With smartphones, we now have the ability to monitor our physical activity, purchase plane tickets, and conduct business discussions with colleagues from anywhere in the world. However, when it comes to accessing public services, the process is far from being seamless. For example, in the US, only two percent of government forms have been digitized, and nearly half of governmental websites are not optimized for mobile devices. This gap presents an opportunity for the private sector to offer its products and services to accelerate the process of digitalization.
GovTech is an umbrella term that covers digital innovations tailored to enhance the accessibility and efficiency of government, public administration, and public services. According to recent data, the global GovTech market was valued at USD 480,309.6 million in 2022 and is expected to reach USD 1,199,876.7 million by 2028, which makes it a large market for business.
Statista projects global spending in the sector will top $17.5 billion in 2024 and continue to grow further. This trend is supported by several major deals happening in the sector this year. In March, the San Francisco-based software provider OpenGov generated one of the biggest exits to date for the GovTech sector selling a majority stake to existing shareholder Cox Enterprises at a $1.8 billion valuation. Another GovTech-company Second Front Systems raised funding in January after securing $40 million a couple of months before. In total, Crunchbase calculated 18 deals in the GovTech sector that happened within the last year and a half.
Artificial intelligence
The success of the company depends hugely on the choice of the technological base of their products. Like any other sector, governmental services are increasingly relying on emerging technologies, with one of the most promising being artificial intelligence (AI). In the GovTech sector, AI-based products can enhance customer experiences, reduce fraud, improve risk management, and even promote energy efficiency, among other benefits. They can achieve this by analyzing data and revealing blind spots, automatizing routine tasks, etc. According to Accenture, by 2035, AI could generate up to USD 939 billion in economic value across 16 major developed economies.
There is also a big promise in generative AI. This is a type of artificial intelligence that analyzes data and based on it generates images, videos, music, or text that mimics human-created content. GenAI is considered a go-to technology in the sector, where significant time is spent on routine tasks, such as drafting standard responses to citizens or summarizing data and preparing paperwork like project proposals and reports. According to the National Archives and Records Administration, the US federal government digitized more than 500 million pages of government records by fiscal 2024. No doubt they too will be analyzed and structured by AI.
Currently, the applications of AI vary across different regions of the world. For example, in Singapore, it is utilized to scan the dark web for patterns that can aid law enforcement officials in understanding the illegal drug market. The country also employs AI in its National Digital Identity system, allowing citizens to securely access government services online. In Australia, AI-based technology helps to protect the Great Barrier Reef by analyzing satellite images to detect and respond to threats like coral bleaching.
Overall, according to research from Avanade, the current objective for AI in governments globally is to improve efficiency, with 44 percent of respondents citing this as their top goal. By automating mundane tasks, it’s estimated that workers could save up to 20 hours per week, allowing them to focus on more impactful activities. McKinsey’s analysis suggests that the integration of generative AI can streamline administrative tasks, potentially saving up to 20 percent in costs for the US government annually which is equal to $41.1 billion. Recent research conducted by McGuire Research Services for Avanade indicates that 82 percent of government employees have already started using AI on a daily or weekly basis, while 84 percent of organizations plan to increase their IT investments by up to 24 percent to leverage AI.
VR and AR
Augmented and virtual reality are other emerging technologies in GovTech. When combined with artificial intelligence and 5G capabilities, they can create immersive experiences that enhance workforce development, drive organizational transformation, and improve public engagement. For example, Singapore’s Smart Nation initiative and Dubai’s Smart City project leverage simulations and digital twins (virtual replicas of buildings, transport systems, etc.) to facilitate detailed urban architecture planning, preemptively identify potential issues and assess design flaws in infrastructure management.
In the government sector, AR is used extensively for training purposes—simulating complex scenarios for social workers or medical operations—which promises better staff engagement and learning retention. For instance, medical professionals can practice robot-assisted surgery in a virtual environment to enhance their skills.
Another focus area is 3D technology. Deloitte’s report discusses the use of 3D city maps for emergency planning in the US, enabling agencies like the Federal Emergency Management Agency (FEMA) and the Department of Transportation to simulate scenarios involving weather, traffic, and emergencies. By utilizing 3D maps, agencies collaborate with local law enforcement and healthcare institutions to optimize emergency responses and city planning efforts.
Where to start
When considering market entry, startups must carefully assess geographical markets. Many countries are actively digitizing their public services, but the progress and efforts vary significantly across regions. According to the World Bank’s GovTech Maturity index 2022, which reflects the implementation of GovTech, several countries stand out as leaders.
In Asia, South Korea is recognized for its exceptional IT infrastructure. Saudi Arabia is notable for its ambitious Vision 2030 and strong digital transformation efforts. The UAE excels in smart government initiatives and was ranked highest in the index. Within the European Union, Estonia is known for its advanced digital society framework, and France also ranks among the leaders in GovTech implementation. In the Americas, Brazil leads in digitizing government services, driven by a proactive digital strategy by the government. From my perspective, these countries are ideal for startups to achieve significant success.
