A look into the future of GovTech in Latin America, what did we learn thanks to #BizkaiaGovTech?
By Lucas Jolias
On March 7th and 8th, a meeting of high-level international experts was held in Bilbao with the aim of presenting the GovTech strategy of Bizkaia and receiving recommendations for its deployment in the coming years. This meeting is part of the GovTech Bizkaia program, an initiative of the Provincial Council to promote the digital transformation of the public sector and encourage entrepreneurship in the region.
The GovTech strategy of Bizkaia has become a pioneering model in Latin America. This strategy aims to promote the digital transformation of the public sector through technological innovation and entrepreneurship. To this end, four main lines of action have been established: the generation of an open innovation ecosystem, the digitization of public services, the training of public officials in digital skills, and the creation of a culture of innovation in the public sector. During the meeting of the international expert committee in Bilbao, some of the most strategic projects in public digitization and entrepreneurship were presented. Among them, initiatives such as "Bizkaia Beaz", the startup incubation and acceleration program, or the Bizkaia Accelerator Tower (BAT), a space that brings together startups, companies, investors, and top technological partners, stood out.
Why has Bizkaia become a pioneering model in GovTech strategy in Latin America? Because in a short time, they have been able to create an open innovation ecosystem that has allowed collaboration between the public sector, the private sector, and civil society. In a few months, they defined and prioritized public problems to be solved and received proposals from more than 70 startups to solve them. In this way, Bizkaia not only invests in technology but also generates innovation spaces with entrepreneurship to solve public problems.
The group of experts was made up of, among others, specialists from the OECD, IDB, ITU, Gobe Estudio, and only one startup: OS City. From OS City, we contributed our two cents, sharing our experience from the point of view of startups. It's very difficult to summarize what was discussed in those two days since there were many ideas, but I will try to summarize them with a special focus on the entrepreneurial sector (I apologize to my colleagues in advance, as much of what was discussed will not be reflected in this short post).
The GovTech market has specific characteristics that differentiate it from other markets. For startups, this means that the market demands a degree of knowledge about how the public sector works and a much greater effort than other sectors. There are two ways to enter GovTech: either by being a "pure" GovTech and dedicating 100% of the effort to understanding this market or by being a B2B startup with the necessary (economic, organizational, financial) backing to face the challenges of working with the government. GovTech programs promoted by governments must take this into account since when working on challenges and selecting startups, there must be a correspondence between the selected challenge and the maturity level of the startup (do they want to pilot? Scale up? Solve a "central" problem?). Remember that the purpose of the programs is to generate joint innovation processes that, if all goes well, could lead to a technological acquisition in the future. But one does not necessarily detach from the other. We repeat: one thing is to buy technology, and another very different thing is to buy innovation.
Something that startups in Latin America repeatedly see is the tension between GovTech startups and the state regarding how technology is acquired. If this dilemma is not resolved, it will be difficult to have a prosperous and sustainable GovTech market. GovTech startups want to have a product, not be a software factory or a service company. Having a product is what will allow them to scale and, therefore, be attractive to investors. Technology companies that sell to the government have always existed, but companies with specific products for this sector are much more recent. That is why governments are not accustomed to dealing with companies that offer specific products for the public sector. For years, governments have been accustomed to hiring tailor-made software, which means they have a hiring culture that is difficult to change. In addition, in general terms, Latin America lacks standards that allow governments to provide digital services similarly, so each government has its own rules and needs. If we want to foster the ecosystem of small GovTech companies and startups, we must change the mentality of "made just for me."
There are significant benefits to moving to a product procurement model. First, tailor-made developments are 10, 50, or even 100 times more expensive than specific products for the public sector. Therefore, contracting specific products for the public sector can significantly reduce costs for governments. Second, product procurement can reduce implementation times since tailor-made developments can take one to two years or more to reach a stable product with the required functionalities.
In addition to the tension between GovTech startups and the government over control of systems, there is also tension over new business models for startups: on-premise vs SaaS. Governments are afraid of being locked into a single vendor, a completely understandable concern given history. However, today there are other ways to avoid this problem that do not depend on delivering source code or installing the system on their own servers (typical of the custom development model). Governments can establish contracts that guarantee interoperability, portability, and service continuity, which means that SaaS providers do not have to deliver the source code. Initiatives such as GovStack are moving in this direction. We need to agree on standards or "best practices" between startups and governments that allow companies to scale and governments to avoid being trapped by low-quality providers. Part of the government's technological legacy is due to bad vendors who have "imprisoned" them or custom developments that the government has not been able to maintain.
There are tools or methodologies to resolve this tension. One of them, in my opinion, the most necessary, is for governments to generate sandbox testing of new solutions. Sandboxes are controlled spaces that allow both the public sector and the government to test new solutions on real processes, with real databases, in order to achieve a Product Market Fit a little faster. For example, what if governments generated innovation sandboxes on digital identity systems, electronic files, or single windows? Startups could test new developments and innovations (following certain rules), and governments would have an offer more in line with their particular needs. In addition, it would be possible to reduce the time (and complexity) of changing one provider for another, since the new solution has already been tested in a real environment.
In conclusion, it is important to overcome the tension between GovTech startups and the government so that the GovTech market can thrive. Although there are significant challenges, there are significant benefits for both sides in moving to a product contracting model. If we all overcome this tension, the GovTech market will be able to offer innovative solutions that improve the lives of citizens. Bizkaia GovTech has been an ideal space to raise these types of dilemmas facing the ecosystem. It has surely been the first of many encounters, in a nascent but necessary sector if we want to reinvent the Public Sector of Ibero-America.