Theoretical framework chapter is aimed at collecting appropriate literature findings related to the fol-lowing three fields which together build theoretical background for further empirical study: PSIs, OSSs, and BM. PSIs are treated as middle size organizational units which provide social services but neverthe-less play the role of business agents at market building their relationships with companies and citizens, selling and buying services and developing their own business strategies to perform efficiently. OSS is studied from European perspective to provide better understanding of its effects in Swedish PSIs. Investi-gation of BM includes different perspectives among which value based BM and OSS based BMD.
As it was mentioned earlier in the paper, current study is an inductive research which means that theories will be built upon collected and analysed data and then compared to already existing conceptual knowledge about the subject of interest. Thus, section Theo-retical framework presents those very findings which will be the base for final compari-son with achieved results. As Bell (2005) points out it is very important to be clear about the following parameters of the literature search: language of publication, subject area, business sector, geographical area, publication period, and types of literature. Lit-erature selected for current analysis has the following parameters:
Language of publication – English, Swedish;
Geographical area – European Union countries (preferably Sweden), USA;
Subject area – government, management;
Business sector – public sector (mostly), consultancies and developers;
Publication period – since 1990s;
Literature types – books, articles from academic and professional journals, the-ses and other academic papers.
For the purpose of current research study, literature search is conducted using two main tools: university library and the Internet in order to collect information from both print-ed and on-line editions. Internet becomes especially important when it comes to search-ing e-articles published in electronic academic and professional journals, for example International Journal of Public Sector Management.
This part of the paper is devoted to one of the sectors of governmental activity where OSS based BM is supposed to be applied after its development – public sector. Specific features and tendencies in development of public sector organizations will be consid-ered as well as the main outcome of their work activities – public services. The focus is on managing local authorities‘ activities and IT-based performance of PSIs. One of the sub-parts is entirely aimed at describing specific features of public organizations in rela-tion to political and socials aspects of Swedish public sector environment in order to strengthen theoretical background with nationally conditioned peculiarities of Swedish PSIs necessary for further work with Kivos phenomenon. The main focus of current paper is made on local (municipal) governance since desired business model should be developed for further use at Swedish municipalities which are represented by thirteen communes included in Kivos group. This part starts with general description of public sector organizations and their management in order to provide comprehensive under-standing of the concept.
Public Sector Institutions (PSIs) might be considered as an intermediaries that deal with government and citizens producing, delivering, and allocating goods and services at na-tional, regional, and municipal levels. There are certain universal trends apparent in public sectors around the world: public sector organizations have diversified and grown in functions, yet resources everywhere are being threatened. Recent research has acknowledged the importance of measuring organizational success and efficiency, yet measuring of intangible products such as services remains a challenge. Intangible prod-ucts can only be measured through the end-user, whose needs and expectations may vary (Luoma-aho, 2008). From this point of view, PSIs are not alike and their end-user orientations differ in scope and meaning. Some classifications of PSIs on this base have been made by researchers, for example, depending on the receiver of the benefits (Laing, 2003), degree of contact and service charges (van der Hart, 1990), citizens‘ atti-tudes and levels of trust (Rothstein and Stolle, 2002).
Interest in public sector management development in Scandinavian countries has picked up in recent years, although this is not to suggest that they have only recently acquired an interest in public administration (Savoie, 2007, p. 44). Over the last two decades, the philosophy of management in governments worldwide have incorporated private sector management techniques under the general label of New Public Management (NPM) which is difficult to define precisely (Pollitt & Bouckaert, 2000) but can be expressed through at least four key ideas: efficiency, management, accountability and organization culture (Try & Radnor, 2007). These elements represent an ideological shift to ―Mana-gerialism‖ from the previous public sector ―Administrator Model‖, a major change from previous public sector traditions, although Osborne (2006) suggests that a new para-digm of New Public Governance (NPG) maybe emerging which incorporates the plural and pluralist complexities of modern public service management into NPM. It can be argued that one of the central tenants of NPM (and NPG) is an increased focus on pub-lic sector performance (Try & Radnor, 2007).
Public services: quality and effectiveness
What is significant in modern societies is that they are very much the subject of services provided by local and central government. Since no means of measuring these in eco-nomic terms exists, the problem of evaluating the nature and extent of the services to be provided by government is a major and much greater one (Glendinning, 2007, p. 45).
The emergence of the concept of quality in relation to public services can be interpreted in the context of this development of legitimately discourses (Sanderson, 1996). In pro-pounding an alternative conception of public service quality, we need to be explicit about the assumptions on which it is based. It is founded on a position which rejects the value judgments implicit in the notion of optimality of individual choice in the market, emphasizing the broader social and institutional context which structures the distribu-tion of wealth, power and opportunities for choice (Sanderson, 1996, p. 98).
According to Patel (1994), quality services are those which meet the right needs, at the right time and in the right ways. Quality is thus the desire to improve social services continuously in line with the needs of the users. There are three key elements in consid-ering the quality of services: fitness for the purpose; responsiveness; conformance to specification. In short, quality can be considered as providing services that meet stand-ards based on customers‘ needs as efficiently as possible every time (p.4).
The achievement of quality is the responsibility of everyone; it should penetrate throughout the organization, forming a ―total quality culture‖. Given that people are the largest and the most costly resource involved in service provision, the organization must establish a culture that does not impede its staff. This requires a major change in attitude led from the top, whereby the pursuit of quality becomes the key goal of the organiza-tion (Patel, 1994, p.5).
Formal and Informal Quality Assurance Systems might be introduced. While establish-ing systems is important, successful quality programmes can only be implemented by committed and involved staff. The successful implementation will depend on the degree of ownership and co-operation from staff closest to the point of service delivery and the extent to which the wishes and views of service users are taken into account. Note that it is important to have the appropriate systems and procedures in place, but these alone will not guarantee the delivery of a quality service (Patel, 1994, p.15).
Effectiveness in public policy requires a broad analysis of the potential to change eco-nomic, social, political and institutional structures and processes, and to introduce coor-dinated policies backed by resources across a range of services and activities in order to satisfy defined needs. Thus, the ―quality‖ problematic essentially involves harnessing institutional structures, public policies, resources and service provision to achieve, through the most effective (and efficient) means, those welfare outcomes which are so-cially perceived as most desirable in relation to the diagnosis of social problems and the valuation of social ends (Sanderson, 1996, p. 98).
IT-based performance of PSIs
As Bacon (1998) pointed out more than ten years ago, it is now possible for computer systems to support the delivery of two of the most important objectives of local public services: the development of the ―enabling‖ local authority, where service delivery is devolved to many separate organizations, and the provision of direct citizen access to local services in the form of a ―one stop shop‖ (Bacon, 1998). Nowadays both these op-portunities exist but some more advantages have been added by introduction of new in-formation technologies.
Hyde (2007) determines that following characteristics are main attributes of modern public sector institution‘s performance related to usage of IT: replacement of existing batch systems by on-line ones; computerization of clerical work; database systems de-velopment; information networks development; other developments (e.g. word pro-cessing systems integration). Talking about effects IT systems have on public sector or-ganizations, the following directions might be distinguished (Hyde, 2007):
Employment protection/job loss
Job content effects: deskilling/upgrading
Managerial and supervising activities
In fact, PSIs even nowadays are not much affected by the rule « automate or liquidate » because the main purpose of computer systems in public services is to support business activities without replacing human labour. Furthermore, machines mostly carry out those tasks which require fewer skills but take place in the organization on the regular base, whereas decision-making is still under responsibility of humans. When it comes to usage of more advanced then obviously more skills and knowledge are needed and thus these innovations are being managed by people.
Therefore, managerial and supervising activities are of the highest necessity in any or-ganization whether public or commercial and being supported by many different infor-mation technologies they allow people to be more independent and have access to much more information stored in databases. Among organizational effects of IT systems the following can be mentioned: formalization and standardization of organizational proce-dures, easier transformation of control styles (from centralization to decentralization), simplified structures of organizations (less functional), changes in organizational cul-ture.
But not only opportunities and advantages are carried out by IT innovations. Major problems have occurred in maintaining continuity of personnel and expertise on IT pro-jects due to shortages of such staff, failure to be flexible on incentives, and widespread use of consultants on tightly drawn, time-bound contracts. At the same time IT imple-mentation has rarely been treated as a long-term evolutionary process that develops along with the organization (Willcocks, 2007, p. 23).
As Willcocks (2007) also notes, among IT implementation problems many are political in nature. It is crucial to understand a particular organization‘s political structure and how different types and levels of computerization will relate to political activity. The development of such understanding needs to be the first step in planning and imple-menting computer-based systems in any organization. A political perspective implies the possibility of resistance and the need to gain organizational acceptance for comput-erization. Resistance should not be seen merely as a problem to be solved so that the original system can then be installed as intended. Resistance can be used more positive-ly in systems development. In fact it provides a good clue as to what is going wrong and what can be done about it. The narrow determination to see a certain systems design up and running will inhibit useful analysis of resistance — as is all too typical of dominant systems design practices in both the private and public sectors (Willcocks, 2007, p.25).
Some problem areas, particularly shortages in IT specialist staff and inadequacies in IT project management skills, far from having been managed out or down, have partially contributed to greater use of consultants in the public sector, contracting-out and even privatization of computer departments. A further range of problems involves the politics of computerization. Information creates a number of dilemmas for organizations — for example, who controls it, what sort of information will be collected and to whom will it be made available (Willcocks, 2007, p. 19).
Software procurement in public sector
The decision due to the choice of the best vendor and the most appropriate business software which meet organizational requirements becomes critical for companies of all sizes and market industries. All business processes within the organization, business re-quirements, current situation and possible changes in environment should be analysed before making final decision to avoid significant system modifications after implemen-tation (Motiwalla & Thompson, 2009).
Quite often organizations choose large and famous suppliers such as Oracle, Novell, IBM and some others, due various facts, among which simplified implementation and benefits from further partnership such as training, technical support, possibility to use vendor‘s tools when customizing the software to suit business processes, are considered the main (Somers & Nelson, 2004). However, not all organizations consider partnership with a supplier as a vital or even simplifying their business life. Some of them instead try to avoid such long-term attachments since it causes dependency and new spending on each modification including development, implementation, staff training, and maintenance.
In such case one of the approaches is to switch (fully or partly) from legacy systems to OSS. It can be tried by commercial firm as well as PSI. When this is chosen, public sector agents are still obliged to support interoperability, transparency and flexibility, as well as economical use of public funds.
This implies the following principles that should be applied to public procurement:
support competition through procurement practices;
avoid harming competition in the market of private consumers;
public services should be accessible without demanding citizens to purchase or use systems from specific vendors;
ensure the best costs to service ratio over the long term.
The above mentioned principles are the basis for European Interoperability Framework, as well as legislative framework governing public procurement such as Directive 2004/18/EC on public supply contracts and Directive 2004/17/EC on utilities, and Di-rective 98/34/EC on the provision of information in the field of technical standards and regulations (Ghosh et al., 2010).
Open standards in public procurement of software are also mentioned in a number of of-ficial EU institutions documents. As it is stated in State official report published by E-delegation (2009) in EU there is strong standing point for usage of open standards which emerge from interoperability framework, EIF 1.0. Open standards are widely ac-cepted in the public sector, in EU and other countries. In Netherlands there are require-ments for usage of open standards and Norway gradually introduces open formats which should be used by office applications between public institutions.
Implementation of software based on open standards is considered a good practice for public authorities for several reasons. Ghosh et al. (2010) emphasize on the need to con-sider the degree of openness and ability to foster fully competitive market before choos-ing technologies since it positively contributes to competition and net social and eco-nomic welfare. Public agencies should also contribute to this by encouraging develop-ment for fields where OSS is not yet introduced and selecting open standards based software as a preference to other similar non-open standards based technology.
Besides the needs addressed to what public agencies are expected to do in order to fos-ter principles of transparency, interoperability, independence and flexibility, there are also requirements to what the software should satisfy. These requirements, as Ghosh et al. (2009) state, should be defined according to the best practice IT procurement princi-ples. Simply specifying particular products or even vendors is considered bad practice and may violate procurement regulations. Therefore clear and rational requirements should be defined, for instance in functional, technical and business perspectives. A number of requirement groups is not limited and can be changed according individual situation.
Specific requirements exist for standards that are the base for software applications. These requirements imply that the standard should not discriminate against OSS solu-tions and should be implementable by all potential providers of alternative technologies. Moreover, development of the standard should be open and transparent. This implies that public agency should be independent concerning development of the standard and have possibility to influence further development. And finally, re-use should be one of the standard principal features, so that other public or private organisations can also use it in other OSS solutions (Ghosh et al., 2010).
This short review of requirements for software procurement shows that there is a body of information concerning regulations that should be taken into consideration. There is though much more information regarding legal issues and recommendations on current tendering practices and procurement of OSS which can be found in OSS Procurement Guideline (Ghosh et al., 2010). The subsequent part 3.2.3 is a short supplement to re-quirements for software procurement, which reviews current practices of software pro-curement in public sector.
Kingdom of Sweden consists of 290 municipalities (kommuner). Each of them has an elected assembly, the municipal council which appoints the municipal executive board, leading and coordinating municipality work. There are bodies of local politicians in the municipal councils which take decisions on municipal matters whereas political deci-sions are taken by an elected council in the county council (LGPS, 2006). The public sector in Sweden is responsible for one third of the labour market while government agency employees account for approximately 270 agencies. Under the Swedish consti-tution, individual ministers are not permitted to influence agencies exercise of public (DPADM, 2006).
According to Lindgren (2009), the municipalities are local political entities with the right to make their own decisions. At the same time they are executors of governmental and parliamentary policies. Among the key responsibilities of the municipalities are the following: pre-schools, secondary schools, upper-secondary schools; elderly care; as-sistance to the functionally impaired; rescue services; water and waste; public libraries; public transport (in cooperation with county councils). Municipal activities are financed through municipal taxes, government grants and municipal fees, and are primarily regu-lated by the Swedish Local Government Act. Municipalities are also governed by cer-tain laws such as the Swedish Social Services Act, the Swedish Planning and Building Act and the Swedish Schools Act (Lindgren, 2009).
In other words, as it is stated in Local Government and Public Services Committee re-port (2006), the size of municipalities can range from the very small (2,500 inhabitants) to large conurbations (Stockholm municipality is 760,000). They are responsible for providing a major part of all public services. The specially regulated tasks of that mu-nicipalities are required to provide include: education, social services, care of the elder-ly, care of people with physical or intellectual disabilities, physical planning and build-ing, certain environmental tasks and rescue services.
Table of Contents
1.2 Problem overview
1.3 Purpose statement
1.4 Research questions
1.5 Concepts and definitions
1.6 Perspective and target audience
1.7 Knowledge gap covered
1.8 Delimitations of the study
2.1 Research method
2.2 Research design
2.3 Research strategy: Case study
2.4 Data collection and analysis
2.5 Method evaluation
3 Theoretical framework
3.1 Managing PSIs
3.2 OSS: European practices
3.3 Relevant BM issues
4 Empirical study
4.1 Background of Kivos
4.2 OSS related projects in Kivos
4.3 Interview and survey outcomes
5 Results interpretation and BMD
5.1 Results interpretation
5.2 OSS based business model for Kivos
5.3 Validation of the model
5.4 Strengths and weaknesses of the model
5.5 Practical application of the model
7 Final discussion
7.1 Recommendations for model implementation
7.2 Recommendations for further research
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Design of the Open Source Software Based Business Relationships Model for Public Sector Institutions Case study of Kivos municipalities