With the establishment of the Ministry of Digital Transformation in 2019, the GovTech direction in Ukrainian IT has been rapidly developing, with new players actively entering the market. Kitsoft's CEO, Oleksandr Iefremov, answered DOU's questions about the market's features and prospects and how it differs from abroad. We publish the main theses from this conversation.
What is GovTech?
GovTech (Government Technology) is an IT industry domain where private or state enterprises create technological solutions on the state's order, thereby improving citizens' access to public services and simplifying their interaction with the state.
Kitsoft has been developing and implementing digital transformation products for 15 years and created the Diia portal for the Ministry of Digital Transformation. Oleksandr Iefremov notes that the Ministry of Digital Transformation brought a vision of a completely different GovTech — one that meets the needs of society and implements projects according to modern standards.
Who Represents Ukrainian GovTech
The Ukrainian GovTech market has significantly increased in the last 2-3 years and continues to develop. The main market participants are the following:
-
The Ministry of Digital Transformation, which is the trendsetter for GovTech in the country;
-
Central governments implementing digitalization policies;
-
Donors who have expertise and fund a large number of projects;
-
Municipalities that lead digitalization projects (among them, "Kyiv Digital" stands out);
-
GovTech companies — consultants and contractors in various fields, including business analysis, development, cybersecurity, etc.
The market structure is also changing. Whereas state procurement used to dominate, there is now more donor funding, making projects more flexible and higher quality. International donors bring, besides money, a higher level of project management. In addition, with the establishment of the Ministry of Digital Transformation, certain standards and approaches have been implemented, contributing to a faster development of state digitalization. Diia — a mobile app, a web portal, and a brand of e-governance in Ukraine — in this case, is the flagship.
About Features and Prospects
The Ministry of Digital Transformation became a model of strong customer and product leadership in Ukraine. In recent years, it creates a large number of products and, with donor funding, orders their development on the market.
Therefore, in the GovTech domain, even those companies that previously did not look at this market are starting to work today. For example, most large Ukrainian outsourcers are doing one or another GovTech project. However, due to the market's specificity, not everyone succeeds.
GovTech projects require more of a product approach than an outsourcing one because few state bodies in the country have a truly strong product manager. In such a case, the service provider must provide leadership and management.
The IT infrastructure of state services is also changing. It now represents a set of ready-made tools that can be simply reused. The same identification services ID.gov.ua, the infrastructure of electronic signatures, including Diia.Signature, Diia itself as an identification and document sharing tool, Trembita as a system of interoperability and electronic interaction of different systems.
The growth of the GovTech market is expected to continue, provided that the policy regarding the direction of state digitalization does not change. Among the most relevant projects are further digitization of state services, the MilTech direction (creating products for the military), and SmartCity - digitizing services provided by municipalities. Combining GovTech with Web3 (blockchain) technologies can create additional value and strength for the state.
How our GovTech differs from foreign ones
Today, the Ukrainian market is still tens of times smaller than the level of Western countries. Unlike Ukraine, they have significantly more service providers who often directly support key state services and own them, while the state rents them as a service from the developer company.
In Europe, not only development but also the service part of the market is actively developing. If the implementation of Diia ecosystem products allowed us to leave other countries far behind, in terms of the overall level of project and service management, Ukraine still has a lot to learn and develop to reach the level of Western countries.
— says Oleksandr Iefremov, CEO of Kitsoft.
Challenges of GovTech in Ukraine
Since the public sector has its procedures and requirements for approving stages, this can create difficulties for planning and financing projects. Bureaucratic procedures and the specifics of document flow also pose certain challenges and slow development.
The relatively low level of salaries for IT staff and project managers in the public sector results in a relatively low level of professionalism of project teams from the customer's side. This requires additional efforts from the company for effective communication and management of such projects.
Another common opinion about GovTech is that the industry is corrupt. However, with the arrival of donors and the systematization of projects, corruption now influences no more than in the corporate sector.
As for the cost of state IT projects, it is incorrect to compare the budgets of GovTech projects and small online stores. It is more appropriate to compare the cost of developing state IT systems with banking systems, insurance companies, and the large corporate sector. If we compare the required level of service, risks, transparency, and business sustainability working with the state, then the project budgets are entirely justified.