How will Internet of Things,
mobile internet, data analytics
and cloud transform public
services by 2030?
techUK Public Services 2030 Conference
4 March 2015
Andrew Goodman, McKinsey & Company
CONFIDENTIAL AND PROPRIETARY
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Governments will need to do more with less over the next decade
Governments must do more
with less
Macroeconomic
vulnerability and
uncertainty
Demographic changes
mean public services are
evolving as populations age
Emerging global
interconnectivity requires
increased coordination
Increasing public sector
complexity from crosscutting issues
Rapid technological
innovation raises citizens
expectations
SOURCE: McKinsey Center for Government
Unsustainable debt
burdens driven by
healthcare, pension, and
economic stimulus
Need for
transformative
innovation in
government
Pressure for public sector
productivity improvement
Winning the war for top
talent as the workforce
ages and the skilled labor
market tightens
Increasing natural
resource constraints
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Twelve potentially economically disruptive technologies
Mobile Internet
Next-generation
genomics
Automation of
knowledge work1
Energy storage
The Internet of
Things
3D printing
Cloud technology
Advanced materials
Advanced robotics
Advanced oil and
gas exploration and
recovery
Autonomous and
near-autonomous
vehicles
Renewable energy
1 Includes Data Analytics
SOURCE: McKinsey Global Institute analysis
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By 2025, these technologies could have economic impact in the trillions
$ trillion, annual by 2025
Range of sized potential economic impacts in each category
Low
High
Mobile Internet
IT and how we
use it
3.710.8
Cloud technology
1.76.2
Internet of Things
2.76.2
Automation of
knowledge work1
5.26.7
Advanced robotics
Machines
working for us
Rethinking
energy comes
of age
0.21.9
3D printing
0.20.6
Energy storage
0.10.6
Renewable energy
Changing the
building blocks
of everything
1.74.5
Autonomous and nearautonomous vehicles
Advanced oil and gas
exploration and recovery
Next-generation
genomics
Advanced materials
Impact from other
potential applications
0.10.5
0.20.3
0.71.6
0.20.5
What does this mean for
the public sector?
1 Includes Data Analytics
SOURCE: McKinsey Global Institute analysis
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AUTOMATION OF KNOWLEDGE WORK - DATA ANALYTICS
Big data has already helped transform several industries in the
private sector
Financial
Services
Food /
agriculture
Retail /
grocery
SOURCE: McKinsey analysis
Regulators make data public at scale
Transaction data enables segmentation, evolution
of highly targeted products
Government and other players provide reporting
and prediction data and services
Innovation (e.g., genetically modified seeds)
bends cost curve and changes playing field
Granular POS data drives changes to
merchandising, marketing
Sophisticated machine-learning algorithms
predict future purchases
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AUTOMATION OF KNOWLEDGE WORK - DATA ANALYTICS
The relevance of big data in the public sector will hinge on gaining access
to larger datasets in the private sector
Relative size of data processed or stored by
organizations
processes
~24 petabytes
daily
transfers ~19
petabytes over its
networks daily
adds ~12
terabytes daily
< 1 terabyte of
data stored, total
SOURCE: OECD; Twitter; AT&T; Google
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AUTOMATION OF KNOWLEDGE WORK - DATA ANALYTICS
Application of data analytics in the public sector could
help to significantly reduce rates of fraud and error
Selected analytical techniques
Text mining
Relevance in the public sector
In 2013 the National Fraud Authority
estimated that the UK government
loses in excess of 15 billion a year
through tax fraud, and more than 7
billion in expenditure fraud and
error through improper payments
The US Government has identified
13 high-error programs with annual
improper payments in excess of
$750m some have improper
payments rates in excess of 20%
Several advanced analytics
techniques have been used to
improve compliance and recovery
by insurers, payors and tax authorities
Network analysis
Geospatial analysis
Machine Learning
SOURCE: National Fraud Authority; PaymentAccuracy.gov
Example
Public Sector
Application
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INTERNET OF THINGS
More objects are becoming embedded with sensors and gaining the ability
to communicate the physical world is becoming an information system
Projected growth in the Internet of Things
Billions of connected end-points
Key concepts
The Internet of Things is an ecosystem
3.6
2.9
includes data sources (sensors) and
other devices embedded in the physical
world connected by networks to data
visualization and analytic computing
resources
Connected end-points in the IoT can
2.3
provide information on identity,
location, status, and instructions
1.8
In many industries (e.g. GE aircraft
1.3
engines), IoT concepts and devices
have been used for 20 years
1.0
While consumer products (e.g.,
2013
14
15
16
17
2018
wearables) are a focus of media
attention, 70-80% of total value of the
IoT lies in enterprise applications
1 Personal computers, tablets, and smartphones excluded
SOURCE: MGI, Company Annual Reports, Capital IQ, Machina, Expert Interviews, Global Insight, Census
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INTERNET OF THINGS
RFID tagging has been widely used in the private sector,
but its use in public sector procurement remains limited
RFID tags
Identifies one specific unit of product.
Like a Passport or Driver License, it is
unique
Readiness exceeds sight range
(can be read through walls, ceilings, etc.)
Multiple items read at a time
(hundreds in seconds)
RFID tags can be reused as new
information can be over-written
SOURCE: McKinsey analysis
Example
Public Sector
Application
Relevance to the public sector
RFID tagging has helped private
sector firms to increase the accuracy
of inventory tracking by 25%+
Use of passive and active RFID tags
can help to reduce inventory loss
and enable data-driven supply chain
optimisation
The US Department of Defense has
used RFID tags in its supply chain
since 2005 and now tags more than
15,000 cargo loads a week
Despite pilots dating to the 1990s,
use of RFID in the government supply
chain is still limited compared to the
private sector
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INTERNET OF THINGS
San Franciscos SFpark initiative optimizes parking spot
utilization and reduces congestion through GIS sensors
Example
Public Sector
Application
SFPark is a parking system that:
Collects real-time information about where parking is available
Adjust prices of parking at different locations dynamically, according to demand
Reduces traffic congestion by decreasing the number of drivers circling and doubleparking and ensures drivers willing to pay a premium are more likely to find
a convenient spot
Embedded real-time sensors
identifies parking lots that are
available
Drivers can easily visualize
parking availability and prices
online and via smartphones to
plan their journeys
SOURCE: San Francisco Municipal Transport Agency
Central database monitors
parking occupancy, transport
officals analyses historical
parking occupancy and usage
patterns by location to make
data-driven pricing decisions
Price revisions are readily
communicated to the public
Rates are adjusted no more than
50 cents per hour down or 25
cents per hour up, and no more
often than once per month
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MOBILE INTERNET
Adoption of mobile devices is growing at double-digit rates mobile
devices have become more ubiquitous than land lines
Consumers are increasingly demanding
mobile devices
Global mobile device sales
million units
2005
2010
+25%
66
Laptops
and will have multiple connected device in
the near future
2020
+15%
Internet devices per person
2015E; units
North America
5.8
130
Japan
5.4
510
+35%
54
Smartphones
Western Europe
+20%
230
1,460
Tablets
4.4
+25%
Eastern Europe
2.2
Latin America
2.1
Asia-Pacific
1.5
20
190
Middle East/Africa
SOURCE: Cisco Traffic forecast; SA; Interviews; Strategy analytics, WSJ press article, Team analysis
0.9
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MOBILE INTERNET
Mobile devices could help to provide an integrated solution
to citizen identification, authentication and verification
Estonias Mobiil-ID System
Example
Public Sector
Application
Selected uses
Estonia has one of the most advanced
and widely used e-government
systems in the world almost 100% of
the population have an electronic ID
Mobiil-ID can be used on any
smartphone or tablet and replaces a
traditional electronic ID card
With Mobiil-ID, citizens can access
public e-services, authenticate their
identity, and provide digital signatures
for transactions, public service
registration and contracts
The government has made Mobiil-IDs
digidoc libraries available to
developers to catalyse private sector
uptake
SOURCE: Public sources; McKinsey analysis
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CLOUD
There has been a fundamental shift from a build model to a consume
model in Enterprise IT, giving rise to Cloud Service Providers
Cloud services are fundamentally changing IT
consumption model
giving rise to the Cloud
Service Provider segment
Cloud
IaaS
PaaS
SaaS
BPaaS
Private
Community
Hybrid
Public
Legacy
Architecture
and creating risks & opportunities for traditional players
IT infra
Development platform
Software applications
Business processes
SOURCE: McKinsey Cloud Service Provider Initiative
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CLOUD
Example
Public Sector
Application
Moving to a modern cloud-based environment could help
government departments realise IT savings of up to 40%
Comparison of monthly per-desktop TCO for desktop environment
(% cost, normalized to benchmark of 100%)
188
Software /
services
66
-42%
Hardware
15
109
User support
(L1 L3
helpdesk)
Other
42
88
20
100
44
14
32
27
19
14
11
Government - prior to
cloud transformation
Government - cloud
based environment
Gartner 2013
TCO benchmark
Savings primarily driven through significantly reduced software/services and user support costs,
reflecting the centralised support and deployment of updates and apps in a cloud environment
SOURCE: Gartner; Mckinsey analysis
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Thank You
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