reengineering must precede task automation” • Adequate budgeting and time horizon • Total cost rather than development cost • Long-term perspective

7. Strategies for IT Projects • Do nothing • Upgrade existing systems • Purchase off-the-shelf software • Purchase customized systems (purchasing enterprise solution--ERP) • Develop its own e-government (in-house) • Outsourcing • Partnering (cloud computing)

8. Funding Sources • General tax (tax revenue) • User fee • Grant and subsidy • Enterprise fund • Long-term loans • Advertisement on the Web • Commercial partnerships • Philanthropy (donations) and aid • Cooperation with other governments

9. Key Financing Questions • Who will pay? Tax or user fee? • Who will get (need)? Customized or general services? Concentrated? • Who will develop? in-house, off-the-shelf, or outsourcing? • Types of tasks or online services • Types of technologies & IT staffers • Long term vs. short term

10. Financed by General Tax • Disproportional Benefits & Costs • Paid by all citizens • Benefits by a small group of citizens • Need to consider • User types (young vs. old, individuals vs. firms) • Use patterns (frequency, intensity, etc.) • Technological requirements (e.g., cutting edge technology)

11. Financed by User Fees • Can fix disproportional costs and benefits • May discourage use of the services. • How to determine the optimal level of user fees. Not too high. • Reasonable if a small group of clients (firms) frequently uses the online services • Chen & Thurmaier (2008): externality and opportunity cost analysis

12. General Tax vs. User Fee 1 Numbers of Beneficiaries Large Small Customized General Types of Service

13. General Tax vs. User Fee 2 Willingness to Pay High Low Low High Technological Requirement

14. Electronic Procurement 1 • G2B (customized services) User fees • Cost and time saving: disseminating RFP, submitting and receiving bids • Business process reengineering rather than simple computerization • Politics rather than simple technology

15. Electronic Procurement 2 • Accessibility and equal opportunity openness of government • Transparency and accountability • Technical standards • Security issues

16. System Development Strategies Functionality General Unique Local Global Coverage of the Systems

17. A Cost Benefit Analysis

18. Outsourcing • “Outsourcing was more the result of affordability issues than strategic choice” • Best value rather than lowest cost • Selective (not entire functions) outsourcing • Total cost of ownership: • Capital costs • Operational and administrative support • End user costs—education/training

19. Choice of Outsourcing • Tasks with low risk and low importance • No sufficient IT staffer and fund available in organizations • Political rationality (e.g., competition) by Ni & Bretscheneider (2007) • A typology of type (unique vs. general) and coverage/impact (local vs. global) • Externality and opportunity cost analysis by Chen & Thurmaier (2008)

20. Potentials of Outsourcing • Less costly in IT experts (human resources) • Less expensive • Up-to-date hardware and software • Flexibility and scalability • Predictability in financing • Competition among contractors.

21. Challenges of Outsourcing • Less likely competitive markets (contractors) • Monitoring contractors and their performance. Marvel & Marvel (2007) • Dependency on contractors (e.g., monopoly and turnover), litigation issues • Data security and privacy (accountability) • Loss of jobs and labor savings (?)

22. How to Make a Contract? • Efficiency gain • Loss of effort, quality, responsiveness, accountability, etc. • Monitoring performance (rewards & penalty) • Where is the equilibrium of this trade-off?

23. Summary in Outsourcing • Outsourcing entire functions not recommended • IT staff is needed anyway • Data owned by government • Data security and privacy (public data and private information) • Provide incentives and monitor contractors’ performance. Chen & Perry (2003) • Role of the leadership of public managers: all contracts are incomplete to some degree