Welcome to the KuppingerCole Analyst Chat. I'm your host. My name is Matthias Reinwarth, I'm Lead Advisor and Senior Analyst with KuppingerCole Analysts. My guest today is for the first time Alejandro Leal. He is a Research Analyst working with KuppingerCole Analysts out of Stuttgart, Germany. Hi, Alejandro. Good to see you.
Hi, Matthias. Good to see you. Thank you for having me.
Great to have you. And we want to talk about a topic that is often a bit not that much in the in the in the public view. We want to talk about the use of digital services in public administration. But first of all, when we look at public administration, public services that are provided by governments. How has that changed in the recent times? What is digitalization? Something that has already been a topic there? And what are the types of services that governments need to provide for their citizens?
Yes, you're absolutely right. The topic of digital transformation has changed over the years. Before getting into the topic, I think it would be helpful if we first take a look at the field of public administration and its developments. If we take a look at the traditional model of government, public entity receives resources through a budgetary allocation and then uses these resources to provide services to stakeholders. In this case, citizens. The people at the receiving end are largely passive and do not actively shape the design and the delivery of the service provided. They might, however, read the service provided by filling out a survey or by rejecting or supporting the incoming government. Today, the public sector is facing a huge innovation challenge. Trust in governments in many countries is at an all-time low. Resources allocated to the public sector are limited, and existing regulations in the government discourage culture of change and innovation. So we need to also take into consideration that these public entities are also expected to play a large role in driving economic growth. To sum up, people in the government must aim to do more with less. And when it comes to public administration, the field has gone through several waves of changes in both theory and practice over the past 30 to 40 years. For example, in the 1980s, we see the rise of something called new public management, and this basically constitutes the transfer of business and market principles and management techniques from the private sector into the public sector. However, the problem of new public management is that it tends to mistake the most basic requirements of a state, particularly a democracy, such as paying attention to regularity, transparency, accountability and due process instead of focusing only on low costs and efficiency.
As a result, new public management started to lose influence at the turn of the century. And now we see the rise of something called the neo-Weberian state. At least within academic circles this is the most recent development, let's say. The neo-Weberian state originates from the writings of the German sociologist Max Weber. And this paradigm involves changing the administrative structures from an inward oriented one, focused on compliance with internal rules, into meeting citizens expectations and requirements. And this is where digital transformation comes in. In essence, digital transformation is commonly regarded as an implementation or a process that organizations go through to make better use of technologies in response to employees', customers' or citizens' expectations. And some of the principles of digital transformation include data driven or data informed making mechanisms, openness and transparency, interoperability, openness, and user centrality and, of course, privacy and security. Those are probably the main concerns of citizens. So if you ask me, why is digital transformation important in the public sector? As you know, Matthias, after two years of a pandemic, users are more accustomed than ever to extremely user friendly digital processes. And at the same time, in parallel, the highest level of security and privacy must be ensured for personal data. The task in the public sector is clear to offer a whole existing structures, modes of operations and processes and focus even more on citizens. Digital transformation is an imperative. But the question is how to make digital transformation happen within the government, that's often less clear.
Okay. But I'm living in the center of a larger town just extending my parking permit for two more years can be difficult. This is not Belgium. This is Germany. And digital processes are by far not yet there. So it was just not possible to do this online. I had to call them up and they sent it by mail. So really paper mail, at least it was possible remotely. So I did not have to go there to extend the existing parking permit to have my car here in the street. But that could have been much, much better. You've mentioned these waves of change. Where are we now when it comes to this digital transformation across this different these different countries that you that you're looking at, that you're talking about, where are we?
Well, of course, many countries have different issues when it comes to providing public services. I think it depends on the context and the culture of the country. If we take a look at the case of Estonia and its digital transformation journey, I think we can learn some valuable lessons and perhaps we can also see how these lessons can be applied in other countries, in Europe or across the world. Just to briefly give a background on Estonia, it's a country in northern Europe located in the Baltic region with a population of 1.3 million. And, you know, Estonia has a very, very small population. And that can also facilitate the delivery of digital public services in comparison to a country like Germany that has 80 million people, or approximately. So that can also make a difference when it comes to delivering public services. And the case of Estonia is very interesting because the journey of digital transformation was a part of a broader political consensus at that time that also included the agreement to join the European Union and NATO. So in the year 2000, Estonia made a commitment to digitally transform the Estonian society by introducing two main pillars. One is the X-Road platform and the digital ID. I will get deeper into those two briefly.
But first, something that happened in the year 2000 was that Estonia made sure to provide a computer in every classroom by the end of the year. And it also introduced the Internet access to be a fundamental human right in their constitution in the year 2001. So if we see Estonia's digital transformation, basically it consists of a digital citizen who can access public and private services through a digital platform that ensures the interoperability of decentralized information systems. Basically, Estonia had a very interesting story because a few years later, to be precise, in the year 2007, Estonia was perhaps the first country to experience a cyber attack by a state. Following the relocation of a controversial Soviet era statue in a park located in central Tallinn, Estonian banks and government agencies experienced distributed denial of service attacks. And for several days, these were affected, the systems were affected. And due to the attacks, the Estonian government together with NATO, they established the NATO's Cyber Defense Center of Excellence, which is basically an institution that aims to train all the NATO members to do cyber defense and to increase reliance, and resilience as well. The same year the Tallinn Manual was developed and this is very interesting because it's a manual that aims to provide a global norm in cyberspace by applying existing international law into the cyber realm. So Estonia, after experiencing the first cyber attack by a foreign state, they together with NATO and European Union members they decided to come up with a manual to take a look at how international law and cyberspace are related.
And just to briefly talk about the two main pillars of Estonia, the X-Road and the digital ID. So the X-Road, as I mentioned, it's a platform that ensures the data exchanges of citizens and institutions within the country. It's decentralized and basically citizens can share personal information with Estonian institutions. But the important thing here, and I think this is very interesting, is that citizens, they are notified which institutions access their personal data, and they can either accept or reject such requests. And they can also verify and request these institutions why they need their information. And that leads to trust in institutions, at least within the country of Estonia. For example, you mentioned driver's license. Let's say you get pulled over in Estonia, you're driving and a police stops you, ask for your driver's license. In Estonian, you don't really need a driver's license. You need to present your digital ID which is compulsory for all citizens and residents. And the police officer can check through the X-Road platform the database of the road administration to see if the driver has a valid license or not. And the other aspect of the Estonian e-government is the digital ID. And the digital ID, as I said, is compulsory. Almost hundred percent of the population has it. And there are many use cases for this digital ID, for example, users can also... citizens can vote digitally. About 30 to 35% of citizens that vote do it digitally. They can also sign documents with the digital ID, they can access their medical records, they can pay taxes, and they can also order prescriptions.
So that's really interesting. So that really reminds me of one of this important topics that we are currently talking about. This is this this identity and self-sovereign identity and also verified identities when it comes to presenting a digital identity that I have that is based on, for example, a bank ID or a state issued ID. So Estonia was really on the forefront way back then, as you said, in 2007. So could that be also a role model when it comes to creating digital identities for other countries, when it comes to talking about self-sovereign identity?
Yes, certainly. We can also learn from some of the limitations of Estonia, for example, the digital ID that the data available, citizens, you can go as far as the year 2014. And one of the questions is that since digital transformation happens very quickly, since technologies are driving up very fast changes, some of the concerns that citizens have in this, doing it, for example, is that how can they access the data from years ago? And that's something that in the case of self-sovereign identities, this Estonian case could be helpful because there are many criticisms of self-sovereign identity, so many limitations, because since these are very recent emerging technologies, there needs to be more research in this field, more research in addressing what citizens are concerned about, what are the privacy issues that they care about. And there are many companies out there, many vendors that are developing new self-sovereign identity solutions, but they need to take into consideration the political aspects of it because at least in democratic countries, we tend to forget about history and we tend to assume that the use of these technologies will not have any repercussions. But historically speaking, personal identitfications have been used to discriminate minorities or people with disabilities or refugees, for example. And that's something that self-sovereign identity and the vendors that are creating these technologies, they need to take that into consideration.
Right. And I think we should really continue this discussion, this conversation. And with that topic in another episode, because we're getting to the end of this one. Thank you, Alejandro, for laying out the changes that digital transformation has imposed on the public service, on public administration. And I think moving towards self-sovereign identity and moving towards self-sovereign identity as a key for empowering citizens to execute their right for privacy while getting access to public services, is worth another episode that we will have very soon to discuss the aspects that you've mentioned, to really making sure that it's not discriminating, that it's really equal, and that is as privacy conserving as it can be. So thank you, Alejandro, for today's episode and we will continue this discussion for the time being of everybody who's interested in learning more about Self-Sovereign identity. Please head over to our website kuppingercole.com and just type in SSI into our search field. And if you want to get into a discussion around this topic of the digitalization of public services, please reach out to us and to Alejandro or to me just via email. The email address can be found on our website and if you're looking at this at YouTube, just drop us a comment and we will get back to you and get it to a discussion. We really want to have this discussion with the audience and if you have any questions for the upcoming episode, just let us know. Thank you very much, Alejandro. And yeah, looking forward to talking to you very soon.
Thank you, Matthias.
