• Opinion
  • September 26, 2018
  • 6 minutes
  • 2

What is GovTech? The $400bn market shaking up public sector procurement

Opinion: GovTech is gaining traction globally — both inside and outside of government

This opinion piece was written by Edward Elliott, a program manager at GovTech fund PUBLIC. It also appears in our government innovation newsfeed.

Very few people probably ever got excited by the term “Public Sector IT”. But in the last 18 months, the catchier “GovTech” has gained traction both inside and outside of government, from Treasury announcements through to mayoral challenges, to the new “GovTech Summit” supported by President Emmanuel Macron this November in Paris.

The UK GovTech market is estimated to be worth £20bn ($26bn) by 2025, with a global valuation of $400bn. That’s larger than its even buzzier neighbours fintech or proptech. But you would be forgiven, as a public servant, for asking — “What is GovTech?”

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The answer is complex but extremely exciting.

As a term, “GovTech” has been used in Africa and the US for most of the last decade, but its global popularity has soared in the last year as a way to describe a growing movement of startups providing new technology services to government.

“Very few people probably ever got excited by the term “Public Sector IT””

Whereas small tech players have reshaped much of the private sector landscape since the advent of cloud computing, the public sector has remained largely untouched, government procurement traditionally favouring large incumbent providers.

But the ongoing advancements of AI, IoT and blockchain, alongside some high-profile outsourcing failings — Carillion and Capita among others — have led many to see GovTech startups as not only a more dynamic, but safer alternative.

What do GovTech startups do?

The answer is extremely broad. Just as public services span from defence to welfare, justice to healthcare, GovTech startups prove equally diverse. Participants on GovTech accelerator GovStart have included everything from communication apps for doctors to smart city furniture and AI-powered cybersecurity services.

In fact, many of the most interesting GovTech companies look to service the public sector’s vast back office processes — HR, compliance and recruitment above all. Jobs search engine and GovStart alumnus Adzuna, for example, this year gained the UK’s Department of Work & Pensions “Universal Jobmatch” contract — a £2.5m ($3.3m) per year tender to manage the department’s jobs board.

What does GovTech offer public servants?

As government budgets become tighter and expectations from an increasingly digitally savvy citizen base grow, GovTech presents an alternative to the tech incumbents who, for the most part, are struggling to stay ahead of the rising tide.

As individual companies, GovTech startups are perpetually seeking an edge by utilising the newest technology, the only way to break through a fiercely competitive market — and a benefit to any government buyer.

As a market, GovTech offers agility, innovation and a greater variety of buying options, including on price. The UK’s Ministry of Justice has returned to major contracts despite frequent abuses (such as with G4S and Serco); GovTech may offer an alternative.

What will GovTech look like in five years time?

More companies, more investment and more public sector contracts awarded to startups. The GovTech market is projected to grow larger than fintech over the next five years, and its visible impact on the way we live our public lives — register for hospitals, travel around cities and find employment or housing — will become more and more evident.

To foster this future, however, governments need to adjust their approach to procurement. Startups face consistent roadblocks when approaching public sector procurement, from finding out what challenges a department faces, to the labyrinthine mechanics of government tender processes.

Part of this can be resolved via changes in process (for example, improving transparency and availability of frameworks such as the UK’s G-Cloud); others will rely on a much deeper progression in the public sector’s approach to risk and reward. Achieve these and the public sector will be in a prime position to harness a wealth of innovation and creativity, to the benefit of startups, frontline staff and service users alike. — Edward Elliott

(Picture credit: Pexels)


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