Wednesday, November 05, 2008

Should the government provide online services where competitive commercial sector services exist?

In the past it has been the practice for many governments around the world to avoid playing in the centre of commercial spaces, where competitively priced services are already provided by private businesses.

Government interventions in these markets are managed through legislation and direct intervention as a last resort (in cases of market failure) - as we are seeing in the current financial crisis in some countries.

The philosophy behind this approach is often that in markets where the private sector is willing to provide goods or services, competing on price, options and customer service, it is less likely that a government can add the same level of value.

Instead government concentrates on the 'margins' - situations where people are unable to afford or access the mainstream private sector services.

This, in essence, is how the public housing and unemployment benefits systems function. In both cases there are private sector options (private rentals/home purchase and jobs), while governments provide safety nets for citizens unable to access these alternatives.

Should government follow a similar approach online?

Looking at the online world, the costs and barriers to providing information and services have declined, broadening the range of services that may be offered by private enterprise.

Reflecting this, should governments follow the same philosophy of avoiding playing in commercial spaces, again only focusing on marginalised citizens?

Or should government provide public alternatives to existing commercial services?

This is a big - and highly political - question, which can be seen by the Commonwealth government's stance on internet filtering. While there are many commercial products available (from retailers, ISPs and online) including both charged and free services, the government is pursuing an approach of providing its own products, licensed from commercial providers, to ensure availability.

Similarly, should government provide 'web infrastructure' tools such as geospatial services, when large commercial organisations are already providing these services?

Geospatial services are a case in point.
We've seen the WA and QLD governments roll out their own public geospatial services specifically for their own state use, with the Commonwealth soon to follow suite at a national level via the AGOSP program.

These services provide similar functionality to both Microsoft and Google maps, and in fact Perth's public transit authority has its timetables available in a Google maps beta (but not in the state's own geospatial service).

Equally, for search, the Commonwealth government licenses the FunnelBack search technology, designed in Australia by the CSIRO, for use in and other sites (including the CSA website) rather than implementing Google's free service, as the US government has done.

In both these cases governments have followed a competitive tendering process to select the technology that best met their documented needs. The solutions are also under the control of Australian governments, rather than being owned and operated by foreign owned companies.

However, as demonstrated by Sensis this month, as reported in the SMH's article Sensis concedes defeat to Google, sometimes where the market is going is also important.

Sensis is discontinuing its Yellow Pages search and maps technologies. It will instead rely on Google to provide both services. As Google search was reportedly used by more than 7 million Australians per month, rather than the 184,000 who used Sensis's search engine there's clear commercial reasons why Sensis would want to stop sinking funds into trying to keep up with Google and instead leverage Google's audience.

Is this a valid choice for government?
Rather than custom developing or tendering for services that copy publicly available (and generally free) online services, should government agencies 'piggyback' instead?

This is a hard question to answer. Various Australian government agencies already piggyback on publicly available services - such as MySpace, SecondLife, Youtube and Google Maps.

On average Australian government websites get 25 percent of their traffic from Google search (based on Hitwise's statistics) - far outweighing the level of traffic from the central state or Commonwealth gateways.

On this basis, Australian government is already piggybacking on publicly available commercial services - and highly effectively.

However when introducing its own internet filters, customised geospatial services or search tools, Australian government is choosing to not piggyback - taking on the burden of building usage and investing in the ongoing development of new features to remain current with the commercial market.

I'm not about to venture an opinion on whether or not governments should follow this route, these decisions may be made for reasons of national security, flexibility or specific public needs.

However the options should be carefully considered by the initiators of these projects.

The decision to 'go it alone' needs to take into account the competitive landscape.

What alternative services are available for citizens - which do online audiences already prefer and why?
Why should citizens choose the government alternative and will the government's service deliver the outcomes citizens desire?
Is the government prepared to invest in continuous development? Or will the service fall behind commercial alternatives?

Without a full consideration of these factors, like Sensis's failed mapping and search service, these government offerings may not, in the longer-term, deliver the benefits desired.


  1. Craig - two references are useful. Gartner vision of the emerging midoffice, based on web services. see
    The second, more "civic" analysis, is from US scholars: Government Data and the invisible hand. see

  2. Hi Craig - an interesting article. I wanted to make one correction. Sensis is not discontinuing its Yellow website ( nor its online mapping site ( The agreement with Google means that from 1Q 2009, business listings from our Yellow website will be available on Google Maps ( This provides an additional channel to make our Yellow content available to people looking for a local business. Hope that helps. Steve

  3. Osimod,

    That Gartner report is fantastic - will be blogging about it shortly.

  4. Craig - I agree with the principle of your argument. However not that the US Government has not implemented the free google search - they use the MSN public index with enterprise search Vivisimo over the top of it (see The US Gov Google index is something that Google has built to demonstrate they could do it and constrain their search. The US, like Australia, went to market for search and Google did not participate (in either). As you note their are lots of Google conditions that raise issues about using the Google public engine for governments.