Digital Transformation and E-Procurement in the Public Sector: What You Need to Know
“We’ve seen two years worth of digital transformation in two months,” noted Satya Nadella, the CEO of Microsoft at an earnings call in April 2020. True to his word, digital transformation is on the rise like never before.
What is Digital Transformation?
The concept of digital transformation has become a key focus of the rapidly changing world of today. If you’re not a part of this wave of innovation, you might not know exactly what it entails. Most people assume it involves simple technological updates, or at best an inclusion of new technology in existing systems. In reality, digital transformation is a far bigger phenomenon.
It’s the top-down re-imagining of businesses, equipping organizations with the tech tools they need to keep up with their competitors and meet the requirements of an ever-changing market. With the inclusion of new technology, organizations can gain access to brand-new workflows, tools, and expertise. Digital transformation allows them to redefine how they do business, opening the doors to customer growth, cost reduction, and higher efficiency.
Studies show that digital transformation can boost worker efficiency by 50%, boost customer interaction by 46%, and improve service quality by 26%. And that’s just the tip of the iceberg.
Digital Transformation in Pakistan
According to the GSMA’s Digital Societies Report from 2020, Pakistan is one of the leaders in the Asia Pacific region when it comes to digital growth rates. By 2023, our mobile industry will contribute $24 billion of value to the economy. Locally, digitalization has been transforming private sector companies for years. The public sector, on the other hand, hasn’t been growing at nearly the same rate. That means it’s a space with a lot of untapped potential.
Public sector organisations in Pakistan have either lagged behind in their adoption of new digital technologies, or ignored them altogether. That’s a shame because all of those organisations could drastically upgrade their operations and capture huge amounts of value by undergoing digital transformation.
The Public Sector: A New Frontier for Digital Transformation
Digital transformation is especially suited to the public sector because the scale of these organizations spans a large population base spreading over diverse social and geographical strata. The expertise enabled by a digital transformation framework can help public sector funnel resources towards achieving smoother operations, quicker processes, greater public satisfaction, and lower costs.
In the developed world, public sector bodies are implementing digital transformation strategies to deliver better services and improve their engagement with citizens in an increasingly online world. According to a report by Deloitte, governments all over the world are investing in digital transformations, and 97% of the officials surveyed agree that digital transformation has had a huge impact on their services.
It requires effort and investment to make the leap, but the benefits are plain to see. It’s high time for the Pakistani public sector to do the same. Long term savings, huge effectiveness gains, and superior citizen and workforce experiences could be on the horizon.
The Prerequisites of Digital Transformation
Successful digital transformations start with the right mindset, which necessitates an overhaul of organizational structures, work processes, skills, and company culture. All these areas form the critical success factors for digital transformation in any business.
Since there is no one-size-fits all approach to digital transformation, organisations need to come to their own unique understanding of the digital technologies they implement. This requires a high degree of digital agility. That kind of flexibility is rarely found in public sector companies. That’s why public sector institutions need to push for greater digital fluidity, which will keep them relevant and competitive.
Unfortunately, since public institutions are subject to government regulations, they don’t have the freedom of private sector companies to iterate or implement new technologies at will. As a result, their progress into digital transformation is relatively slow.
The Pitfalls of Digital Transformation in the Public Sector
When a digital transformation takes place in the public sector, it faces a unique set of problems: both failure and success could yield long term repercussions in terms of functionality, accessibility, security, and sustainability. To join the 30% of companies that are able to get the most out of digital transformation, organizations need to be prepared. That’s why an understanding of the pitfalls of digital transformation is crucial for any public sector company seeking to make the shift.
Many public sector companies lack the clarity, the mindset, and the strategic thinking required for a successful digital transformation. The public sector also faces the challenges of competing priorities, funding issues, legal and legislative constraints, insufficient technical skills, and an aversion to risk. All these form major pitfalls for the public sector’s digital transformation process. With the right guidance and leadership, however, all of those obstacles can be overcome!
E-Procurement—The Starting Point of Digital Transformation
There are many areas in which the public sector companies could potentially benefit from digital transformation. One such area is that of supplier exchange, also known as electronic procurement, or e-procurement.
E-procurement is a system that streamlines the regular procurement process. It centralizes and automates interactions between organizations, customers, and other value chain partners to improve the speed and efficiency of procurement practices. Essentially, e-procurement is the purchase and sale of supplies, equipment, and services through a web interface or other networked systems, allowing for electronic data interchange and enterprise resource planning.
This system boasts a suite of innovative features designed to optimize the efficiency, effectiveness, and costs of procurement. Those features make it ideal for large scale organisations operating in the public sector.
What E-Procurement Can Offer
Modern e-procurement systems are the solution to a lot of problems faced by public sector organisations. They can also substantially benefit stakeholders, governments, private enterprises, and the citizens all those entities seek to serve.
Effective public e-procurement systems can help public organisations obtain better value for money, reducing pressure on public budgets. They also serve to control corruption, due to the transparency of such automated systems, and reduce the barriers to entry for public tenders.
Studies show that e-procurement can reduce government costs by up to 30%, and service efficiency by up to 40%, while also ensuring increased tax compliance. That’s not to mention the savings on corruption in contracts, which make up about 25% of most public sector work forces.
Other benefits of e procurement for both public and private sector include:
- The automation of laborious tasks, speeding up processes, freeing up human resources, and reducing errors.
- Improved workflows and communications for procurement.
- A single platform for managing and auditing
- Real time updates for vendors, management, stakeholders, and partners
- Real time connections to external supply chains, and ERP
- Streamlined negotiations between multiple partners and potential stakeholders
In addition, the implementation of e-procurement systems also simplifies the process for customers, in the form of easy access to supplier catalogues and websites, and the efficient processing of orders and unparalleled accuracy in pricing.
There are huge benefits that come with digital transformation, but there are also loads of challenges. It’s important for public sector organizations to be aware of these as they enter this new realm. Digital transformation is the need of the hour, and it’s picking up pace with technologies like e-procurement. In the words of George Westerman of MIT: “When digital transformation is done right, it’s like a caterpillar turning into a butterfly.”