Sunday, March 27th, 2011

Why Is Government in This Business Again?

Pretty much every level of government is broke is about right now. So hard questions are being asked about what services are essential for government to provide, whether anyone wants to be asking them or not.

One thing that needs to be looked at is different ways of structuring the way the government does things in order to leverage the capabilities that the market can bring to bear today in ways that would not have been possible before, particularly in the realm of technology, where the time is ripe for this.

Thinking about the city as platform concept, the model is that rather than having the government directly provide the entire service stack, it only provides the platform on which private enterprise delivers a lot of the value.

Think about CTA bus tracker for example. This is a very cool app that lets you find out when the next bus is coming in Chicago. It’s more or less a necessity now in an era of service reductions.

After the CTA put out this application, someone reverse engineered the protocol to determine the API that would allow third party applications to tap into the bus tracker data. At that point the CTA opened things up and published an official API.

I think this sequence illustrates an important point at about the traditional way of thinking, which is that the government provides the integrated service stack top to bottom. The ability of others to tap in at any layer other than the top was added later. But imagine if the CTA had designed bus tracker as a platform up front? If it had done that, it may never have needed to design the end user application in the first place. Others may have built the app for them. That could have saved the CTA some money.

This is sort of the type of model I’d like to see start evolving. Get the government out of the service layer, where it isn’t very good anyway. While bus tracker isn’t bad, most government web sites suck out loud. The Cook County Treasurer site where you pay your property taxes doesn’t even work with Firefox, for example. The Illinois Department of Employment Security notoriously only works with Internet Explorer. The private sector is much better at deploying technology, and certainly much better at finding the types of applications that will actually generate value to users and delivering that in an intelligent way.

A great example of this in my view is the IRS. They probably do still have their own e-file site, but they’ve also got a system other providers can tap into. This lets people like Intuit with their Turbo Tax product deliver a superior interface and make it easier and better for taxpayers to comply with their obligations.

The CTA’s open fare media project is a great step in this direction. They asked themselves what they were doing in the proprietary payments business, and came up with the answer that they shouldn’t be. They are looking to leverage all the same payment technologies used by everybody else and simply get out of that business.

Maybe government agencies will always need some sort of an official web site for various things, but to the extent that more and more technology (and potential other matters as well) can simply be devolved to the private sector, which is better at it anyway, money can be saved while delivering a superior citizen experience.

Topics: Public Policy

13 Responses to “Why Is Government in This Business Again?”

  1. TriMet’s TransitTracker service has been open source/open data pretty much from the get-to. And yes, lots of third party apps, including Google Transit, use this to great advantage.

    But the big advantage to open source/open data is not the ability to leverage the “private sector”–but to a) leverage volunteers, who will create useful things for free, and b) to prevent monopoly of public data by rent-seeking private businesses.

    And the Firefox issue is an example of what happens when rent-seeking private enterprise (in this case, Microsoft) is allowed to get their meathooks in. Microsoft tried–and nearly succeeded–in “capturing” the world wide web by designing nonstandard features and protocols into Internet Explorer; technology (chiefly ActiveX controls) that aren’t supported elsewhere (and with good reason–ActiveX is a well-known security risk). MS failed in this attempt (though nowadays there is renewed concern about proprietary portals like Facebook and hardware vendors like Apple attempting to achieve similar levels of lock-in), but a few legacy sites still use MS-specific technology, often simply because they were sold a bill of goods and its a) too expensive for them to switch, and b) they have a captive audience, so there’s no motivation. Not all of these websites are in the public sector, either–my wife is a real estate agent, and there are a few professional websites which she uses that are IE-only (she uses Firefox otherwise) and for which there are no reasonable alternatives.

    I must also protest slightly to the whole “government is broke” line. The government is us, Aaron–and if we the people decide not to fund the public sector adequately, often due to the fear of capital flight, that’s our problem.

  2. Danny says:


    Of course we ultimately decide how to fund the government. But the increasing cost of government still puts strains on our well being. If wages aren’t increasing (they aren’t), and the government is costing more and delivering less, we are all worse off. Paying more isn’t always the fix.

  3. Andrew says:

    There is certainly reason to question why government is in the business of providing full end user experiences, but in part this is because government has to offer to all and be open. Not everyone has a smart phone (or an iPhone for an App that isn’t written to Android, or Blackberry, or…), not everyone can see, not everyone can hear. Government needs platforms that address all of these needs, companies do not.

    Companies are not government, and government is not a company. A company’s goal is to make money (this is ok, just the nature of what it is). What if instead of offering press releases on its own web site, the White House offered it just through news outlets?

    So we must have open data and platforms that allow businesses to develop, but we also need free access to information for end citizens, not just through a company.

    On a similar note, why do taxpayers pay again and again for the same platforms to use to do day to day business, instead of government designing and sharing it (think: budget systems, pubic safety dispatch software, even transportation systems). Outsourcing whole platforms sounds great, until you keep paying for it.

  4. Andrew, that’s a noble aspiration, but a) we’re broke, so cuts are coming regardless and b) the government doesn’t provide this in any case, which is amply illustrated by the fact that you have to be an IE user to apply for unemployment online in Illinois.

  5. Brennan says:

    A couple weeks ago the IBJ reported that the city was launching a new iPhone app that would allow residents to report potholes and other problems. They took a beating in the comments because they used a firm headquartered in Dayton, OH to build it (although this firm has an Indiana presence), and the cost for such an app was on the high side. (

    At the time, I wasn’t so concerned about this one app, but the lack of a larger strategy like the platform strategy you lay out here.

    Unsurprisingly, NYC seems to be way ahead of the game here with their Data Mine and Big Apps competition (

    Indianapolis could do the same thing and not only have great new products for its citizens, but also support a nascent tech community. They’re always asking how they can help the tech community. The answer isn’t to give us more money, but to give us a bigger stage.

  6. Alon Levy says:

    When you’re broke, do things more cheaply. This means in-house – consultants take extra cuts of the money, outsourcing leads to rent-seeking, etc. This is especially true for tracker apps, which require public infrastructure in order to tell where the buses and trains are.

    A more complete answer is that technology is rarely a major cost for transit agencies, and can be a source of revenue when used right. For example: in Hong Kong and Tokyo, the transit agencies make a lot of ancillary revenue from licensing their smartcards as anonymous electronic money. (JR East actually developed Suica in-house; the MTR developed Octopus by sourcing each component to a different company and keeping ownership of the end product). In London, New York, and Chicago, they’re instead trying to tap into PayPass so that MasterCard can reap more profits – and because they still need their own cards for people who don’t have a credit card, they’re not even saving money.

  7. Alon, in the private sector outsourcing saves tons of money. Often it is in effect guaranteed in the contract. What I’m talking about isn’t necessarily outsourcing, but there’s no reason government can’t do that. Of course rent seeking is a concern with public decision making, but that’s true regardless.

  8. Alon Levy says:

    In a recession, though, the outsourced contracts are the first to go. What I’m familiar with is the language learning business, which is cyclical – in a recession, corporations stop paying for English lessons for their employees.

    Rent seeking is especially egregious when there’s a private interest that gains from it. For one infamous example, the private prison industry’s lobbying for lock ’em up laws is a huge problem in states like Arizona, eclipsing the prison guards’ unions.

  9. Attrill says:

    I think the main thing that is needed from government bodies is providing open access to data and a standard API with basic documentation. I agree that there are places where the private sector can step in and provide a better interface, but not in all areas.

    Government entities face some unique issues in dealing with technology. Government employees get paid less in exchange for stability, but a healthy tech company needs a regular infusion of fresh blood to stay current and innovative. Many government agencies were actually on the cutting edge of technology in the 70’s and 80’s, but that means they are now saddled with out of date technologies (i.e. Cobol databases) that are expensive to upgrade. There are also political considerations, and some politicians do NOT want to make some information transparent easy to access. Private sector companies would (and do) find it very hard to work with these problems/restrictions, and charge Government agencies accordingly. I work for a company that builds online applications, and we have chosen to stay away from Government contracts due to the unique issues they present.

    I also agree that there is no guarantee that contracting out work will save tons of money. As Alon states – there needs to be a profit in it for a private company to take on a job, so there is a built in cost right there. In a BEST case scenario that means taking wages or retirement benefits from government workers and giving it to investors and banks instead. In a worst case scenario it means paying more than it would cost in house to cover kickbacks along with paying profits to investors. When talking about outsourcing it is important to remember that the most egregious wastes of public funds always involve private contractors with connections to politicians.

    In Chicago there are a number of examples of this happening with websites. The most well known is the new Metra site. Metra paid $2.5 million for a website that should have cost a quarter of that (and it doesn’t even have schedules that can be read on mobile devices). In comparison, The City of Chicago rebuilt it’s entire website internally (with contracted design work) for less than half that – and it is a MUCH more extensive site, with scores of forms, applications, and thousands of pages of information. Looking at those two sites I find it hard to believe that contracting out work is always the better choice.

  10. John Morris says:

    It does seem like once in a while a core competency can develop. I don’t know much about NYC’s 311 system like if they handle it all, but it does look like they run it pretty well and could perhaps do this for other cities–advise on infrastructure etc..

  11. Adam says:

    Yes, “we” are broke. If “we” encompasses a vast majority of the country, but the top 1% are still raking it in.

  12. I’m not sure I can agree with the basic premise that governments at all levels are “broke”.

    They’re not all broke, and many that say they are appear to be broke because their revenues have atrophied by political choice, usually via the race to the bottom many cities and states are engaged in with the offering of tax abatement to companies.

  13. Jason Mann says:

    I have to agree a bit with Alon and Andrew, who, I think, are indirectly pointing out that Aaron’s main premise is really an ideological one–the market will solve everything; we know the storyline: governments are slow-bureaucracies who don’t understand markets and the private sector is a world of nimble, creative developers, totally open to competition and market forces. As usual with these economic-based analyses, the real world is a little more nuanced that that: black-is-white and white-is-blace.

    Aaron, in general, is right, government data API’s are the more correct way to go, but he’s missing out that the market itself needs to be created first, and government agencies need to sometime spend some money to help that along. AND, part of that money they need to spend is to actually break-up bureaucratic monopolies that have been created by the “private” sector (call it rent-seeking–whatever).

    What a lot of folks don’t know is that this very sector, transit tracking systems, have been held hostage by some patent-troll companies over the last decade, and it was some government agencies, particularly the Portlands and Chicagos, that helped bust some of that open–but they had to “pay” to get it done.

    And I think one problem here is that Aaron has bought into, hook-line-and-sinker, a storyline in Chicago that some local avant-guard developers screen-scrapped the initial CTA’s BusTracker website and got the CTA thinking about an API. It is my understanding from meeting some of these people at conferences, etc. over the years, that the Chicago folks (and the Portland folks, for that matter), knew fully well their sites would be screen-scraped; but they HAD to put out their own sites to 1) create the market for their data; and 2) to give backing to private sector IT transit companies to be willing to make the investment into transit information systems, else be sued by these transit trolls.

    The storyline Aaron cites only exists because the screen-scrapers in the CTA case happen to have personal connections to a local transit blogger who has repeatedly put-out this story that Aaron has then picked-up on.

    The IT department at Trimet Portland are the ones who should get the credit for pushing the idea for open government data. But to do so, is to blow-open the idea that governments don’t have anything to do with market creation.

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