How to digitalise local governments?

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Regarding digitalisation, central governments seem to get most of the praise. Bigger cities are not doing poorly, either. What about smaller municipalities, though? Being the “closest” government to its constituents, they play a vital role in providing services and keeping in touch with the citizens and could benefit greatly from digitalisation. However, a recent study of the digital services of Estonian municipalities, commissioned by the Association of Estonian Cities and Rural Municipalities and conducted by Proud Engineers, found that there is room for improvement. Out of 79 municipalities in Estonia, 13 have no digital services and only 4 are highly developed. But why?

The wicked circle of market-based efficiency

Local governments’ role in digitalisation varies from country to country, depending on the administrative structure, finances, digital proficiency, and other factors.

Generally, since local governments are “custom made” reflecting local needs and peculiarities, the digital services they provide should also be customised. However, this creates a systematic problem that the software market cannot easily resolve. Small local governments have difficulty amassing enough resources and competencies to produce or procure quality software development.

Especially in Estonia, where local government reform in 2017 reduced the number of municipalities by joining smaller ones. The reform aimed to create more efficiency in public administration. By reducing the overall administrative costs, however, it resulted in adverse effects of digitalisation.

According to the study, the strive for efficiency created two wicked circles: limited finances decreased the competencies of the local governments, reducing further investments into, and control over, digital services. Then, as the local government’s control over its services diminishes, the software developers gain more power in deciding how and what services should be developed, further decreasing local governments’ willingness to invest and competencies.

Since the shortcomings are systematic, the study suggests that simply increasing financing would not improve the situation significantly. Rather, more profound steps should be taken.

Two suggestions for improving local government digitalisation: centralisation and collaboration

The first solution that the study suggests would involve centralisation. One possibility is to create a central legal body that would essentially take over the contracts of local governments with service providers and represent them technically, legally and organisationally in relations with the state and service providers. The priority should be to achieve substantive competencies in service provision and not so much technical competence. The task of the organisation would be to gather the functional needs of local governments and discuss them with service providers and coordinate the implementation of changes resulting from changes in legislation but also make joint decisions to change service providers and conduct joint procurements.

Such a structure would help to create a clear boundary between the local governments and the outside world, both at the organisational, legal and technical levels, and to achieve greater control of the local governments over their information systems, and on the other hand, to create a strong partner for the state for dialogue in fulfilling national requirements from open data to information security.

This solution requires a necessary other step to be taken, namely improved collaboration between local governments. Collaboration should include both organisational and technical dimensions.

Organisationally, instead of five local governments hiring five people to fulfil five different roles, five specialists are hired to fulfil the roles required by five local governments. In this way, it would be possible to ensure a higher level of competence, create better cooperation between local governments, simplify the creation of sectoral networks and create a mechanism by which it is possible to better centrally motivate or develop the performance of one or another role.

Technically, cooperation should result in a library of centrally coordinated standard solutions. Estonian central government has benefitted from creating such solutions, for example, forms for public procurement. The study suggests that local governments could standardise contracts with special service providers, job descriptions for compliance and other roles, descriptions of standard business processes (e.g. family operations or operations related to land management) and similar items.

It should be noted that this kind of library should not be viewed as a final product but rather as a constantly evolving and improving process.

The Association of Estonian Cities and Rural Municipalities is keen to take necessary steps to improve digital service provision in Estonian municipalities. Hopefully, lessons from highly digitalised Estonia could also be useful for other countries




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