Industry Focus: Public Sector's Big Reach

Clients and consultants are looking outward beyond their own four walls to learn about innovative practices and processes from other countries and other industries.

This Spring, Slate Foreign Affairs writer Joshua Keating completed his application for citizenship in Estonia. The process cost him U.S. $87, and it took 10 minutes. The small country’s online-residency process is a big deal, according to leading public sector consultants like IBM GBS Global Government Industry Leader Sietze Dijkstra. Dijkstra says that the Baltic republic’s progressive online capabilities reflect the type of digital services federal, state and local governments around the world are asking for help creating.

Although the underlying objective of most public-sector entities remain the same as it ever was—“delivering the best, most relevant services in the most cost-effective fashion,” notes Dan London, group CEO of Accenture’s Health & Public Service Operating group—the means of achieving this goal are expanding, thanks primarily to technological breakthroughs and intense budget constraints. Other factors, such as the coming retirement wave among U.S. public sector employees, are also exerting their disruptive might.

These change agents have stimulated a new tendency among public sector consulting clients, reports Sharon Marcil, a senior partner with The Boston Consulting Group who leads the firm’s government practice in the Americas. She sees a growing desire by U.S. public sector clients to “face outwards” beyond their own four walls to learn about innovative practices and processes from other countries and other industries. “Our clients are saying, ‘Provide us with your experiences throughout the public sector and, absolutely, your experiences in the private sector,’” she says, noting that many of these clients are keenly interested in learning about new public-private collaboration models.

Scott McIntyre, PwC’s U.S. and global public sector leader, reports a similar interest. He expects to see “more public sector programs relying on co-creation with various constituent groups and stakeholders which could lead to interesting opportunities around program design and execution.”

Despite the resiliency of the sectors’ longstanding underlying objectives, the solutions clients are requesting are new. And the sector, like most others before it, faces increasingly global competition. In the past, for example, U.S. cities tended to compete against other U.S. cities to lure new businesses—and with them, new jobs and additional tax revenue—to their locales. Today, says Dijkstra, the same cities are not only competing against Boston and San Francisco, they’re also going toe-to-toe against Amsterdam and Berlin.

The Disruptive Reign of Technology Change and Cost Rationalization Continues

As has been the case since the onset of the global financial crisis, public sector entities are seeking new ways to rationalize their cost structures. The goal, as always, is to provide the best, most relevant service at most competitive cost. “I think we’ve reached a place where uncompetitive cost structures are an absolute driver of change,” asserts London, who reports that Accenture clients are looking for help transforming more fixed costs into variable costs while also rationalizing overall costs.

Marcil also points to the need to do more with less as a major driver of public sector change. This need stems from sluggish economic growth in developing countries combined with large aging populations that need more support and services. “All of the agencies in state and local governments are really being asked to do more with less,” Marcil says, “and that has implications in terms of consulting services and how our clients are behaving.”

Technology represents a more nuanced force of disruption. While more public sector entities want to harness the power and benefits of leading technology—data analytics, social media, mobile technology, cloud-based technology, and more—there are multiple obstacles in the way. These include aging IT infrastructures and systems, implementation and training challenges related to new technology, major (and perfectly valid) cybersecurity concerns, and more.

The allure of new technology is manifold. London reports that more public sector clients are taking advantage of digital technology investments to increase efficiency, strengthen citizen satisfaction and lower costs. “Technologies like cloud, analytics, mobility, interactive services and others are making a real difference in the way our clients are providing services,” he says, noting that these forms of technology can deliver “much more personalized services at lower cost structures.”

Public sector organizations that are behind the new-technology curve are likely hearing about it from their stakeholders.

“Technology is the biggest driver of change in the public sector today,” reports Janet Foutty, the Deloitte Consulting LLP principal who leads the firm’s federal government services. “What is interesting about this driving force is its origin – the citizen.” She says that more consumers are demanding that “their government act and respond more like a retailer,” which is transforming how people interact with government along with their expectations of these interactions.

7 Opportunities for Highly Skilled Consultants

Technology is both a large and multi-faceted challenge. Public sector organizations need help addressing the technology they have (legacy systems), the technology they want, the services new technology enables and the need to protect the data these systems use. There are other opportunities in the public sector, of course, but a larger portion of the requests that consultants field from their clients relate to technology right now:

1. IT Modernization: Harvesting the benefits of big data, advanced analytics and other new digital technology requires most public sector organizations to dig into their existing systems (down through layers—and decades—of legacy artifacts). Many federal clients have large amounts of outdated and nonintegrated core systems that need to be modernized. This is the case at the state level as well, where Long says that “IT systems are often very old, fragmented and patched together through years of policy and legislative changes.” Some of these systems have been around so long that no one on staff possesses the knowledge necessary to maintain them. Long also says that many IT modernization efforts are “tremendously complex and often result in significant process changes for both state workers and end users.”

2. Cloud: Replacing traditional information storage and systems with cloud technology can provide organizations with access to the latest capabilities at comparatively lower costs. Rather than buying hardware and developing and/or implementing software, London notes that more public sector clients are saying, “’Let me move this to the cloud, do this as a service and buy it by the drink,’” he explains. “A consumptive model that allows them to pay as they go is very attractive in terms of the speed of undertaking changes and the cost structures associated with them.”

3. Digital Services: Many cloud investments are enabling the types of digital interactions citizens increasingly expect from their governments (and retailers). Dijkstra reports that demand for data-driven, digital government capabilities is rapidly increasing. He also notes that these transformation efforts often require new organizational structures and behaviors to ensure that digital fuel—data—can be collected and shared among groups that have a legacy of silo-esque operating modes.

“Government needs to become increasingly close to its citizens in terms of access, transparency and services,” Marcil says, noting that the rise of the digital economy is reshaping how U.S. citizens interact with their public sector counterparts. “They’re expecting more from our federal government.”

4. Cybersecurity: Foutty and her Deloitte Principal Stephani Long, the firm’s public sector leader for state and higher education, describe cybersecurity as one of the biggest challenges and opportunities currently confronting public sector clients and their consulting partners. Emphasizing that this challenge is hardly unique to the public sector, Foutty says that Deloitte is applying cybersecurity lessons learned from the commercial side.

While public attention has focused on recent cyberattacks on the IRS and the U.S. Office of Personnel Management, Long points to Deloitte research showing that only two percent of state budgets currently go toward cybersecurity efforts. Given that state governments “are vast repositories of personal information,” Long asserts that “cyber risk will remain a significant business issue.”

5. Cost-Reduction: Federal, state and local governments remain under pressure to cut costs, while improving performance, increasing efficiency and effectiveness, and sometimes expanding service offerings. As a result, Long indicates that state-level clients are “embracing customer-focused approaches to improve service delivery; adopting innovative solutions to modernize their organizations; using new technology and strategies to transform their finance, procurement and human resource operations; and replacing vague ‘waste, fraud and abuse’ efforts with defined processes that are empirical, disciplined and actionable.” At the federal level, Foutty describes an opportunity to help clients move back-office functions to a shared-services model.

6. Retirement Cliff: Six or seven years ago, public sector agencies braced for a massive wave of Baby Boomer retirements. Once the financial crisis struck, however, it became clear that many retirement-eligible employees would delay their departures. That delay is over, especially on the federal side, notes Marcil, who says that agencies need assistance managing this retirement cliff. This work involves workforce planning, organizational design, performance management, and more than a little behavioral change.

7. Public-Private Partnerships: This is more of an opportunity for consultants who work at the state and local levels, where Marcil points to an “increasing desire for private-public partnerships as a source of funding and as a source of expertise.” Marcil points to the large gap between the need for infrastructure investments among global governments and the ability of these governments to fund the needed investments. One solution, she continues, consist of public-private partnerships in which the private sector builds, controls, and operates infrastructure projects—under strict government oversight and regulation.

‘Hyper-Focus’ on the Right Skills

The demand for innovative public-private partnership models reflects the public sector’s growing appetite for leading practices and solutions from outside the sector. The outward focus Marcil describes crops up frequently when she and her clients discuss technology solutions. “They recognize that in some areas, such as big data and digital [services] delivery, the most cutting-edge solutions will come from our experiences working with organizations in the private sector,” she says. Marcil expects this interest to intensify. “To be successful in the future,” she adds, “I think you’re going to need senior consultants with deep experience and expertise spending time on the ground and bringing best-in-class expertise – not only from the public sector, but also from the private sector.”

When he discusses how client demand and expectations are evolving, Accenture’s London says he sees a “hyper-focus on having exactly the right skills to serve our clients.” This translates to a diverse collection of multiple skills; more accurately, this transfers to all skills. London says his practice has been “giving a tremendous amount of focus to investing in strategy skills, consulting skills, digital skills, technology skills, and operation skills,” he says. “We find that each of those distinct pieces’ skill areas is required to do these end-to-end transformations.”

London and other public sector consultants also emphasize that technology skills are no longer sufficient—especially in technology-related project work (See “Legacy Systems are the New Potholes,” below). Deloitte is addressing this nuance as it invests in expanding its digital offerings, both in terms of number and scope. “What we have found is that our clients don’t just want the technical coding skills,” Foutty notes. “They also want engaging design and user experience. So, the skills mix has changed in that respect—from just providing technical hard skills of an IT worker to providing clients with artful visual design and intuitive user experience.”

This technology-skills evolution also is occurring on the client side. As more public sector organizations adopt more digital services, their IT employees will need to become more service-focused as well. Recent Deloitte research on public sector technology describes the IT worker of the future as a professional with the requisite technical skills (e.g., programming or system administration) who also possesses so-called “softer” skills from disciplines like anthropology or sociology.

Long agrees that the same drivers of change enacting on clients are leading consulting firms and practices to develop new mixes of resources needed to serve public sector clients. Deloitte’s state and local public sector practice now has “a larger mix of staff with expertise in digital, analytics, mobile and cyber,” she explains. “We are also focused on new and quicker methods to implement complex IT systems—with more inclusion of the end user in the process. Creative design studios are now common in the development process as a positive citizen/user experience is key to any successful change.”

That sort of approach suggests that the public sector’s service to its citizens will soon feel less like a traditional slog through the DMV line and more like obtaining citizenship in E-stonia.

Sidebar: Legacy Systems are the New Potholes

Just a few years ago, public sector consultants were spending a lot of time talking about potholes. Today, they want to talk about data analytics.

This is refreshing news, especially given how difficult it is to build bridges, at least in the U.S. “Americans of all stripes know that something is seriously wrong when other advanced countries can build infrastructure faster and more efficiently than the U.S., the country that built the Hoover Dam,” write Business Roundtable President John Engler and North America’s Building Trade Unions President Sean McGarvey in a Wall Street Journal op-ed.

Digital government rolls off the tongue as a new buzzword, for good reason: digital services can help public sector organizations achieve significant cost reductions while improving efficiency and citizen satisfaction. The Boston Consulting Group research pegs the cost savings of government e-service (compared to traditional, mostly manual services) at $18 per citizen in Europe and $15 per citizen in the Americas. Four years ago, one in 10 government transactions was performed online; by 2020, BCG projects, one in three of these transactions will be digital.

The booming interest in government digital services can mask the fact that building digital services in the public sector can be just as vexingly difficult as building bridges. Related BCG research shows that there is ample room for improvement when it comes to the citizenry’s satisfaction with current e-services. Only 61 percent of U.S. citizens, 45 percent of Indonesia citizens and 42 percent of Denmark citizens are satisfied with public sector digital services.

And it sounds like the same forces that make bridge-building such a bear also can mar public sector digitization efforts. IBM GBS Global Government Industry Leader Sietze Dijkstra has been involved in numerous public sector digitization projects, many of which are designed to enable organizations to leverage advanced analytics to fuel better, more agile decision-making. He estimates that roughly 10 percent of the time on these projects is focused on building the actual analytical capabilities. Another 30 percent is spent on training, but the lion’s share—as much as 60 percent of the time—is spent on figuring out how to collect and share the data that the sophisticated analytical engines need to run.

Addressing this collection/sharing challenge requires the same silo-busting, behavior-shifting and process reengineering work that also must be done to improve the way public sector entities build infrastructure. —E.K.


Sidebar: What’s Keeping the Public Sector up at Night?

Price Waterhouse Cooper Executive Portrait

When Harvard Business School Professor Rosabeth Moss Kanter appeared on The Daily Show to promote her new book “Move: Putting America’s Infrastructure back in the Lead”, she gave Jon Stewart a troubling status report: “It’s shabby,” Kanter said of our infrastructure. “It’s deteriorating. It’s behind other countries in the world. It’s an embarrassment.” While it’s tempting to say this bad news is good news for public sector consultants, it really qualifies as a bit overwhelming. Crumbling infrastructure rates, barely, as one of numerous areas where public sector organizations need fresh thinking and innovative solutions from their consulting partners. Scott McIntyre, PwC’s U.S. and global public sector leader, recently took time to summarize the pressures bearing down on the public sector and highlight how those disruptions are creating so many challenges and opportunities.

Consulting:  What are some of the largest drivers of change/forces acting on the public sector today?

McIntyre: The public sector is dealing with issues and complexities that affect the entire economy and really, every part of society. Rapidly changing citizen demands, societal needs, and challenges associated with national defense and economic security are among some of the biggest forces impacting government decision makers today. Politics, budget constraints, and other factors are also playing an amplified role.

Consulting:  What are the most noteworthy challenges and opportunities confronting clients in the public sector?

McIntyre: Today, many government decision makers are faced with cost pressures, human capital challenges, security and privacy concerns, as well as the rapid expansion of public sector missions. Challenges vary by agency and program, but there are opportunities to effectively address and make significant impact on any of these areas across the entire public sector space.

Consulting:  What types of expertise and service offerings are in highest demand right now?

McIntyre: There is big demand for real, comprehensive and implementable organizational and program-specific strategies that enable transformation, cost take out and operational effectiveness. There is also greater demand for data analytics, cybersecurity and risk management among other high priority needs. Taken together, the public sector’s various missions and programs touch everyone everywhere, so like any industry, these complexities are driving opportunities for innovation, as well as opportunities for program and process improvements across the sector.

Consulting: Have the skills mixes required to serve public-sector clients changed in in the past two years? How so?

McIntyre: We see government clients recognizing the interconnectivity of already complex government programs that require rigor around data analytics and statistical modeling. While the basic skillsets required are similar to that of any other industry, consultants in this industry are most valued for their ability to see and understand the big picture while drilling down to meaningful data.

Consulting: How do you expect public sector consulting to evolve in the next three-five years?

McIntyre: Expect to see more evidence-based consulting that relies on data analytics, modeling, and simulation to create strategic alternatives and scenarios based on greater insights into trade-offs and risks. We should also see more public sector programs relying on co-creation with various constituent groups and stakeholders, which could lead to interesting opportunities around program design and execution.  —E.K.