This is the first of a six-part blog series derived from a recent article in Public Administration Review, Balancing Digital Transformation and Modernization: Pathways for Public Managers, by Marc Picavet, Kevin Desouza, Greg Dawson, Jim Denford, and Dan Chenok.
Much of the digital budget for government CIOs goes for operations, often referred to as “keeping the lights on.” This can include maintaining legacy systems, patching security holes, migrating aging databases, and other routine, invisible work of to ensure that legacy technology continues to operate effectively. But this spending pattern can lock in outdated operations and not contribute to strategic needs. And the choice of whether to “modernize” existing systems, or “transform” to new approaches, can create dilemmas for action based on which path to pursue; the modernize-or-transform dichotomy, according to research for this article involving senior government CIOs across the United States and Australia, presents the wrong frame of reference.
TWO TERMS, ONE PERSISTENT CONFUSION
Digital modernization is about upgrading existing systems -- moving to cloud, digitizing records, hardening cybersecurity infrastructure. This path improves efficiency and security without fundamentally changing how the organization works, who does what, or how citizens experience public services. Modernizations are often incremental, lower-risk, and easier to justify in a single budget cycle.
Digital transformation reflects a different paradigm, involving a strategic decision -- not just a technology decision -- to make digital resources the organizing logic of how government operates. Rather than modernize to leverage better tools to do old things, transformation brings fundamentally new ways of delivering public value. This requires changes in culture, structure, skills, and citizen engagement models. Transformation can be disruptive, expensive, multi-year, and politically difficult.
Most government digital initiatives fall somewhere between these poles – a condition often not realized by and leadership teams. A project can start as modernization, and then have implications that ripple into the organization’s processes and culture. Or a transformation initiative can scope down to modernization given inadequate funding.
“One of our first issues is probably from a strategic perspective -- making the differentiation in terms of what is a modernization effort and what is a transformation effort.” -- Senior public executive, interviewed for the study
THE BUDGET LOGIC THAT KEEPS GOVERNMENTS STUCK
A false choice persists for understandable reasons. Modernization brings safety, often producing visible wins within a single budget cycle or political term. This approach costs less upfront. For officials who seek to show results before the next election, modernization presents and attractive option.
Transformation brings the opposite, with long-term and diffuse benefits. Costs can be front-loaded and significant. Progress spans multiple administrations, which means any given leader may approve investments without realizing benefits.
This often results in a well-documented cycle: government invests in modernization, defers transformation, accumulates technical debt, spends more on modernization to manage that debt, and defers transformation further. At the U.S. federal level, agencies spend approximately 80% of the USD 100+ billion annual IT budget simply maintaining legacy systems.
This phenomenon extends to other governments. For example, the United Kingdom’s Universal Credit programme illustrates the downstream cost of deferred transformation: projected whole-of-life costs rose from GBP 2.2 billion to approximately GBP 12.8 billion, largely because old and new systems had to run in parallel for years. The cost of not having transformed earlier was immense.
THE SPECTRUM, NOT THE BINARY
Modernization and transformation do not reflect opposing choices on a menu. They provide regions on a continuum, and most digital initiatives involve elements of both -- often simultaneously. Infrastructure modernization upgrades create the technical foundation that makes transformation possible. Transformation pilots generate the business case and technical learnings that justify modernization investment.
The PAR article adapted for this series calls for “hybrid digital modernization-transformation thinking” -- a deliberate strategy that recognizes both approaches as complementary, and designs investment accordingly. Government leaders need not choose one or the other approach, but rather can opt for both and in the right proportion, at the right time, with a clear view of how each step enables the next. Distinguishing and connecting the two approaches sets the necessary frame for managing both.
NEXT: Part 2 of this series will address the distinction between monolithic and modular change strategies.