Govtech: an Unexpected Push to Mexico’s TransformationBy Jesús Cepeda | Tue, 08/25/2020 - 13:52
“Everything you’ve read about Mexico is true: drug cartels, crime syndicates, government corruption and weak rule of law hobble the nation” wrote Thomas L. Friedman in The New York Times back in 2013. It was just months after receiving my PhD in Artificial Intelligence from Tecnologico de Monterrey. I remember having mixed feelings while reading, getting such a degree from such an institution is an immense privilege [ref1] but how can I feel any sense of accomplishment if this is how my country is described internationally? I realized I was missing something, we were missing something.
“But that’s half the story”, continued Thomas L. Friedman in the same publication he titled “How Mexico Got Back in the Game”. In his article he shares an opinion about technology I was developing that was empowering citizens and authorities with timely data, opening a window towards ‘democratizing democracy’. In other words, unknowingly Friedman was stitching together my privilege and the missing part. This writing is about that missing half, about the journey of a rising industry now known as Govtech.
Some people say the word “govtech” has an original meaning of “technology for the public”, others say “is public sector modernization putting people first”. Others even interchange govtech with civictech, I believe there is a clear distinction. The latter includes interactions only between citizens, while the former includes citizens and public administrations. Semantically, every govtech effort includes civictech, but not the other way around. In essence, govtech is about making the public sector more innovative, agile and technologically functional.
This is the world I got immersed into since 2013. Unknowingly, I was stepping into an industry that wasn’t broadly accepted up until recently. Even today with the rise of technology startups and the thousands of accelerators around the world, people talk about B2B or B2C businesses, but very few talk about B2G and the huge opportunity behind. I guess I understand why, this industry has a business dissonance. On one hand you want to make the customer (government) more agile, but to do so implies you’re able to survive that lack of agility - actually that is today’s most pressing problem for the public sector, they’re living a crisis of institutional agility. On the other hand, the ones able to stand up to the challenge are companies providing legacy tools, which is exactly what you’re trying to modernize if you do govtech. I mean, how many innovative startups with an average lifespan of 20 months can survive a typical government buying cycle of 18 months! Or, how many VCs understand there is an industry where the definition of MRR (monthly recurring revenue) simply does not exist? It’s a harsh world, maybe I haven’t immersed in it, maybe it pulled me with its strong dark forces, but believe me it is one of the most promising industries today.
For context, here are some numbers about the Govtech industry potential, in 2018 capital investments raised by top 100 companies in the US was $358M USD, globally it was +$2.9B USD. The global market size that year was considered a +$400B USD opportunity with a compound annual growth rate of 15%. This means that pre corona times, the business opportunity for making the public sector technologically functional was expected to surpass a market size of $1T USD by 2025. What do you think is happening during corona times? What can you forecast for “the day after”? I hope you’re sharing the optimism I feel, if any curve has flattened it has been the evangelization curve, now public decision-makers have no need for an explanation or solid argument when it comes to thinking digital, to promote the use of data and technology as enablers of effectiveness, efficiency, and transparency in the provision of public services. They now understand the need to go from paper to paperless to contactless. The customer now gets it, what is more, the customer is learning the hard way as I’m writing these words. And you know what? Beyond the great business potential, it’s an underserved market, essentially because of the business dissonance I’ve explained before. There is an emerging wave of govtech startups and international funding, but it’s an industry still without a clear lead. It’s a fertile global field with few seeds, and it’s more attractive if you think about Latin America, and even more if you think about Mexico.
I’ve said that making the public sector more innovative and agile is a growing and attractive opportunity for making business and fostering economic development. Mexico, according to the Development Bank of Latin America ranks 5th with a 5.2 score (out of 10) in what they call the “Govtech Index” [ref2] just below Spain (6.6), Portugal (6.2), Chile (5.3) and Brazil (5.2). The index quantifies 28 metrics across 7 dimensions grouped into 3 pillars: startups, governments and public contracting. This means that a score of 10 would have a prosper symphony in-between those three pillars, and a prosper field for business: agile companies, agile customers and agile contracting, in other words, cashflow. Mexico’s score of 5.2 means that there’s plenty of work to do but it’s ranked top 3 in Latin America when it comes to govtech readiness. The score depicts a Mexico topping at acquisition frameworks and having its worst at acquisition culture. This says a lot about the need for evangelization, but again, this index was elaborated pre corona times.
What is being done today and particularly from our frontlines out of OS City is to address this opportunity and COVID-19 as an unexpected push towards Mexico’s transformation. Mexico’s readiness, govtech trends, and local talent are all pointing in the same direction, a more technologically functional Mexico, a new approach for economic development suited for corona times and a customer that is living its worst crisis of institutional agility, its most pressing moment to improve efficiency and transparency. We are tackling that push with 2 initiatives to accelerate the govtech ecosystem within the country including technology access by democratizing solutions for the transformation of governments into platforms of digital services, and knowledge access by stitching together industry stakeholders, providing common grounds for innovation, testing solutions, and online events to foster the ecosystem.
In summary, getting immersed in this world of govtech has given me the chance to meet the most innovative startups, governments, and people that can help raise Mexico’s score in the Govtech Index, making it a prosper field for business, economic development and transformation. Next, on September 30th, Foro Govtech Mexico [ref3] is taking place on-line, expecting to gather hundreds of stakeholders within the country to stitch together the local ecosystem and perhaps give birth to that missing lead in the industry. I’m starting to understand that my real privilege has been the opportunity to put my technological background at the service of what today is considered an industry that has the potential both to transform my country and do great business.
“Mexico still has huge governance problems to fix”, concluded Friedman in his article. With this I know that there’s still something I’m missing, something we’re missing. Fortunately we’re now creating it and, mark my words, next unicorns are gonna be of govtech breed.
[ref1] Only 0.1% of 25-64 year-olds in Mexico hold a doctorate, the lowest share among OECD countries. In technology, that’s even a lower number.
[ref2] Zapata, E., Stirling, R., Pasquarelli, W., & Shearer, E. (2020). The GovTech Index 2020 Unlocking the Potential of GovTech Ecosystems in Latin America, Spain and Portugal. Caracas: CAF, Oxford Insights. Retrieved from http://scioteca.caf.com/handle/123456789/1580
[ref3] To give some context, last July took place the regional Foro Govtech LATAM, gathering 1197 stakeholders in the region. You can download the report and see the sessions on video, here.