Adoption Dilemma

The dark side of e-government isn't cost overruns, turf battles or integration issues; it's low adoption rates. Without customers, the public sector can't justify large investments in e-government for much longer.

by / February 3, 2004
Utah has long been considered one of the country's leaders in digital government. It has had top-level leadership, and former Utah Gov. Mike Leavitt was an early and enthusiastic booster. The state provides more than 150 services online, and has won numerous awards for its e-government prowess -- including the Center for Digital Government's "Best of the Web" award in 2003.

For all its digital government successes, Utah has one big problem: Citizens and businesses aren't exactly beating down the door to shift to the digital channel. Take auto registration renewals. For several years, Utah's automobile owners have had the option to renew their registration on the Web and avoid the long lines in the Division of Motor Vehicles (DMV). You would think getting people to conduct this transaction online would be a no-brainer. After all, this is the DMV, the agency whose very initials have come to symbolize everything Americans dislike about government.

But three years after this online transaction was rolled out, only 12 percent of Utah's auto registration renewals are conducted online. The overwhelming majority of Utah drivers still obtain their motor vehicle registration by driving to a state office and queuing up.

Adoption rates for online unemployment insurance claims, sales tax filing and primary care network filings are similarly lagging in the single digits or teens.

Utah isn't the only government entity struggling to move more of its customers over to the digital channel. In Texas, only 2 percent of drivers renew their vehicle registrations online. In most states, it's not much better. In fact, Utah's 12 percent adoption rate is the highest in the country for vehicle registrations, according to the Center for Digital Government.

Overseas, the problem is much worse. The UK spent a fortune building a digital gateway for citizens and businesses. The British public's reaction? A collective yawn. Only 10 percent of Brits have used even one of the scores of online government transactions. The biggest disappointment was the Department of Inland Revenue's multimillion-dollar online tax filing system with a meager 1 percent adoption rate.

To be sure, the digital adoption outlook isn't universally bleak. Many government-to-business (G2B) applications -- professional licensing and UCC filing, for example -- have impressive take-up rates. Other G2B transactions still have relatively low adoption rates, but are rising steadily. Despite these successes, however, it's undeniable that adoption rates for many transactions -- particularly business-to-citizen services -- are well below original projections. All in all, adoption rates for most online services average less than 30 percent, according to the Center for Digital Government.

Why Does This Matter?
For one thing, there's the matter of self-preservation. "No CIO wants to be remembered as the person who built a field of dreams to which no one came," said Paul Taylor, chief strategy officer for the Center for Digital Government.

Then there's the little matter of the bottom line. As many governments face their third consecutive year of budget shortfalls, achieving cost savings from IT investments has become priority No. 1 for many CIOs. This won't happen, however, until governments significantly boost adoption rates. "Until we can get very high adoption rates, it will slow down our being able to get efficiencies out of electronic government," said Michigan CIO Teresa Takai.

To understand the link between digital government adoption and cost savings, consider a government activity like tax filing. Processing millions of tax returns is an expensive endeavor, running in the tens of millions of dollars in many cities and states -- and much higher for national governments. The good news is whole activities -- and costs related to them -- can eventually be eliminated by filing and paying taxes via the Web, including opening the returns, data entry, error correction and postage.

However, most big savings don't kick in until a significant percentage of taxpayers file their taxes online. Until that happens, revenue departments need to run parallel paper and electronic processes, meaning they can't make significant personnel reductions or sell expensive equipment used to sort and image paper forms. A consultant's study conducted of the Texas Comptroller's Office found that much of the $30 million it spent on tax processing per year could be eliminated by e-filing, but not until the agency reached an adoption rate of 70 percent or more.

In fact, if the adoption of an online service is low, the extra costs of adding and maintaining the Web channel -- together with existing costs of supporting physical and phone service channels -- could mean Web-enabling a service might increase a government's service costs. This won't fly for long politically in the current fiscal environment. "We need to get to the point where the level of adoption is high enough to either eliminate the lines or reduce them enough, so we can take people working the counter or opening the mail and reassign them," explained Utah CIO W. Val Oveson.

Why has adoption lagged behind expectations for many e-government services? There is no shortage of reasons -- privacy, security, ease of use, lack of Internet access, inability to find the Web site -- all of which present their own unique challenges to government CIOs. While formidable, the challenges aren't insurmountable, especially if CIOs adopt these five strategies.

Make It Mandatory
The quickest, most surefire way to raise adoption rates is by forcing customers to use the digital channel. Conventional wisdom says this is never an option for governments due to access and fairness issues. Not true. While governments can't use the mandatory approach for most e-government services, in certain cases, it's perfectly legitimate. Several states, for example, already require businesses with annual revenues over a certain threshold -- for example, in Texas it's $100,000 -- to pay sales or franchise taxes via electronic funds transfer. There's no reason why a similar approach couldn't be put into practice for some B2G applications.

Closing down nondigital channels is an option for certain government-to-citizen services. If you want to renew your license for nontitled boats and off-road vehicles in Colorado, for example, you have to do it online. Michigan and other states are closing most or all state unemployment insurance offices, thus forcing citizens to apply for unemployment benefits by phone or over the Web. As Internet access becomes as ubiquitous as television and radio, the number of government transactions that will be available only online will expand. "Now you can't get a cash voucher from government," said Christopher Baum of the Gartner Group. "Over time, as more and more people get used to the digital economy, the same will hold true for many e-government transactions."

In the meantime, the best opportunity to achieve 100 percent adoption is with internal functions, such as finance, training, payroll and human resources. Unlike most citizen and business services, government can require public employees to use the electronic channel, and there is big money here. The state of Florida estimates it will save $24 million per year by Web-enabling and outsourcing HR, payroll and benefit administration functions. Much of that will come from requiring state employees to use a self-service digital channel for most of their HR needs.

Make It Cheaper
"For online adoption to be successful, it needs to take less than 10 minutes and be cheaper than 37 cents," said Taylor. Unfortunately this is not always the case thanks to cumbersome registration and authentication processes, and sometimes high convenience fees required for many e-government services.

To make it cheaper and easier to complete the transaction electronically than in person or by mail, governments can provide discounts for completing transactions online or raise the costs of using other channels. The New York and New Jersey Port Authority used the latter approach to get people to switch to electronic tolling in the New York City area. Commuters without a transponder pay an extra buck each time they drive into Manhattan. The strategy worked. About 60 percent of toll transactions in the region are now conducted electronically through E-ZPass.

For governments worried about a potential backlash from raising fees for nondigital transactions, another option is to simply stop sending out paper renewals. Texas recently began mailing out postcards directing people to a Web site in lieu of paper renewal forms -- and online license renewals for doctors, and savings and loan associations soared. More than 60 percent of doctors and 70 percent of savings and loans now renew online. Indiana did the same thing for nursing license renewals. The result was an impressive 78 percent adoption rate.

Market It
If people don't know a service is available online or can't find it, they're not going to use it. Unfortunately this is all too common. In fact, a 2003 Hart Teeter survey commissioned by The Council for Excellence in Government found this to be the No. 1 reason people don't use e-government.

One way to increase awareness of the availability of e-government services is marketing. "You can't just unveil something and expect everyone to know about it and use it," said Brian Moura, assistant city manager for San Carlos, Calif. "You have to publicize it, market it, do press releases. The problem is all this runs counter to the way many cities do things."

Sunnyvale, Calif., found this out the hard way. Many years ago the city spent several hundred thousand dollars building a sophisticated application that lets homeowners and contractors obtain building permits online, then sat back and waited for the mad rush of architects, plumbers, electricians, contractors, developers and homeowners to take advantage of the new online services. They didn't come. "We didn't market to them," admitted Sunnyvale CIO Shawn Hernandez. Three years after the service was launched, the adoption rate is still 6 percent.

There are many ways governments can market e-government services -- even on a low budget. San Jose sends out press releases, mails out flyers and even trots out the mayor to do promotional events. The state of Florida does public service announcements. Michigan asks business and professional organizations to run advertisements about the e-government services in their newsletters.

Form Partnerships with the Private Sector
Marketing, of course, is not exactly a core competency of government. For this reason, some innovative governments are turning to partnerships with market-savvy private organizations to increase uptake. These "channel partnerships" can be established with banks, brokerage firms, sporting goods stores, travel Web sites, trade associations and other companies or organizations that have trusted relationships with customers governments want to reach. These companies and organizations could host e-government transactions for governments.

The state of Texas, for example, is partnering with a handful of companies that provide legal automation services for Texas law firms to host the state's new online court filing system. These companies have established relationships with the law firms and can package the online filing application into their other set of services. "We see them acting as our marketing force," said Phil Barrett, director of TexasOnline.

One of the most successful channel partnerships is between the IRS and private tax preparers and software manufacturers. To meet a congressional mandate and get 80 percent of all tax returns filed electronically by 2007, the IRS turned to the private sector, embarking on a plan to leverage the technological and marketing prowess of tax software companies and national tax preparation firms, as well as the millions of individual relationships built by tax accountants with their clients. "It was a no-brainer," said Terry Lutes, director of Electronic Tax Administration for the IRS. "Over half of all tax returns came in from tax professionals. Millions more were completed by taxpayers with the help of tax software. We needed to work with the private sector to accomplish our goals."

Lutes hired a handful of national account managers -- an unheard of job title in government -- and gave them a single goal: enlist software companies like Intuit; tax preparation firms, like H&R Block and Jackson Hewitt; portals, like AOL and MSN; individual practitioners; and banks and other financial institutions to shift tax filing to the Internet.

The strategy was simple. Rather than try to drive traffic through the IRS or other government sites, why not link with commercial partners who already have high traffic? Individual taxpayers file their taxes electronically using the trading partners' online forms. By creating multiple channel partners, the IRS gains free marketing and a better chance of meeting its aggressive targets.

Within three years of launching the initiative, the percentage of Americans aware of e-file shot to 80 percent, and 46 million returns were filed electronically -- about 35 percent of all returns. Much of the rise was attributed to massive advertising campaigns from the agency's private-sector partners. "They're a powerful ally in marketing the message of filing online," said Lutes.

Change the Culture
Perhaps the most important thing a government entity can do to increase adoption is transform its culture. Throwing an e-government application on the Web and going about your operations the same way as before will all but guarantee low adoption rates. Agencies that have the most success with adoption fully embraced digital government, making it a central part of their mission and strategy -- rather than just an afterthought.

"We've found there's a huge difference in adoption rates between agencies that truly commit to digital government and make it part of their culture, and those who don't," explained Tamara Dukes, president of New England Interactive, which runs several state portals. Thus boosting adoption, like so many other areas of digital government, ultimately comes down to a cultural transformation, a thorny problem in any organization, let alone the public sector.
William D. Eggers Contributing Writer