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Yes, the public and private sectors are different

 

May 5, 2016

During the 20th anniversary of the Hungarian State Treasury last week, six companies who provide “IT backup” solutions for Public Financial Management (PFM) took part in a panel discussion. I represented FreeBalance. The other invited firms provide a wide range of IT solutions to businesses and governments. Our market is exclusively government. Exclusively PFM.

When asked about the differences between the public and private sectors, guess who disagreed?

Apparently I went to Budapest to isolate myself among representatives of the world’s largest IT firms. That’s because they were in almost violent agreement with each other there isn’t much difference between the public and private sectors. That the difference is a myth. (They did seem to disagree about whose products the Government of Hungary ought to buy despite the fact that the question wasn’t about that.)

The truth is working with governments is much different than working with businesses.

The rationale to suggest there is little difference sounded like claptrap to me.

Here are some of my points:

  • Commitment Accounting: there’s a completely different mode of accounting in the public sector. Budgets are laws, not guidelines.

  • Lines of Business: no business conglomerate is in as many lines of business as a government. Defence, education, healthcare, infrastructure, transportation, legal, public security, statistics, and finance.

  • Mandates: businesses can “fire” unprofitable customers, governments can’t fire citizens.

  • Complexity: coordinating government actions to achieve desired outcomes is much more difficult than trying to generate a profit. And, many businesses do not succeed.

  • Politics: this goes beyond office politics to the real thing. Fundamental organization changes can occur after elections.

My sense is the other panelists did not want to be trapped talking about long decision cycles in government. And, they really want to sell stuff that was originally designed for the private sector to governments.

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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