Implementing the OZG: the German public sector is still undergoing fundamental change, offering long-term opportunities for IT providers

With the Online Access Act (Onlinezugangsgesetz, OZG) of 2017, Germany set the goal for public administration to make all public services accessible via online portals from 2022. In 2023, it is obvious that this goal has not been reached, and there is talk about a successor, OZG 2.0, so to speak.

Public service digitalization is an ongoing uphill struggle for German public authorities. The increased use of IT and electronic media in government and administrative processes aims to support the flow of information and improve communications among authorities and between authorities and citizens/companies. Examples in Germany include online tax returns, the implementation of digital tendering procedures for public contracts, IT consolidation at the federal government, and register modernization.

Digital transformation processes that impact society and the economy, efficiency requirements in the public sector, and a retirement wave in public authorities are driving demand in Germany. For example, the EU-wide introduction of digital processes could generate annual savings of more than €50bn and benefit taxpayers.

To meet the needs of the German public sector, IT providers are enhancing their offerings. Big international players have always invested in this safe industry. For example, Kyndryl Germany plans to be much more active in the public sector in the medium run. It is specialized, German players, though, that benefit from mutual trust and the competitive advantage of sharing the same values. Materna, a Germany-based IT services provider, is a good example of a company assisting German authorities with their needs: it has an end-to-end portfolio ranging from consulting services to software development and implementation to managing applications/workloads. Materna covers specific topics (e.g. barrier-free access), vertical aspects (i.e. the specialized procedures specific to the public sector), and horizontal solutions (e.g., electronic filing) in line with current public sector initiatives (e.g., the national legislation transposing the EU Directive 2016/2102). Materna's strategy is paying off and is in tune with current needs: with group revenues of EUR 433 million in 2021, a 22% increase YoY, the company is one of the specialists in providing IT services in Germany. The business unit dedicated to this specific industry alone contributed over 30% to revenues, and a third of the staff of the group worked for this vertical in 2021. PAC expects the company to continue honing its image and to benefit strongly from the current trend.

Where can we draw a line? It is worth remembering that public service modernization not only refers to the technological support of government work, but also to a process that has to go hand in hand with fundamental changes to how tasks are performed, how the organization is set up, and what the culture of public administration looks like. Public authorities are facing a lot of challenges in terms of changing responsibilities and processes, shaping digital change, and involving and supporting their employees through a more flexible and digitalized work environment that fosters collaboration, interaction with citizens, and work-life balance. At the same time, the public sector has been rather slow to adapt to change. From PAC's point of view, only cooperative and collaborative methods can translate the best ideas into solutions, broaden pilot projects, and consolidate the large variety of solutions. In addition, agility needs to become the central IT approach in public administration in order to ensure the quality, flexibility, and speed of services in the long run.

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