Understanding IT Investments in the Public Sector: The Case of E-Government

Prompted partly by the legislation of the Clinger-Cohen Act of 1996, public sector agencies are gradually adopting a more value-oriented approach for making IT investments. In order to comprehend this relatively new phenomenon in the public sector, we propose a conceptual framework that points out the types of value that matter in government IT investment decisions and explains what factors generate value in this context. Our framework suggests that three factors affect public sector IT investment decisions: the value of the IT solution at the initiator level (i.e. government agency), the value at the adopter level (i.e. taxpayers, lawmakers or other government agencies), and the IT risk. The IT value at each level, defined in both economic and political terms, is influenced by the political mission of the government agency. Our framework advocates that power-shifting process changes that accompany the IT investment increase both the IT initiator value (by streamlining its processes) and the IT adopter value (by enhancing their efficiency and control on the process), and decrease the associated IT risks. We test the framework with three case studies of investments in egovernment solutions for grant application and processing. Our analysis shows that power-shifting process changes positively affect perceptions of value, reduce the associated IT risks and subsequently translate into IT investment decisions.