Governments Must Not Put Digital Transformation on Pause

Thoughts about technology that is inclusive, trusted, and creates a more sustainable world

These posts represent my personal views on the future of the digital economy powered by the cloud and artificial intelligence. Unless otherwise indicated, they do not represent the official views of Microsoft.

I’ve been thinking a lot these last two months about how the pandemic is serving as a forcing function to drive digital change at an unprecedented pace. I can’t put it any better than Microsoft’s CEO Satya Nadella, who remarked a few weeks ago that:

“We’ve seen two years’ worth of digital transformation in two months.”

I think that might even be an understatement. I know we can all think of examples where formerly analog routines in our daily lives have suddenly morphed into something utterly digital. Perhaps most of us haven’t yet had the occasion to see a doctor by videoconference, but I wager that many of the readers of this post have been seeing a lot of their co-workers on their computer screens lately. And those of you who have children are probably watching them watch their teachers on those screens too. But today I want to talk about how digital transformation is spurring change in large organizations like corporations and—especially—government agencies.

The digital transformation of organizations was of course already well underway long before the SARS-CoV-2 virus arrived. A recent Harvard Business Review article about the growing digital divide between organizations reminds us that:

“Firms have been moving to an increasingly digital core based on software, data, and digital networks for years, requiring a fundamentally new operating architecture.”

The Harvard authors go on to observe that:

“The stakes for digital transformation have increased dramatically. Now, digitizing the operating architecture of the firm is not simply a recipe for higher performance, but much more fundamental for worker employment and public health. This is creating a new digital divide that will deepen fractures in our society. The firms that cannot change overnight will be left way behind, exposing their employees to increasing risk of financial and physical distress.”

I have little to add to that statement except to say that it applies just as much to governments as to businesses. Governments and public sector institutions as a whole are just as much at risk of falling onto the wrong side of a growing digital divide as corporations. Investor Warren Buffet has a saying about how crises are good at revealing previously unsuspected weaknesses in organizations. It goes like this:

“You only find out who is swimming naked when the tide goes out.”

A striking and sadly appropriate illustration of this maxim comes from the IT disaster that the COVID-19 pandemic has brought about in many US states. In state after state, hundreds of thousands of newly jobless workers have struggled in vain to apply online for the $250 billion of emergency unemployment benefits promised to them by the CARES Federal stimulus bill passed in March.

For example, the nation’s capital Washington DC requires jobless workers who apply for benefits online to use Microsoft’s outdated and long-retired Internet Explorer web browser, which is not even available on smartphones. Some applicants in New York have been required to fax copies of their pay documents to the state. In many states the winner of this technology race to the bottom appears to be the good old printed paper form.

Florida residents have been lining up at unemployment benefits locations to submit paper applications. A city worker handed out applications at a location in Hialeah on April 9. Photo: Cristobal Herra, Shutterstock. Source: Wall Street Journal

However, the root of the problem is not in the sometimes archaic nature of the user interfaces presented to workers applying for benefits. Rather, it lies in the back-end IT systems that handle those requests. From a blizzard of media reports over the past few weeks, we have learned that virtually all the unemployment benefit management systems in US states are still based on 1980s era mainframe software written in the 1950s era programming language COBOL.

A partial list of states where emergency unemployment benefits were delayed due to obsolete COBOL-based mainframe systems includes Colorado, Connecticut, Florida, Hawaii, Kansas, New Jersey, New York, Maine, Oregon, Rhode Island, Texas, and Vermont. To be fair, it’s not the COBOL language itself, which though venerable is highly reliable, nor the mainframe hardware, which—though a de facto IBM monopoly these days—has been brought up to date with modern semiconductor technology. Rather, the real culprits are the ancient software applications that were developed on these platforms decades ago by programmers long since retired. These applications have never been updated to cope with the challenge of interacting with thousands of online users, and they are intrinsically unsuited for cooperation with modern web-based architectures.

The IT departments that run these systems are not incompetent. They have simply been overwhelmed by conditions their systems were never designed to cope with. Unsexy back-office systems like those that handle unemployment benefits were chronically underfunded not because policymakers were short-sighted, but because they had the same mistaken belief in the improbability of an event like the COVID-19 pandemic that we all had. Now the policymakers know better, and so do we.

The US Congress has been debating several proposals to send billions of dollars in assistance to states to help rebuild their antiquated IT systems. But it’s not known when or if these proposals will be voted on. The European Union for its part has bold plans to spend billions of euros during its next 7-year budget cycle on what it calls “Digital Europe,” though it’s not clear how much of that money will be specifically earmarked for the digital transformation of governments and their institutions.

It is time for governments to fund the digital transformation of their core IT systems. We must do this while the memory of the coronavirus pandemic is still sharp in our minds, and before the next crisis arrives.