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Innovation is changing the way governments interact with citizens and businesses. The driving force behind these changes is the growth of the GosTech industry – technology solutions specifically designed for government purposes.
About the expert: Alexey Solovyov, venture investor, founder of A.Partners investment company, venture partner at Skolkovo Ventures.
In terms of digitalization of public services, our country is definitely not lagging behind – now our country ranks 32 in the UN EGDI e-government index and is among the leading countries. However, the challenges of the pandemic have shown the need for mass digitalization of interaction between the state and citizens, digitization of healthcare, state security, transport, logistics, taxation, and business relations.
GosTech in the West
GosTech implies the development of technological solutions for various areas: such projects can take on the modernization of the provision of public services, make public administration more efficient, and reduce the technological gap between the state and other areas of life.
Solutions of the classical definition of GosTech are divided into two areas:
- for the effective provision of public services to citizens (solutions for external users – end users);
- to improve the management and interaction of state mechanisms among themselves (processes within the state “machine”).
The governments of many countries have become more active as customers of such technologies, making the State Tech sector one of the most profitable on the horizon of three to five years.
According to an Accenture report, the global market for State Tech was already estimated at $2018 billion in 400, and by 2025 it could reach $1 trillion.
GosTech start-ups appear on foreign markets every year, and there are already a number of cases where private companies successfully develop with venture capital money and become providers of technological solutions for the state.
The cost of such solutions in Europe alone is €22 billion. The US is also actively investing in State Tech. The US government launched a federal digital transformation program that allocated $500 million in 2018-2019.
Analysts combine GosTech segments into conditional four groups:
- e-government and e-government services;
- “smart” city;
- the safety of citizens;
- public administration.
Drivers of the GosTech market in our country
In our country, it is worth defining this market through the prism of customers who form the demand for GosTech+ solutions. There are three categories of customers:
As for the first two groups of customers, the issues of digitalization of the state are intended to be solved by the national project “Digital Economy” until 2024, for which a budget of ₽1,8 trillion was allocated.
The demand for GosTech solutions in our country is also confirmed by plans for the digitalization of various departments: the Ministry of Internal Affairs asked for ₽55 billion, the Federal Penitentiary Service – ₽25 billion, and the Russian Guard – ₽10,8 billion in 2021-2023. For example, the National Guard plans to spend ₽6,7 billion on supporting the existing infrastructure and launching new services (for example, converting public services into electronic form, connecting 50% of the National Guard to electronic document management).
In the case of state corporations and companies with state participation, the basis for the development of GosTech + is the course towards import substitution. State-owned companies are already switching to domestic software. For example, Rosatom is ready to spend ₽820,2 million on operating systems and their support. The corporation plans to switch to Astra Linux OS. The Pension Fund also decided to adapt the module related to electronic signatures and encryption to work with domestic Astra Linux operating systems.
At the beginning of 2021, the Ministry of Digital Transformation published a new draft decree on the transition of critical information infrastructure (CII) facilities to the predominant use of domestic software and equipment. It is necessary to introduce Russian software before January 1, 2023, equipment – before January 1, 2024.
The need to create domestic platforms in different segments can be justified by the growth of sanctions (for example, Microsoft did not renew the license to purchase software for the Bauman Moscow State Technical University) and the requirements for data processing on servers located in the Russian Federation. Due to these requirements, for example, such video conferencing services as Zoom and Google may become unavailable for use by Russian state-owned companies, which is pushing the state to become a customer of its own video conferencing systems. Rostelecom and Mail.ru have already announced the launch of a video communication service for schoolchildren to be implemented in Russian schools.
The state is increasingly acting as the customer of IT solutions. Thus, the KSOR company introduced an automated system for non-contact monitoring of the driver’s condition based on computer vision for Mosgortrans State Unitary Enterprise, which helped to reduce the accident rate on public transport in Moscow by 26%.
Russian Railways, which operates about 500 information systems, has implemented robotic solutions from the RPA ROBIN platform. At the end of 2020, more than 1000 such solutions were put into operation in the company, more than 980 operations were automated with their help. At the end of 2020, robots processed 500 thousand requests from users of Russian Railways information systems.
Who are the doors open for?
In our country, the GosTech industry is rather developing according to a “closed scenario”, when the necessary technological solutions commissioned by the state and self-government bodies are developed by large IT companies, vendors within the government on exclusive terms.
At the moment, the market is based on the collaboration of the authorities with large technology companies such as Yandex, Mail.ru Group, Kaspersky Lab. The market will grow, but most of the budgets allocated for digitalization will be mastered by the largest IT vendors: domestic software manufacturers have already quadrupled their sales in 2020.
So far, startups have nothing to count on, because it is almost impossible to enter a large state order for the development of a particular platform.
For example, Sberbank won the tender of the Ministry of Digital Transformation for the creation of a unified state digital platform GosTech (the company was the only participant in the competition, Rostelecom and Post to Our Country refused). The platform should become a single environment for all IS from different vendors.
If a small company manages to touch such an order, then only if it is part of some large system of such a project. Each such complex project commissioned by a large state-owned cross-platform consists of many components that can be implemented by startups that currently have the most advanced solution.
Conditions for the growth of the market in our country
The GosTech+ market in our country will reveal its potential under several conditions:
- Proposal of new technologies from startups
The development of parts of large projects can be done by private technology companies and startup teams, but their product must be a new strong technology. Paying fines, registering at the MFC, creating applications are not the most difficult parts of such projects. Such large-scale tasks as user identification, security of personal data, synchronization of information bases, data storage and backup have not yet been solved. Startups should focus on the development of technological solutions embedded in large systems, taking into account the need for data processing, analysis, forecasting on a national scale in order to be able to become the leader of the national market and get the largest customers in our country.
- Increase in speed and flexibility
The GosTech+ market is always characterized by a small number of customers and a very long sales cycle. It is difficult to implement an advanced solution, unless the approval process takes months of bureaucratic work.
- Implementation of the M&A tool by vendors
A positive scenario for the development of the market for government customers and suppliers represented by IT giants, as well as for domestic startups and their investors, is the search for a point of intersection of interests. The answer to this challenge is the use of M&A – the purchase of technology start-ups by large companies. Sberbank, Mail.ru and other corporations have been implementing a strategy of mergers and acquisitions for several years, which has a positive effect on the development of the market for innovative entrepreneurship in our country. Through work with vendors, technology startups will be able to get customers in the face of government customers and offer the best solutions for the digitalization of all the services that we use every day.
- Implementation of the course for import substitution
The transition to such a policy is, on the one hand, an opportunity for domestic companies to offer their solutions for large-scale government and corporate tasks. On the other hand, it is a risk that the course may change in the future. I would consider the current situation as a chance not to fall behind and catch up, but to come to the forefront and make solutions better than the existing ones.