Social Protection & Jobs Discussion Paper No. 2515 | June 2025 Guidance Note on Public Employment Services Digitalization © 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: +1 (202) 473 1000; Internet: www.worldbank.org. This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. RIGHTS AND PERMISSIONS The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: +1 (202) 522 2625; e-mail: pubrights@worldbank.org. Abstract This Guidance Note was developed to support Public to priorities. Choosing the right pace—through Employment Services in navigating complex decisions phased, pilot, or parallel approaches—helps reduce involved in digitalizing employment services. As the risk and accommodate institutional constraints. role of PES evolves with the need to balance expanded mandates with limited resources, digitalization presents Selecting the right development strategy. In-house an opportunity to strengthen service delivery, enhance development provides greater control but requires operational efficiency, and improve access for job seekers significant capacity. Outsourcing can accelerate and employers. However, successful implementation delivery but demands strong procurement and depends on more than just introducing new technology. vendor management. Many PES benefit from hybrid It requires strategic alignment, institutional readiness, approaches that combine local ownership with and careful planning at every stage of the process. specialized external expertise. This Note offers a practical framework to guide that Matching solution types and hosting models journey, combining structured decision-making tools, to context. Custom-built systems allow for full country examples, and insights drawn from a broad tailoring but come with higher complexity and costs. range of experiences. While every PES operates in a Pre-packaged solutions are faster to deploy but unique context, a number of cross-cutting lessons and may limit flexibility. Hosting decisions, on-premises recommendations emerge from the modules: or cloud-based, should consider data governance, scalability, and infrastructure readiness. Importance of clearly defined objectives. Not all service delivery challenges require a technological Planning for financial sustainability. A clear fix. Diagnostic tools such as root-cause analysis and understanding of the total cost of ownership is business process mapping help identify whether critical. This includes not only initial development digitalization is the right response—and where it or licensing fees but also recurring costs for can add the most value. maintenance, upgrades, and user support. Different pricing structures, such as fixed-price, time-and- Assessing internal readiness and external materials, or subscription models, require careful conditions. A realistic evaluation of internal evaluation to align with budget realities. IT capacity, infrastructure, human resources, and financing is essential to define the feasible Digital transformation is not a singular event but a long- scope of a digitalization effort. External factors term process. As PES increasingly rely on digital tools such as data regulations, vendor markets, and to deliver services and inform policy, systems must be broader e-government strategies also influence flexible and adaptable to effectively connect job seekers implementation options. to opportunities. This Note aims to provide a foundation for that transformation, grounded in practical experience Defining a clear and focused digitalization scope. and adapted to the diverse realities in which PES operate. Whether the primary goal is to enhance data analytics, improve internal efficiency, or expand By applying these insights, PES can take informed steps digital access for users, a well-scoped project sets towards building digital solutions that are not only manageable expectations and aligns resources functional, but truly transformative. Acknowledgements This Guidance Note was developed by the Labor and Skills Global Solutions Group at the Social Protection and Labor Global Practice. The Note was prepared by Muhammad Ezzat, Sara de Lorenzo, and Guillermo Tovar. The development of this Note benefited from the supervision of two technical consultants, Kaleab Mezgebu and Giannis Tzimas, who oversaw technical content and analysis. Eliana Carranza (Senior Economist) and Alicia C. Marguerie (Senior Economist) provided overall guidance. The team acknowledges contributions by Matteo Morgandi (Lead Economist) who contributed to shaping this work, and Harry Edmund Moroz (Senior Economist) who provided valuable input during the development of the Note. The team is also grateful to World Bank experts for their inputs: Johanne Buba, Aylin Isik-Dikmelik, Koen Maaskant, Josefina Posadas, Maria Julia Granata, Byoenggi Park, Hunt La Cascia, Nithin Umapathi, Ahmet Fatih Ortakaya, Angela Elzir Assy, Nebil Chemek, Abla Safir, Nga Thi Nguyen, Anastasiya Denisova, Phillippe George Leite, Sandor Karacsony, Johannes Koettl, Matthew Dornan, Alyssa Farha Binti Jasmin, Roman Zhukovskyi, and Tania Priscilla Begazo Gomez. Special thanks are also due to officials from Public Employment Services (PES) in South Korea, particularly Jaejin Im and Hyeongyeong Kang, for their contributions. We are also grateful to PES officials from Brazil, Moldova, South Africa, Cambodia, Indonesia, Malaysia, Tunisia, and Bhutan for sharing their valuable perspectives. In addition, the team extends its appreciation to representatives of various organizations, whose inputs informed our analysis of digital solutions and their application in PES, including Tessa Ruijgrok and Jonas Oijevaar (WCC), Simon Schmid and Rintse van der Werf (SkillLab), Stefan Winzenried (JANZZ.technology), David Padgett (SeeMeCV), Christian Meyer (Tabiya), Mustafa Sayedi (SkyHive), Davor Miskulin (Lightcast), and Lunga Msimang and Mosuoe Sekonyela (Harambee). The collective insights and contributions of all these experts and organizations have been instrumental in shaping this Guidance Note, and their collaboration is deeply appreciated. 1 Table of Contents Acknowledgements 1 Abbreviations 5 Key Terms 6 Public Employment Services (PES) Delivery Chain 6 Purpose of the Note 8 Content Structure 9 Introduction 11 Challenges in PES Digitalization 14 The Role of the Private 16 Sector in PES Digitalization 16 Module A. PES Objectives and Challenges Identification 18 A1. Defining the Challenge 19 A2. Creating a Clear Digital Strategy 20 A3. Mapping Business Processes 22 Module B. Assessing the Readiness 27 B1. Internal Assessment: Evaluating PES Readiness for Digitalization 28 B.1.1 Technology and infrastructure 29 B.1.2 Human and organizational capacity 31 B.1.3 Financial resources and budgeting 32 B2. External Assessment: Navigating the Digital Landscape for PES 32 B.2.1 Mapping Key Actors in PES Digital Ecosystem 33 B.2.2 Legal and policy frameworks for PES digitalization 35 Module C. Defining the Digitalization Scope 39 C1. Setting the Priorities: of PES Digitalization 40 C.1.1 Data-focused objective: Enhancing data analytics for better labor market insights 40 C.1.2 Operational-focused objective: Improving internal efficiency and service capacity 41 C.1.3 Client-focused objective: Enhancing user experience through accessible and responsive services 43 C2. Defining the Timeline 44 Choosing the right approach: Lessons learned from practice 45 Module D. 7 Deciding the Software Development Strategy: In-house versus Outsourcing 4 D1. In-house Development 49 D2. Outsourced Development 50 Considering a Hybrid Approach for PES Digitalization 52 Module E. Outsourcing and Selecting the Best Digital Path 54 E1. Building from Scratch versus Pre-packaged Solutions 55 Context Matters: Identifying the Right Path for PES Digitalization 60 E1.1. Custom-built software solution Key Considerations 61 E1.2. Pre-packaged solution 62 E2. Hosting the Digital Solution 63 Module F. Pricing Structures for Digital Solutions 66 F1. Common Pricing Structures 67 F1.1. Custom-built solutions 67 F1.2. Commercial Off-the-Shelf 67 F1.3. Software as a Service 68 F2. Special Pricing Arrangements 69 F2.1. Modular COTS or SaaS 69 F2.2. Bundled Packages 69 F2.3. Cost Considerations for PES Digitalization 69 Concluding Reflection and Key Insights 71 BOXES Box 1. Module questions 10 Box 2. Examples of PES digitalization opportunities for stakeholders 12 Box 3. Country example: Securing staff acceptance in Korea’s digitalization of employment incentives 15 Box 4. Examples of right solution identification through root-cause analysis 20 Box 5. Country example: Business process mapping in Tunisia’s PES digitalization 23 Box 6. Identifying design versus implementation failures 24 Box 7. Identifying high-potential processes for digitalization 25 Box 8. Country example: Digitalization of Employment Promotion Incentives in Korea 26 Box 9. Country example: South Africa’s PES digitalization 30 Box 10. PES staff capacity assessment guide questions 31 Box 11. Financial assessment for PES digitalization 32 Box 12. Key actors to consider 33 Box 13. Country example: Korea’s collaboration cases with private employment portals 34 Box 14. Country example: Bhutan’s Government-Wide Approach to Digital Development 36 Box 15. Country example: Saudi Arabia’s ministerial-focused approach to digital development 37 Box 16. Key questions for PES digitalization: Legal, policy and procurement considerations 38 Box 17. Country example: Bhutan’s shift to a client-focused objective 44 Box 18. Implementation approaches for PES digitalization 45 Box 19. Country example: Brazil’s in-house development with a state-owned enterprise 49 Box 20. Country example: Malaysia’s hybrid approach to PES digitalization— balancing vendor expertise with internal capacity 52 Box 21. Country example: Tunisia’s hybrid approach in action 59 TABLES Table 1. Approach to delivering services, by country income group, 2020 (percentage) 14 Table 2. Key considerations for evaluating development options 49 Table 3. Custom software development versus pre-packaged solutions 55 Table 4. Overview of Off-the-Shelf software and Software as a Service 62 Table 5. COTS versus SaaS 63 Table 6. Cost drivers for custom-built solutions 67 Table 7. Cost drivers for COTS solutions 68 Table 8. Cost drivers for COTS solutions 69 FIGURES Figure 1. Drivers of technology adoption among public employment services, by country income group, 2020 (percentage) 19 Figure 2. Overview of the relationship between the three levels of digitalization 21 Abbreviations API Application Programming Interface COTS Commercial Off-the-Shelf Software DCI Digital Convergence Initiative ESSA Employment Services of South Africa GDPR General Data Protection Regulation GovTech Government Technology IAP Individual Action Plan ILO International Labour Organization JMS Job Matching Systems LMIS Labor Market Information Systems M&E Monitoring and Evaluation MIS Management Information System NGO Non-Governmental Organization PES Public Employment Services RFP Request for Proposal SAAS Software as a Service SOE State-Owned Enterprise T&M Time and Materials TOR Terms of Reference TRA Technology Readiness Assessment UIF Unemployment Insurance Fund 5 Key Terms Public Employment Services (PES) Delivery Chain The services that individuals receive from PES depend While recognizing the significant diversity of PES systems on their specific needs, ensuring the support provided and functions globally, this Note establishes a general aligns with their unique circumstances. Simultaneously, framework by conceptualizing the delivery of PES (and the scope of functions and services covered by PES benefits) as a comprehensive chain that encompasses varies significantly based on country-specific factors, the following stages: including economic context, labor market structures, policy priorities, and institutional and human capacity. All PESs share a similar delivery chain for servicing jobseekers: Provision of Assessment Services Outreach Intake and Intermediation and Enrollment Benefits Monitor and Evaluate across the chain Outreach: Engaging job seekers, employers, and other Intermediation: Facilitating connections between job stakeholders (like educational or training institutions) to seekers and employers, leveraging platforms such as raise awareness and ensure accessibility to services job fairs, job boards, and digital matching platforms, ensuring that labor market needs are efficiently met by Intake: Registration of job seekers and vacancies bridging supply and demand (sometimes also employers offering those vacancies), and capturing basic information to connect them to the Ongoing Monitoring and Evaluation (M&E): Tracking PES system progress, measuring outcomes, and assessing the quality control of PES services to ensure continuous Assessment and Profiling: Evaluating job seekers’ improvement. Feedback loops from M&E support profile (skills, barriers, aspirations) and needs to refer evidence-based decision-making, which enhances them to the appropriate set of services (and to the extent service quality, and ensures that PES offerings remain possible, tailored to their profile) relevant, effective, and adaptable. Provision of Services and Benefits: Delivering active Technical Approach / Software Development Approach: and/or passive labor market measures, such as training In the context of PES digitalization, this term refers to programs, individualized support like case management the strategy and methodologies used to design, develop, and career counseling, entrepreneurship support, implement, and maintain digital systems and platforms job creation schemes, unemployment benefits, cash that support PES operations. Specifically, this Note uses assistance programs, wage subsidies, etc. the term to i) decide between in-house development, 6 outsourcing to private providers, or adopting hybrid seekers, vacancies, employers, and service workflows. approaches; and ii) evaluate whether to build custom It typically includes both front-end interfaces and back- software tailored to the specific PES needs or use pre- end components, ensuring coordination, monitoring, built solutions that may require adaptations. and delivery of services. PES information systems are distinct from, but may interoperate with, LMIS, which Labor market information systems (LMIS): Digitally focus on labor market analytics and intelligence. enabled systems that systematically collect and analyze labor market data to generate labor market intelligence. Front-end Solutions: The front-end refers to the visible They typically include data collection tools, repositories, and interactive layer of a digital system through which and analytical components used for producing reports users directly engage with services. In the context of PES, and dashboards. They support a range of analytics— this includes user-friendly interfaces like web portals, descriptive, predictive, prescriptive, and more— mobile applications, and self-service kiosks. These informing decision-making and policy development. interfaces primarily serve job seekers and employers, Developed by governments or private companies, LMIS enabling them to register, search for jobs or candidates, requires institutional arrangements for data access, and access employment-related services. Front-end safety, and handling. These systems support labor market solutions are designed to be intuitive, inclusive, and observatories and may integrate with job-matching accessible, accommodating a wide range of user needs systems to enhance Public Employment Services. and levels of digital literacy. Job Matching Systems (JMS): JMS include the software, Back-end Solutions: The back-end refers to the underlying user interface, and data infrastructure that facilitate components of a digital system that power its core matching between job seekers and vacancies. This can operations and functionalities, remaining invisible to end occur directly through online digital platforms or with clients (jobseekers and employers). In the context of PES the assistance of job counselors in PES-run systems. digitalization, back-end solutions manage critical tasks JMS may be developed and operated in-house by public like storing and processing job seeker profiles, employer agencies or by private software companies. Additionally, accounts, job postings, and labor market data. They many privately-run digital platforms also provide job- enable features such as job matching, data analytics, and matching services focused on labor intermediation. the integration of databases (e.g., social protection) and JMS are typically integrated with PES core information are accessed by IT administrators rather than the public. systems that support day-to-day service delivery, rather While “back-end” is sometimes used to describe staff- than with LMIS. However, they may draw on LMIS data facing interfaces, in this Guidance Note, it specifically to inform or refine their matching algorithms to the refers to behind-the-scenes operations and digital local labor market context, thereby enhancing their infrastructure that support PES systems. effectiveness. Data Governance Framework: The specific set of policies, procedures, and standards that govern the collection, storage, and use of data. It ensures data quality, security, and privacy, and provides transparency in how data is handled. This framework is critical, for instance, when enabling data exchange through interoperability between systems. A data governance framework becomes increasingly important as PES adopt new technologies—such as AI—that rely on access to large, high-quality datasets. Information System: organized combination of digital infrastructure, processes, and people that collects, processes, stores, and distributes information to support decision-making and service delivery. In the context of PES, an information system supports the daily operations of employment services by managing data on job 7 Purpose of the Note Public Employment Services play a critical role in Instead, the Note focuses on helping PES managers make connecting job seekers with employment opportunities, informed decisions about digitalization investments often under resource constraints and increasing within their specific institutional and country contexts. demands for efficiency. Digitalization offers a pathway Through practical advice and actionable insights, to enhance service delivery, streamline operations, real-world lessons, and decision-making frameworks, and expand outreach. However, navigating this it guides managers in effectively integrating digital transformation requires strategic decision-making solutions. It walks the reader through the digitalization to ensure digital solutions align with PES objectives, process—from assessing organizational readiness to operational realities and challenges. making key technology and implementation choices— with a particular emphasis on how and when to engage This Guidance Note is primarily designed to support external providers. PES managers and practitioners who are actively considering or planning to digitalize their services. It The Note draws on a comprehensive research process, is intended as a practical, step-by-step resource for combining a review of existing literature with semi- those leading or overseeing digitalization efforts—not structured interviews of various software development as a high-level research piece or a review of global best companies, as well as consultations with different practices. World Bank experts and PES officials from Brazil, Moldova, South Africa, Cambodia, Indonesia, Malaysia, Tunisia, Bhutan and Korea. These are the key objectives of this Note: Encourage strategic thinking: Help PES managers Share good practices: Share examples, tools, and evaluate the rationale, objectives, and scope frameworks that contribute to impactful, efficient, of digitalization in alignment with their internal and sustainable digital initiatives. capabilities and external environment. Clarify software development approaches: Support decision-making: Highlight the critical Provide practical guidance on in-house choices that arise throughout the digitalization development versus outsourcing, with a focus process, helping PES managers navigate trade- on outsourcing implications for PES in terms of offs and align their decisions with strategic goals service delivery, financial viability, and operational and operational realities. sustainability. 8 A dedicated Note on PES digitalization is essential Public Employment Services play a critical role in because PES presents unique challenges that sets it connecting job seekers with employment opportunities, apart from broader organizational digitalization efforts. often under resource constraints and increasing Unlike standard e-government services, PES must match demands for efficiency. Digitalization offers a pathway individuals to opportunities, requiring sophisticated job to enhance service delivery, streamline operations, matching, skills profiling, and labor market forecasting. and expand outreach. However, navigating this The personalized nature of these services for job seekers transformation requires strategic decision-making and employers makes digital transformation particularly to ensure digital solutions align with PES objectives, complex. Achieving this at scale, with limited staff and IT operational realities and challenges. resources, presents significant hurdles—even for large, well-funded organizations. Content Structure Digitalization becomes relevant when both the process design and execution are functioning well, although This Note is structured in a modular format, allowing inefficiencies remain. It is not enough to introduce digital readers to focus on the most relevant sections based tools— PES core processes must be clearly defined, on their current needs and guide PES managers at effectively implemented, and aligned with user needs. different stages of their digitalization journey. While the Only then can digital solutions successfully address modules follow a logical progression, they are designed persistent inefficiencies, improve service delivery at to be standalone resources. Through this practical scale, and optimize limited staff and IT resources. In and experience-based approach, PES managers will developing PES, which often operate under constrained find guidance, tools, and decision-making support to conditions, understanding what, how and when to effectively lead their digital transformation efforts— digitalize is critical. whether planning their strategy, evaluating outsourcing options, or implementing digital solutions that enhance This Note serves as a flexible guide tailored to the employment services. realities of PES operations, rather than a prescriptive roadmap. It focuses on critical decisions in the digitalization journey, with particular emphasis on the implications of outsourcing digital development to private software providers and the challenges of managing IT systems and processes within PES. Given this targeted focus, it does not cover broader topics such as the overarching role of PES or highly technical aspects of digital tools. Instead, it provides practical tools and real-world examples, offering complementary resources for deeper exploration. This Note focuses on outsourcing because many PES managers, while familiar with digitalization principles or in-house development, often lack the technical expertise to navigate outsourcing effectively. As outsourcing becomes a common approach due to limited in-house capacity, it presents both opportunities and risks— including enhancing efficiency, accelerating solutions, and accessing specialized expertise, while also requiring careful management of vendor relationships and data security. Poorly planned outsourcing can lead to cost overruns, misaligned solutions, and implementation failures. Given the growing reliance on private sector partnerships in PES digitalization, this Note provides guidance on making informed outsourcing decisions to ensure solutions remain aligned with PES needs, institutional priorities, and long-term sustainability. 9 BOX 1 Module questions MODULE A. What specific challenge is PES aiming to address—and is technology the right PES Objectives solution? and Challenges Identification What are the root causes of the challenge, and how can tools like root-cause analysis help clarify them? How can PES define a clear digitalization strategy that aligns with its goals and level of ambition? MODULE B. Assessing Does PES have the internal capacity—technology, staffing, and budget—to the Readiness support and sustain digitalization? What tools can PES use to assess internal readiness for digitalization? How do external factors like market dynamics, digitalization policies, and data regulations shape PES digitalization opportunities? MODULE C. Defining the How can PES define a digitalization scope that aligns with strategy, capacity, Digitalization and long-term goals? Scope How can PES navigate the trade-offs between different digitalization objectives to maximize impact? What factors should PES consider when determining the pace and sequencing of its digitalization efforts? MODULE D. Deciding the Software What development options are available to PES—in-house, outsourced, or Development Strategy: hybrid—and what distinguishes them from each other? In-house versus What factors should guide the choice in approaches (e.g., internal capacity, Outsourcing vendor availability, timeline)? What are the key trade-offs in terms of control, cost, sustainability, and adaptability? MODULE E. Outsourcing How can PES choose between custom-built software and pre-packaged and Selecting solutions based on needs, timelines, and budget? the Best Digital Path What are the practical considerations and risks when combining both options in a hybrid approach? How should PES choose a hosting model that aligns with technical, financial, and regulatory constraints? MODULE F. Pricing Structures What pricing models are commonly used for digital solutions (e.g., custom-built, for Digital Solutions off-the-shelf, SaaS), and how do they differ? What are the key cost components—both upfront and recurring—that PES should plan under each model? How can PES ensure that digital solutions remain financially sustainable over time? 10 Introduction The digitalization of society has significantly services beyond job placement. For example, there transformed economies and labor markets, compelling is a growing emphasis on labor market information, PES to modernize how they deliver services. Since the career management, upskilling, lifelong learning, and 1960s, rapid advances in digital technology have driven workforce development to ensure job seekers acquire public administrations to adopt new tools to enhance these “21st-century skills” needed. At the core of these efficiency and responsiveness. Currently, PES face the efforts is the development and management of robust added challenge of adapting to labor market changes job seeker and employer registries, which underpin driven by automation, robotization, and the gig economy. all digitalization initiatives. To support these evolving The transition to digital platforms has reinforced the objectives, PES are increasingly investing in innovations need for PES to strategically use technology, not just to and specialized tools, such as AI and data analytics, improve service delivery and efficiency, but to address which are being applied to: the changing demands of job seekers and employers. The COVID-19 pandemic exposed gaps in PES digital 1 infrastructure while accelerating the adoption of Profiling and Skills Gap Analysis remote and technology-driven solutions. The pandemic – Identifying employment potential and matching candidates with targeted training opportunities. posed unprecedented challenges, including a surge in client demand, disruptions to service continuity, and restrictions on in-person interactions. Countries with existing digital capabilities adapted quickly, while others 2 Vacancy Matching and Labor Market Intelligence faced the challenge of maintaining service continuity. – Enhancing job placement accuracy and By 2020, PES digitalization was already advancing. generating real-time insights into labor market trends. All 69 PES organizations surveyed by an International Labour Organization (ILO) study across 64 countries had automated at least one core function1. Yet, the pandemic 3 pushed PES to rapidly expand digital access, improve Automation of Administrative Processes operational efficiency, and enhance service quality and – Streamlining case management, compliance monitoring, and fraud detection. inclusivity. As PES evolves to offer a broader and more comprehensive range of services, integrating and investing in new digital Digitalization has the potential to transform nearly all tools and technologies is essential to keep pace with functions and services of PES. By integrating technology this transformation. In early digitalization efforts, PES strategically, PES can enhance service coverage focused primarily on expanding access to job matching and outcomes for job seekers, employers, PES staff, services through the development of digital channels and external service providers. For job seekers and like web-based platforms. While these platforms remain employers, digital tools and user-friendly platforms fundamental to connect job seekers, PES counselors, increase accessibility and improve service quality, and employers, the evolving role of PES and continuous enabling seamless job searching, skills matching, digital transformation are now driving a broader and and career support. Meanwhile, back-office digital more complex approach to service delivery. infrastructure plays a crucial role in optimizing efficiency for PES staff and external providers, streamlining Today, PES are leveraging advanced technologies administrative processes, case management, and not only to improve efficiency, user experience compliance monitoring. However, the success of these and accessibility but also to expand the scope of digital innovations hinges on effective data management. High-quality, well-integrated data systems ensure accuracy, interoperability, and security, enabling PES to 1. International Labour Organization (2022). Global Report: leverage real-time insights and deliver more responsive, Technology Adoption in Public Employment Services – Catching Up data-driven services. with the Future. Geneva: ILO. 11 BOX 2 Examples of PES digitalization opportunities for stakeholders For Job seekers and Employers – Improved Access and Services Self-Service Tools: Platforms such as job portals or mobile apps that enable seekers to search for job opportunities and employers to find suitable candidates independently (e.g., LinkedIn, Indeed, or local government portals) Skills Mapping Tools: Technologies like online assessments or AI-powered platforms (e.g., LinkedIn Skill Assessments) that help seekers identify skill gaps and receive personalized recommendations and enable employers to find candidates with specific skill sets matching job requirements Career Services: Digital career counseling services that offer resources like career path suggestions, resume building, and interview preparation Chatbots: AI-powered tools that provide real-time information, guidance on job applications, and help with navigating available services (e.g., WhatsApp Business or custom PES chatbots) Virtual Job Fairs: Online events where seekers can interact with employers, submit applications, and attend interviews remotely, expanding access to job opportunities E-Learning Platforms: Digital training resources that allow seekers to upskill or reskill through online courses, certifications, and interactive learning modules (e.g., Coursera, Udemy, or PES-affiliated training platforms) AI-Driven Job Matching: AI models that analyze seeker profiles and employer requirements to provide automated, personalized job recommendations, improving placement efficiency Document Creation, Submission and Verification Tools: Platforms for uploading and verifying employment documents, qualifications, and work permits, streamlining administrative processes Remote Interview Platforms: Integrated video conferencing solutions that facilitate remote interviews and skills assessments, reducing the need for in-person interactions Job Tracking Dashboards: Online tools that allow seekers to track application progress, receive interview notifications, and get real-time status updates on their job search journey Community Forums and Peer Networks: Digital spaces where seekers and employers can exchange advice, share job opportunities, and provide mentorship, fostering a sense of professional support Predictive Analytics for Workforce Planning: AI-powered insights that help employers and policymakers anticipate labor market trends, skill demands, and hiring needs, improving long-term workforce planning For PES Staff and External Service Providers – Greater Efficiency and Decision- Making Job seeker Profiling Tools: Advanced systems that analyze and profile job seekers based on their qualifications, work experience, career preferences and other, helping PES staff provide personalized support (e.g., Google Cloud Talent Solution or Oracle’s Cloud Recruiting System) Job Search Monitoring: Digital systems such as online job search trackers that help PES monitor job seekers’ activities, track progress, and ensure compliance with requirements (e.g., e-Gov job platforms with monitoring capabilities) Automation of Administrative Tasks: Tools that automate routine tasks such as case management systems (e.g., Salesforce, Odoo or SAP SuccessFactors) that handle application processing, report generation, and document management to free up resources for higher-value work Box contiues in the next page 12 BOX 2 Fraud Detection: Systems that detect and mitigate fraudulent activities related to job applications and benefit claims (e.g., FraudNet or ID fraud detection systems in PES digital tools) Data-Driven Decision Support Systems: Platforms that consolidate and analyze labor market data to assist PES staff in making informed policy and operational decisions (e.g., Tableau and Microsoft Power BI can support labor market analytics and internal performance tracking; Redash and Metabase are open-source alternatives that offer customizable, cost-effective solutions for data visualization and dashboarding.) Predictive Analytics for Labor Market Trends: AI-driven models that forecast employment trends, skill shortages, and demand fluctuations, helping PES align training and job placement services with future workforce needs (e.g., Burning Glass Technologies, LinkedIn Economic Graph). Cloud-Based Collaboration Platforms for Case Management: Integrated digital environments that facilitate real-time collaboration among PES staff, streamline workflows, and improve service coordination (e.g., Google Workspace for Government, Microsoft Teams for PES case collaboration) Integrated Performance Dashboards: Centralized monitoring tools that track PES performance indicators, measure service effectiveness, and provide insights for improvement (e.g., Power BI PES dashboards, Tableau Public Sector analytics, Redash and Metabase) Remote Training for PES Staff: E-learning platforms that equip PES professionals with the latest digital tools, case management techniques, and labor market insights through virtual courses, simulations, and interactive modules (e.g., Coursera for Government, Udemy for Business) Cybersecurity Tools: Robust security frameworks to safeguard sensitive job seeker and employer data, ensuring compliance with data protection regulations and preventing breaches (e.g., Microsoft Defender for Endpoint, AWS Security Hub) For Data Management – Enhancing Accuracy and Security External Data Integration: Systems that integrate with external registers like social security, education, or tax databases to offer comprehensive services (e.g., connecting with national labor force registries to get up-to-date employment data) Real-Time Data Access: Ensuring that PES systems have the capacity to process and retrieve data efficiently (e.g., using cloud-based systems that allow instant updates of labor market trends, job postings, and job seeker status) Data Quality and Security: Maintaining strict data accuracy standards and robust data security protocols, ensuring privacy compliance (e.g., General Data Protection Regulation or GDPR), and building trust among users. This can include AI-driven data cleansing tools that detect and correct inaccuracies in job seeker profiles and employer records, as well as blockchain-based solutions for secure data sharing between PES, government agencies, and private sector partners Advanced Data Visualization Platforms: Tools that transform complex labor market and job seeker data into intuitive dashboards and reports for better decision-making (e.g., Tableau, Microsoft Power BI, or Google Looker for labor market insights) Machine Learning for Skills Gap Analysis: Tools that analyze job seeker profiles and employer demands to identify labor shortages and recommend targeted upskilling opportunities (e.g., IBM Watson Talent Frameworks, Burning Glass Technologies) Automated Reporting Systems: Digital solutions that generate real-time reports on PES performance, labor market trends, and employment outcomes, reducing manual effort and improving decision-making (e.g., SAP BusinessObjects, Oracle Analytics Cloud) 13 Challenges in PES Digitalization The digitalization of PES varies significantly across a predominantly technology-based model before the countries, with differences in infrastructure, pandemic, with digital tools as the primary means of service capacity, and strategic readiness shaping the pace delivery2. Meanwhile, 52% used technology selectively to and effectiveness of adoption. While some PES have enhance specific services like job registration and job successfully integrated technology into service delivery, matching, while 20% continued to prioritize face-to-face others still rely on traditional models with limited interactions, incorporating technology mainly to support digital support. Addressing these disparities requires accessibility for clients with low digital literacy or limited a strategic approach to overcoming key challenges in internet access. Despite these differences, all surveyed accessibility, capacity building, cost, governance, and PES digitalized at least one core service, reflecting a collaboration. broader shift toward technology-driven employment services. However, this uneven progress poses challenges, The level of digitalization among PES remains highly particularly for countries with poor infrastructure or uneven. According to the ILO’s 2022 Global Report on limited digital connectivity, as they struggle to modernize Technology Adoption in PES, 28% of PES had adopted at the same pace as more advanced economies. TABLE 1 Approach to delivering services, by country income group, 2020 (percentage) Key Considerations World High income Upper-middle Lower-middle income income Only in selected 52 47 60 50 services Predominantly 28 30 24 29 technology based Face-to-face 20 23 16 21 Source: ILO 2020 global survey on the use of technology by public employment services, generating 69 valid responses A critical concern in advancing PES digitalization PES staff and users must be equipped with critical 21st- is preventing exclusion of vulnerable job seekers. century skills—such as digital literacy, critical thinking, Vulnerable individuals are the elderly, residents of and problem-solving skills. However, resistance to remote areas, and those with low digital literacy and digitalization may arise due to disruptions in workflows disabilities. For these groups, digital services may not be and traditional practices. Overcoming this requires strong the most effective or accessible means of engagement change management strategies, including stakeholder and service delivery. To ensure inclusivity, PES must engagement, transparent communication, and alignment maintain alternative service channels, such as in-person with PES operational realities. assistance, community outreach, or hybrid models— tailored to the diverse needs of job seekers. Limited technical expertise can hinder local capacity to adopt and sustain technologies, making capacity 2. International Labour Organization (2022). Global Report: Technology building essential. The effective use of digital tools Adoption in Public Employment Services – Catching Up with the Future. requires building local capacity and upskilling PES staff. Geneva: ILO. 14 BOX 3 Country example: Securing staff acceptance in Korea’s digitalization of employment incentives Korea’s Employment Promotion Incentive program—offering financial subsidies to employers who hire disadvantaged job seekers (including youth, persons with disabilities, the elderly, long-term unemployed, and career-interrupted women)— has undergone a significant digital transformation aimed at streamlining procedures and reducing administrative burdens (see Box 8 for more information on the Digitalization of Employment Promotion Incentives in Korea). Follow-up Measures to Address Resistance While these reforms reduced application times and doubled To overcome this resistance and fully realize the benefits of the number of applications, some frontline PES staff resisted digitalization, the Korean government implemented several full adoption, continuing to manually verify documents key measures: despite the new automated systems. Staff training to build confidence in digital systems and Root Causes of Resistance reduce fear of change. Interviews with staff revealed three main reasons for retaining Revised guidelines clarifying that staff are not liable for manual practices: fraud missed by automated systems. Regulatory enforcement penalizing staff who request 1. Fraud prevention concerns – Belief that manual unnecessary documents, ensuring adherence to the checks were more reliable in identifying fraudulent streamlined process. claims. 2. Fear of disciplinary consequences – Worry about This case highlights a critical lesson: Digital transformation personal accountability if automation failed to flag is not only technical—it is deeply human. Achieving its full fraud. potential requires investing in change management, clarifying 3. Professional identity – A sense of responsibility and accountability, and supporting staff through the transition. fulfillment in making eligibility decisions. Digital transformation of PES demands strategic and making to create well-structured digital strategies substantial investment, not just in technology but also essential for managing these changes effectively. Data in infrastructure upgrades, staff training, and system can support change management by providing insights maintenance. To maximize returns, PES must align into service performance, user needs, and workforce these investments with long-term strategic goals and trends, helping PES refine their approaches. However, continuously evaluate their impact. Without careful leveraging data also comes with challenges, such as planning and a clear framework for assessment, digital ensuring data accuracy, system interoperability, and initiatives risk inefficiencies, resource misallocation, staff capacity to interpret and act on insights. To navigate and failure to achieve meaningful service improvements. this transition successfully, PES must take a proactive approach—investing in staff training, adapting workflows Digitalization affects both front-office service delivery to new digital tools, and fostering a culture that embraces and back-office operations, requiring PES to rethink continuous improvement. Clear communication, their organizational structures and workflows. The stakeholder engagement, and phased implementation increasing role of technology demands new skills, updated strategies can help mitigate resistance and ensure a processes, and a shift toward data-driven decision- smooth shift to digital-first operations. 15 PES increasingly rely on advanced data to enhance collaboration requires clear governance structures, service delivery and face significant challenges in well-defined roles, and robust contracts that protect collecting, managing, and utilizing large volumes the interests of both the public and private sectors. of information. Managing the impacts of data requires a strong data governance framework to ensure responsible and effective use. While data- The Role of the Private driven decision-making offers opportunities for more Sector in PES Digitalization personalized and efficient services, it also introduces concerns regarding data privacy, security, and ethical use. To address these concerns and ensure The private sector, including software development responsible data use, PES must establish a robust providers, plays a crucial role in both the opportunities data governance framework. These challenges are and challenges faced by PES in the digitalization particularly pronounced in emerging economies and process. Their involvement can be seen across several lower- and upper-middle-income countries, where dimensions. gaps in data availability and quality can hinder digital transformation. To fully harness the potential of data, Private providers are more frequently at the PES must build the capacity to manage it responsibly forefront of technological innovation and contribute and ensure their systems are equipped to support to digitalization by providing PES with access to more secure and effective service delivery. A well-designed cutting-edge tools. Private providers can offer advanced data governance framework is essential for mitigating solutions that enable PES to digitalize key processes, risks and maximizing the benefits of data-driven such as job matching, skills profiling, and labor market innovation. information production. These technologies help PES improve services for both job seekers and employers The need for systematic evaluation grows as PES by automating processes, offering more personalized increasingly adopt digital solutions for job seeker support, and making job matching faster and more interfaces, back-office operations, and external service accurate. This innovation capacity can accelerate providers. Ensuring the effectiveness of digital tools in the digitalization of PES and any other public entity. PES requires continuous monitoring and evaluation to However, integrating these private-sector solutions into enhance efficiency, accessibility, and service quality. existing public infrastructures, especially in countries Monitoring frameworks should be embedded in both the with low digital maturity or limited IT systems, can be development and implementation phases of any digital complex and costly. initiative to assess whether tools perform as intended and enhance the delivery of active labor market policies. Private sector expertise is useful when PES lacks the While user feedback is valuable for refining services, it technical expertise or resources to develop solutions is not sufficient to determine whether digital tools are independently. Localization of solutions is crucial to meeting their intended goals. Alternative assessment ensure effectiveness. PES have diverse needs based on methods—such as return on investment analysis, cost- local contexts, including varying levels of digital literacy, benefit evaluations, and performance metrics—can infrastructure, and socio-economic factors. More offer a feasible approach to help measure the efficiency, developed PES, with the internal capacity to develop scalability, and effectiveness of digital interventions. their own innovations, benefit from greater flexibility and customization—in-house development allows for A challenge in achieving effective PES digitalization lies tailored solutions that meet the requirements of the in balancing in-house initiatives with available services local context, ensuring a high degree of adaptability and and solutions from the private sector. Many PES seek integration with existing systems. Private providers to leverage private sector expertise and innovation can deliver tailored solutions that address specific to accelerate their digital transformation. However, challenges, such as regional labor market trends, low managing these relations and integrating external digital literacy, or accessibility needs for vulnerable technologies into existing public sector frameworks populations. can be complex. Issues related to data privacy, the alignment of public policy with private sector goals, Private sector companies are well-positioned to offer and the capacity to integrate external solutions into scalable digital solutions that can evolve alongside the legacy systems pose significant barriers. Successful growing and changing needs of PES. As PES expand their 16 digital services, particularly in response to the demands use. To safeguard sensitive job seeker and employer of an increasingly digital-first society, private providers information, PES must implement robust regulatory can offer solutions that can be scaled to accommodate oversight, establish clear contractual agreements, growing user bases, new services, or additional features. and enforce strict data protection measures Scalable solutions enable PES to gradually expand when collaborating with private sector providers. their digital services, allowing for more widespread Furthermore, policy and regulatory alignment is access to support and reduce the risk of technological essential to ensure that digital tools comply with labor obsolescence. However, ensuring long-term sustainability policies and data protection laws. of these solutions requires ongoing support, maintenance, and periodic updates, which can be costly and resource Thus, private providers can play a crucial role in helping intensive. PES modernize their service delivery through innovative technologies, specialized know-how, capacity building, While private providers bring advanced skills and and effective data management tools, ultimately innovation, their involvement in PES digitalization improving labor market outcomes. However, successful also requires careful consideration to ensure private procurement and public-private collaboration sustainable digital transformation. Integrating requires careful consideration to overcome the advanced technologies is essential, but affordability challenges for integration, customization, data security, and scalability are critical considerations especially and the scaling of solutions. By strategically and for countries with limited budgets or underdeveloped realistically leveraging the strengths of both sectors, digital infrastructure. Additionally, over-reliance on PES can navigate these challenges and fully realize the private providers can also reduce PES control over potential of digital transformation. system evolution, creating long-term dependencies on proprietary technologies. Therefore, PES must balance external support with strengthening their internal capabilities. Partnering with private providers exposes PES staff to new technologies, offering opportunities to build internal expertise. Actively involving PES IT staff in system development and implementing structured handover training can enhance their capacity in system management, troubleshooting, and customization. Including knowledge transfer requirements in procurement agreements—such as specifying training provisions in Terms of Reference (ToRs)—can strengthen PES ownership of digital tools and ensure long-term continuity. However, while private providers facilitate knowledge transfer in certain situations, scaling these efforts across all PES staff and ensuring sustained technical capacity can be challenging, particularly in countries with limited resources or diverse training needs. As PES digitalize, they increasingly rely on data for decision-making and sometimes on private sector providers for data management solutions. While many providers offer advanced tools to securely handle large datasets and improve decision-making, their involvement also raises critical concerns. Relying on private providers to manage government datasets raises risks related to data privacy, security, and ethical 17 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions MODULE A. PES Objectives and Challenges Identification This module encourages PES managers to undergo an initial phase of exploration to reflect on the organization’s primary objective, understand the main What specific challenge is PES challenges, define clear objectives, and review existing aiming to address—and is technology the right solution ? business processprocesses before engaging in any digitalization initiative. Review of existing business processes and service delivery models ensure these processes are streamlined and optimized as a prerequisite to any digitalization effort. Practical tools are suggested to help ensure that the decision to digitalize is well-informed, thoroughly studied, and useful to the organization’s goals and capacity. What are the root causes of the challenge, and how can Some policymakers struggle to define clear objectives ? tools like root-cause when approaching PES digitalization projects, often due to lack of clarity on prioritization of operational analysis help clarify them bottlenecks and its potential digitalization solutions. Interviews with country PES representatives and key private software providers revealed a common challenge—uncertainty on where to begin digitalization. While many governments express interest in digitalizing their PES, they often struggle to articulate the specific How can PES define a clear entry points but have a realistic expectation of potential ? digitalization strategy that aligns benefits and costs of digitalization. with its goals and level of ambition Before pursuing digitalization, a thorough exploration process using tools proposed in this module may reveal that digitalization is not always the first or best solution. Instead, it may highlight the need for business process reassessments, optimization, or structural adjustments 18 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions to improve efficiency and service delivery. The need to digital solution. Systematically identifying root causes digitalize should only come after identifying a challenge can lead PES to determine where technology can and root cause that directly points towards digitalization. genuinely enhance performance, instead of replicating existing inefficiencies in digital form. Properly assessing and identifying challenges and operational bottlenecks can help determine whether According to a recent ILO survey, performance digitalization is the appropriate solution. If digitalization improvement and coverage expansion are the main is necessary, the next step is to evaluate whether the drivers of PES digitalization, yet these goals are only organization has the human, technical, and financial met when technology is targeting a clear operational capacity to implement it effectively. In many cases, short- need (Figure 1).3 Without such clarity even advanced and medium- term measures are required to strengthen technologies can reproduce existing bottlenecks rather internal capacity and optimize existing processes, than solve them. Defining a precise challenge is the ensuring that PES is adequately prepared to implement a first and most essential step in ensuring digital efforts suitable digital solution. support PES goals. The most successful digitalization efforts come from targeting clearly defined issues—not from adopting technology for its own sake. A1. Defining the Challenge To avoid approaching challenge identification with a predetermined intention to digitalize these common A crucial step in determining whether digital solutions will pitfalls, PES can use structured diagnostic tools to truly add value is clarifying what problem digitalization is identify the main challenges and explore possible trying to solve. Not all challenges require a technological potential root causes. Tools like the Ishikawa (fishbone) fix, and some may even be worsened by an unsuitable diagram4, also known as the “Five Whys” help break Figure 1. Drivers of technology adoption among public employment services, by country income group, 2020 (percentage) Source: ILO 2020 global survey on the use of technology by public employment services, generating 69 valid responses 3. International Labour Organization (2022). Global Report: Technology Adoption in Public Employment Services – Catching Up with the Future. Geneva: ILO. 4. International Labour Organization (2021). Public Employment Services: Diagnostic Tool and Guide. Geneva: ILO. 19 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions down complex problems into their underlying causes. It A2. Creating a Clear Digital Strategy helps distinguish between issues that require process improvements, policy adjustments, or additional resources versus those that could both benefit from Digitalization efforts should be a part of a broader PES process improvements and digitalization. digital strategy if the results of the assessment reveal digitalization as a useful solution. A well-defined strategy A root cause analysis is particularly useful when ensures that digitalization is not implemented in an ad- considering digitalization. It helps PES uncover whether hoc manner but follows a structured plan that aligns inefficiencies stem from technological gaps or other with PES objectives, capacity, and long-term vision. factors. Additionally, other assessment tools, such as Strengths, Weaknesses, Opportunities, and Threats Research shows that having a clear digital strategy is a (SWOT) analysis and core competency assessments, widely adopted practice—with 82% of PES digitalization can offer valuable insights into broader organizational initiatives surveyed following an explicit digital strategy capabilities and limitations. Using a combination of with a clear roadmap guiding these digitalization these methods can help PES make informed decisions efforts5. Aligning digital investments with well-defined about whether digitalization is the right approach or if objectives ensures that technology is used effectively to alternative solutions would be more effective. improve service delivery, efficiency, and outcomes for job seekers and employers. BOX 4 A key function of a digital strategy is to define the right objectives from the start, ensuring that digitalization efforts remain focused, feasible, and aligned with institutional resources. Without this clarity, digital Examples of right solution initiatives risk being either too ambitious and unfeasible identification through or too limited to achieve meaningful impact. root-cause analysis Digitalization can occur at different scales, each Challenge: Low Job Seeker Engagement requiring different levels of investment, technical A root-cause analysis might reveal that low capacity, and institutional readiness. This can range from job seeker engagement stems from a lack of simply digitizing paper-based records to undertaking a awareness, cumbersome registration processes, full-scale digital transformation of PES. Understanding or limited staff capacity, which might require non- these distinctions helps define the boundaries of the digital interventions. However, if the issue is delay digitalization effort, ensuring it remains manageable and in processing job applications due to manual data aligned with the operational capacity and strategic goals entry, a digital solution like an automated case of PES. management system could provide real benefits. Challenge: Low Employer Participation Similarly, if PES is struggling with low employer participation in job-matching services, root-cause analysis might reveal that employers are unaware of PES services and find the registration process too complex; or lack trust in PES services—all of which might require non-digital interventions. However, if the issue is employers abandon job postings due to an outdated interface or a lack of integration with existing recruitment tools, a digital solution like a simplified employer portal or automated job posting feature could provide real benefits. 5. International Labour Organization (2022). Global Report: Technology Adoption in Public Employment Services – Catching Up with the Future. Geneva: ILO. 20 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Figure 2. Overview of the relationship between the three levels of digitalization Digitization Digitalization Digital Transformation The simplest and often A more advanced A comprehensive initial first step, focused step that focuses on organizational shift to on converting information processes and involves integrate technology into all from paper to digital using technology aspects of PES operations form. This is essential for automation and and service delivery, for enabling any future optimization. For PES, this transitioning to a digital- digitalization efforts. could include automating first approach. For PES, this Examples include digitizing job seeker registration, includes interconnected job seeker records, enabling employers to systems like end-to-end employer profiles, or case post vacancies online, or digital case management, management forms. introducing digital case LMIS with real-time analytics management systems, for decision-making, or and referral tracking. AI-powered job matching platform. Making materials Making Services Making organizations digital and digital digital Focus of Digital Strategy Focus in time Increase in complexity Source: European Commission: Directorate-General for Employment, Social Affairs and Inclusion, ICF & Pieterson, W. (2019). A starting guide on creating a digital strategy for PES : getting started with digital strategies, Publications Office. https://data.europa.eu/doi/10.2767/102067 In practice, the three levels of digitalization—digitization, suggested organizational assessments and reflections digitalization, and digital transformation— often overlap on PES’s overall mission and objectives. This tailoring rather than unfold in strictly separate stages. Most of digitalization efforts to the PES’s specific context will organizations typically begin with digitizing records, then help shape a realistic and actionable digital strategy, expand to process automation, and may gradually adopt ensuring that digitalization efforts are ambitious enough broader transformational changes. The appropriate to drive meaningful improvements, yet practical enough blend and sequence will be based on the results of the to be implemented effectively. 21 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Business process mapping can range from simple documentation of steps (e.g., who does what, when, and how) to more detailed analysis of workflow dependencies and efficiencies. For instance, PES may start by outlining Useful resource: how job seekers register for services, then examine A starting guide on creating a decision points and delays in processes like assigning job seekers to counselors. At a more advanced level, digital strategy for PES: Getting mapping helps identify bottlenecks, redundancies, or started with digital strategies automation opportunities, such as whether self-service A Starting Guide on Creating a Digital Strategy for digital tools could streamline intake. PES, published by the European Union, provides practical guidance for PES when embarking To conduct an effective business process mapping on digital transformation. It helps PES define exercise, PES must first gather existing documentation. their digital strategy, align technology with If formal records are lacking, PES should engage organizational goals, and navigate challenges directly with staff through interviews, workshops, and such as fragmented systems and adoption observations to capture how tasks are performed. In resistance. Using real-world examples from PES and other sectors, the guide offers strategic such cases, mapping the “As-Is” process6 is especially insights and best practices to support effective important because it creates a clear picture of how and sustainable digitalization. work is done, revealing any inefficiencies or informal steps that could affect productivity or digitalization. In addition to workflows, capturing data flows or how information is collected, stored, and transferred, can be particularly valuable if digitalization is considered in the A3. Mapping Business Processes future. It helps identify integration needs, automation opportunities, and potential data gaps. Digitalization is most effective when streamlined and Process mapping and root cause analysis are well-functioning, making process mapping a crucial complementary exercises. In analyzing how a process step in determining how technology can add value. functions, PES managers often uncover additional This submodule focuses on understanding the existing insights on an existing challenge, reinforcing the need for business processes which is essential to the successful a structured, step-by-step approach before introducing integration of digital solutions. digital solutions. Business processes mapping should be the starting point for any decision to change the current operating model, including any digital solution. A thorough business process mapping exercise should capture all relevant processes related to the identified challenge – whether they are entirely manual, partially automated, or fully digital. By documenting how tasks flow, which stakeholders are involved, and where bottlenecks occur, the path to digitalization becomes clearer. This enables the design of digital solutions to be more effectively aligned with the existing operational model. 6. The “As-Is” processes refer to how tasks are currently performed, rather than how they are intended to function. Mapping the actual processes helps identify inefficiencies and informal practices, that might not be documented. 22 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions BOX 5 Country example: Business process mapping in Tunisia’s PES digitalization Tunisia’s Public Employment Services – Agence Nationale pour l’Emploi et le Travail (ANETI) -- recognized the need to optimize their processes before introducing new technology. Rather than simply automating existing workflows, ANETI first mapped out user journeys7 to ensure the new systems would be efficient, intuitive, and aligned with operational needs. The guiding principle: “Digitalizing a bad process is a mistake.” The understanding of this fundamental principle by the management and leadership teams at ANETI and the Ministry of crucial to accompanying the PES agency in its digital Employment, in alignment with their strategic vision transformation journey. outlined in ANETI Vision 2030, is essential for a successful digital transformation process. The process mapping and simplification effort resulted in a structured roadmap for digitalization – ANETI worked with the World Bank team, with technical considering both software and hardware components. support from a consulting firm to conduct an This approach allowed ANETI to streamline processes, extensive process mapping exercise over nine months. establish clear functional specifications, and lay the Through a series of workshops, they documented groundwork for their new job matching and information existing workflows, identified inefficiencies and refined systems. One important dimension that contributed to functional requirements for their digital solutions. This the success of the digital transformation process was the groundwork helped define clear user journeys for job coordination between donors and technical partners, seekers, employers, and PES counselors, ensuring that together with ANETI. By building on one another’s value the new system would be built around their needs. added, partners were able to create synergies, avoid This intensive support provided by the combination of duplication, and ensure alignment with ANETI’s vision the World Bank and the technical consulting firm was throughout the process. 1. Identify design failures Process mapping helps document workflows, but a well- documented process is not necessarily an effective one. (structural issues) - Is this business process Some processes may be structured logically on paper (or set of connected business processes) but fail in practice due to poor implementation, while others may be inefficient because of fundamental design flaws. Distinguishing between these two issues is critical designed to deliver the intended service efficiently and effectively ? as digitalization may automate inefficiencies rather than resolve them. The following two questions can guide the analysis of business processes: 2. Identify implementation failures (operational issues) - Is the business process currently working the way it was designed? 7. User journeys refer to the step-by-step experiences of different users—such as job seekers, employers, or PES staff—when interacting with a service or system. If the design is sound, is the process working as intended in practice ? 23 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Understanding this distinction is critical because not correctly, there may be other solutions such as all process inefficiencies require digitalization. If better staff training, clearer guidelines, or improved the design is flawed, digitalizing the process will only resources rather than introducing new technology. entrench inefficiencies in a new format. In contrast, if The following example illustrates how this distinction a well-designed process is simply not being followed applies to PES context (Box 6). BOX 6 Identifying design versus implementation failures Job counseling services are a key function of PES, providing tailored support to job seekers. When challenges arise— such as long wait times or inconsistent service quality—it is important to determine whether the issue stems from service design or execution. The following questions illustrate this distinction within the job counseling process. Design failure (structural issues) – A job counseling service may be difficult to access due to: A complex appointment system requiring multiple in-person visits. Unclear criteria for assigning job seekers to counselors. Insufficient capacity to handle demand. If these issues exist, redesigning the process—such as simplifying scheduling or defining clearer allocation rules—could be explored before digitalization. Implementation failure (operational issues) – even well-designed processes may underperform due to: Counselors not following standardized session formats. Scheduling delays caused by understaffing. Job seekers reporting dissatisfaction with counseling quality. In such cases, operational improvements such as better training, monitoring, or resource adjustments may be an effective approach. Digitalization becomes relevant when both the job counseling process design and execution are functioning well, although inefficiencies remain. Often times, the reassessment of design and execution will happen at the same time as digitalization. In such cases, digital tools may help scale or streamline service delivery. A virtual counseling platform, for instance, can expand access for remote job seekers, or automated scheduling can improve efficiency. Once existing workflows are mapped, the next step is If a process is performed often, involves structured data, to develop improved processes (or new ones, if needed) follows consistent steps, and doesn’t require complex by streamlining steps, eliminating redundancies, and human judgement at every stage, it is a strong candidate clarifying roles and responsibilities. At this stage, PES for digitalization. Conversely, processes that are highly can consider possible digitalization opportunities by customized, infrequent, or dependent on nuanced, in- determining which processes are more suitable to person judgement may benefit more from human-led digitalize or automate. The processes that are high- improvements than from automation. frequency, repetitive, data-intensive, and standardized are typically the ones that benefit the most from Box 7 identifies key processes along the PES delivery automation—and where technology can have the chain that can benefit from digitalization. greatest impact. 24 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions BOX 7 Identifying high-potential processes for digitalization Outreach Provision of Services and Benefits Process: Manual outreach via call lists, printed flyers, Process: Manual scheduling, eligibility verification, or in-person events. A high-frequency, standardized and benefit processing possibly leading to long process with broad reach and consistent messaging. wait times, inconsistencies, and high administrative Potential digital solution: Starting with SMS/email workloads. These tasks are repetitive and rules- notifications and simple websites, evolving into based, making them well-suited for automation. targeted social media outreach with audience Potential digital solution: Automated or email- segmentation, and engagement tracking. based appointment booking system, online eligibility Potential benefits: Increasing efficiency, personalizing verification, case management systems, and digital communications, and reaching a wider audience. service delivery (e.g., virtual counseling). Potential benefits: Reducing administrative burdens, Intake and Registration shortening processing times, and enhancing service Process: Paper-based registration and manual data responsiveness. entry, causing delays or possible errors. A high- volume, repetitive process that requires structured Intermediation data collection. Process: Manual job matching involves handling Potential digital solution: Can range from online large amounts of candidate and employer data. registration forms and email-based registration to Potential digital solution: Can range from self-service kiosks, and digital identity verification. online job boards and WhatsApp groups for Potential benefits: Reducing errors, speeding up job announcements, to online job portals with processing, improving accessibility, and enabling automated matching algorithms, digital case better data management. management systems for employment counselors, and real-time labor market information integration. Assessment and Profiling Potential benefits: Improving matching accuracy Process: Manual assessments and paper-based and speed, providing job seekers and employers profiling forms to evaluate job seekers’ skills, work with more self-service options, and enhancing labor history, and career interests. It is a time-consuming market insights. process that requires consistent data collection. Potential digital solution: Online self-assessment Ongoing Monitoring and Evaluation tools, standardized digital profiling tools, AI-assisted Process: Manual data collection and reporting. A job readiness assessments, and automated skills- data-intensive process which can be prone to errors. matching suggestions. Potential digital solution: From simple excel-based Potential benefits: Improving consistency in tracking systems and online feedback surveys to assessments, reducing processing time, and digital dashboards, automated reporting systems, enhancing data-driven job matching. real-time KPI tracking, and AI-powered data analytics. Potential benefits: Enhances data accuracy, enables timely decision-making, and improves program monitoring and evaluation efficiency. All PESs share a similar delivery chain for servicing jobseekers: Provicion of Assessment Services Outbreach Intake and Intermediation and Enrollment Benefits Monitor and Evaluate across the chain 25 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions BOX 8 Country example: Digitalization of Employment Promotion Incentives in Korea Korea’s Employment Promotion Incentive program has undergone a significant digital transformation to improve efficiency and reduce administrative burdens. Prior to reform, the application process was time-consuming (over 3 hours), paper-heavy (requiring 5–7 documents), and difficult for both employers and frontline staff. In response, the Ministry of Employment and Labor (MOEL), through the Employment Service Infrastructure Division, 4,885 to 8,402 annually), showing clear gains in partnered with the Korea Employment Information accessibility and efficiency. The reform also reduced Service (KEIS) and private IT providers to: arbitrary document requests and freed up staff time for more value-added tasks. Map and simplify existing workflows Eliminate redundant documentation This example illustrates how high-frequency, requirements structured, and standardized processes are strong Introduce automation features such as candidates for digitalization—especially when eligibility pre-screening and automated paired with clear roles, refined procedures, and document verification. data integration. However, as mentioned in Box 3, full adoption requires cultural and behavioral change. As a result, the application time dropped to under Complementary measures—like staff training, revised 30 minutes, documentation requirements were guidelines, and clarified accountability rules—were eliminated, and applications nearly doubled (from key to securing staff adaptability and digital gains. 26 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions MODULE B. Assessing Assessing the Readiness the Readiness Successful implementation depends on whether PES has Does PES have the internal capacity — the necessary resources, infrastructure, institutional ? technology, staffing, and budget— capacity, or budget to support digitalization. These factors—along with the need for streamlined and well- to support and sustain digitalization structured processes—play a decisive role in shaping how digitalization is implemented and sustained over time. This module will focus on assessing these conditions, helping PES determine the feasibility of their digital strategy and ensure that digital investments align with operational realities. What tools can PES use Beyond process optimization, PES managers must also to assess internal ? evaluate their internal readiness for digitalization. This includes assessing whether they have the necessary technical readiness for digitalization infrastructure, human capacity, and financial resources, to support the transition. At the same time, external factors such as vendor availability, regulatory requirements, and government IT policies will influence the feasibility and approach to digitalization. This module provides tools to guide How do external factors like market PES managers through internal and external assessments, ensuring that digitalization efforts are both well-planned and dynamics, digitalization policies, ? sustainable. and data regulations shape PES digitalization opportunities 27 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions B1. Internal Assessment: Evaluating PES Readiness for Digitalization Useful resource: Procurement Practice Note Digitalization demands a realistic understanding of current capabilities and constraints. A structured The GovTech Procurement Practice Note, developed by the World Bank, including a team of procurement assessment ensures that investments are targeted, experts, provides practical guidance on how to helping PES to allocate resources effectively between effectively procure GovTech solutions, ensuring that strengthening IT systems and building staff capacity to technology adoption in government services—such securing sustainable funding. as PES—is strategic, efficient, and citizen-centered. This submodule focuses on assessing the digital Here is a summary of the key tools and frameworks readiness of PES—determining whether it has the provided in the note: necessary foundations to implement and sustain digital solutions. Understanding this is highly important A Five-Step Framework for GovTech in making informed decisions about the scope and Procurement – Helps countries systematically approach of the digitalization effort. plan, assess, and execute procurement for digital solutions. A digital readiness assessment examines three core dimensions: Key Requirements for Implementing GovTech Solutions – Outlines the technical, operational, and governance needs for successful digitalization. 1 Technology and Procurement Strategies for Innovative Technologies – Explores tailored methods Infrastructure such as market research, competitive dialogue, Reviewing existing IT solutions, and public-private partnerships for acquiring hardware, software, and GovTech solutions. interoperability toidentify strengths and Best Practices for Digitalizing Public gaps. Procurement – Highlights lessons from 2 3 e-Government Procurement and other digital governance reforms. Human and Financial Resources Leveraging Emerging Technologies in Organizational Capacity and Budgeting Procurement – Explores the potential of Evaluating staff digital Understanding the budget AI, blockchain, and automation to improve skills, IT expertise, and available for digitalization transparency, efficiency, and competition in governance structures efforts, including ongoing government procurement. that support digital operational costs. operations. This assessment is conducted with digitalization in mind, helping PES set realistic priorities and boundaries for implementation. The findings will inform decision- making, ensuring that digital initiatives align with existing capacity and available resources. 28 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions B.1.1 Technology and infrastructure A realistic and sustainable digitalization initiative such as Terms of Reference (ToRs), are based on depends on an accurate assessment of existing IT realistic technical requirements, streamlining vendor systems, digital tools, and infrastructure. This includes selection and reducing the risk of adopting incompatible reviewing hardware, software, data management or unsustainable solutions. systems, and interoperability with other government platforms. A well-functioning technology ecosystem To support this assessment, two valuable tools can enables smooth service delivery, while gaps in help PES evaluate their technology and infrastructure infrastructure can lead to inefficiencies, security risks, readiness. These resources provide structured or integration challenges. approaches in assessing system capabilities, security, and scalability, ensuring IT solutions align with Beyond identifying current strengths and weaknesses, operational needs. Using these tools can help PES identify understanding existing IT infrastructure helps PES make gaps, risks, and opportunities. It can further strengthen informed decisions on software hosting and scalability PES digital infrastructure for sustainable and efficient needs. It also ensures that procurement documents, service delivery. Useful tool 1 Useful tool 2 Technology Readiness Social Protection Assessment Assessment (TRA) Resource Kit for Information Technology (SPARKS-IT) The TRA is a structured tool designed to evaluate an organization’s IT infrastructure, cybersecurity, and SPARKS-IT is specialized tool, soon to be published, system integration capacity before implementing designed to assess and enhance IT systems that support new technologies. It can help PES managers assess social protection programs. It helps governments, scalability, security, and digital readiness before policymakers, and IT professionals ensure their digital implementing new technologies. infrastructure is efficient, secure, and scalable. The TRA covers the following key areas in infrastructure The tool assesses eight key domains, however, for and digital systems: the purpose of evaluating software, technology, and infrastructure, it specifically focuses on the following Hosting & Cloud Readiness: Whether PES platforms areas: are hosted on-premises or cloud-based, and if internet infrastructure supports cloud adoption. Software & Technology Stack: Scalability & Performance: Can the IT system How is the system designed and built (e.g., modular handle increased demand, and is there a plan for vs. monolithic architecture)? expansion if service usage grows? What technologies and programming languages Cybersecurity & Data Protection: Are security are used for development? measures in place to prevent data breaches, How do software components integrate and cyberattacks, and unauthorized access? communicate with each other? Software & Integration: Can PES systems connect seamlessly with other government databases, labor Hardware, ICT, Data Centers & Hosting: market platforms, or private sector tools? What hardware and infrastructure supports the system? Source: GovTech (2020). GovTech Procurement Practice Note. EFI Is data stored on-premises or in the cloud? Insight-Governance. Washington, DC: World Bank. What is the security and reliability of data centers and hosting solutions? Source: World Bank, forthcoming 29 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Box 9 provides an example of South Africa’s PES the importance of aligning PES’s digitalization efforts digitalization efforts and an assessment of their internal with broader government IT initiatives to improve data software and technology infrastructure. It highlights quality availability and user engagement. BOX 9 Country example: South Africa’s PES digitalization South Africa’s current approach to PES digitalization reflects an ongoing effort to balance internal and external IT expertise while aligning with broader government IT strategies. The country’s primary digital platform, the Employment Services of South Africa (ESSA) system (essa.labour.gov.za), initially developed in Java, includes both a client- facing portal and a backend for PES staff. It has been effective in managing employment-related data and is interoperable with key government Agency (SITA), which is subject to very strict security databases, such as the Department of Home Affairs protocols. While essential, strict security protocols (DHA) and the South African Qualifications Authority can sometimes slow system performance. This (SAQA), enhancing its functionality. experience highlights the importance of also ensuring that systems have the capacity and Building on this foundation, South Africa is now scalability needed for faster, more responsive undertaking a broader digital modernization in services. Regular, comprehensive assessments help which the Department of Employment and Labor align digitalization efforts with the system’s actual (DEL) is transitioning to a new SAP-based platform, capabilities and protocols—supporting long-term SAP Diphetogo. This transition is designed to enhance sustainability. user experience, boost system performance, streamline registration processes, and improve Assessing IT maturity is just one aspect of internal data sharing/interoperability across institutions. This readiness. A realistic internal assessment will transition is part of a department-wide IT upgrade— enable PES institutions to set clear priorities, pursue not limited to PES—highlighting the importance of achievable digital goals, and avoid investments aligning PES digitalization with broader government that may encounter institutional barriers. South IT initiatives. Africa’s experience shows the value of integrating PES digitalization within a broader institutional and A key insight from this transition is the importance government-wide IT strategy—demonstrating that of regularly assessing IT infrastructure to ensure it sustainable modernization requires not only the can support evolving digital needs. ESSA, like many right technology but also careful alignment with other government systems, relies on data servers institutional capacity, governance structures, and managed by the State Information Technology long-term digital priorities. 30 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions B.1.2 Human and organizational capacity Digitalization plans must be grounded in a realistic understanding of both the existing workforce and the Understanding the human resource capacity of PES investments required to fill gaps, whether through is critical in determining the feasibility and success of training, hiring, or partnerships. PES leadership any digitalization effort, ensuring that any proposed must consider how staff resources—particularly IT solutions align with the organization’s current or specialists—will support digital infrastructure, from potential capabilities. Human resources play a central routine maintenance to scaling solutions for increased role not only in implementing digital solutions but also in demand. At the same time, digital literacy initiatives for ensuring their long-term sustainability. The assessment non-IT staff must be prioritized to ensure that these tools must begin with specialized IT staff whose expertise enhance, rather than hinder, daily operations. Mapping will directly influence the choice and implementation the full spectrum of human resource capacities early in of technologies, as well as the management of IT the process allows PES to design digitalization strategies infrastructure. It is followed by assessing the digital that are not only technically sound but also operationally literacy of non-IT staff, who are often the primary users sustainable. Box 10 presents an initial set of questions of these digital systems. that provides a guide for the staff assessment process. BOX 10 PES staff capacity assessment guide questions 1. IT Staff Capacity and Readiness Does PES have a dedicated IT team with expertise in system administration, maintenance, cybersecurity, and scaling digital solutions? What specific technical skills (e.g., software development, database management, cloud computing) are available in-house? What gaps exist in IT expertise, and can they be addressed through training, hiring, or outsourcing? 2. Non-IT Staff Digital Literacy and Adoption What is the current level of digital literacy among non-IT staff? How familiar are staff with using digital platforms for their daily operations (e.g., case management, data entry, reporting)? Is there a helpdesk or IT support available to assist non-IT staff with technical issues? Are non-IT managers regularly trained to oversee and support technological changes effectively? 3. Training and Change Management Does the PES rely primarily on “learning by doing”, or are there structured training programs in place? How frequently is digital skills training provided, and is it mandatory or optional? Are there strategies in place to manage resistance to new technologies? Are there partnerships with external providers or universities for ongoing digital skills development? 4. Sustainability and Workforce Planning How does PES ensure the retention of IT talent given competition from the private sector? What long-term workforce investments (e.g., hiring, upskilling, partnerships) are needed to sustain digital solutions? Are digital skills included in performance evaluations or career development plans? 31 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions B.1.3 Financial resources and budgeting BOX 11 The scale and sustainability of PES digitalization is mostly determined by its financial capacity. Digitalization efforts require more than a one-time investment in Financial assessment software development or hardware purchase – it also for PES digitalization entails new recurring costs for system maintenance, 1. Existing Budget Allocations and operational support, security updates, and long-term IT Funding Streams management. Without a clear understanding of available funding and its duration, PES risks implementing digital Does PES have a designated budget or line item for technology upgrades, IT maintenance, tools that cannot be properly maintained, updated, or or digital innovation? scaled. Are digitalization funds part of a recurring budget (multi-year or rolling) or one-time-only Assessing financial capacity enables PES to allocate (e.g., a grant or donor-funded project)? resources strategically, ensuring that digitalization efforts prioritize key needs while remaining financially 2. Financial Management and Oversight sustainable. This includes evaluating how digitalization Does PES have full control over its IT and is funded—through government budgets, donor support, digitalization budget, or are funding decisions or public-private partnerships—as well as accounting made by a central agency, ministry, or finance for potential ongoing costs. A detailed financial plan department? helps PES balance upfront investments with long-term Are there constraints on how PES can operational expenses and make informed decisions allocate digitalization funds (e.g., capital versus operational expenses, staffing versus about scaling digital solutions effectively. technology purchases)? There are a few concepts that can guide budgetary 3. Operational Sustainability and Cost- analysis for digitalization efforts. PES managers Sharing initiating a digitalization project should consider the If funding is project-based (donors, loans, etc.) Total Cost of Ownership (TCO). GovTech (2021) defines how does PES plan to cover operational costs TCO as “all direct and indirect costs for the acquisition once external support ends? and use of a system or product. This includes any upfront Are there public-private partnership (PPP) development and CapEx as well as any operations and frameworks or vendor cost-sharing models that maintenance expenditure or other OpEx over a defined PES can consider? Do any government-wide IT services (like period”.8 centralized hosting or cybersecurity support) reduce the PES’s financial By balancing expectations between capital expenditures burden for digital projects? (CapEx) and operating expenses (OpEx)9, PES can plan for initial funding approvals while also considering long-term operational and maintenance costs. Failing to account for both upfront and recurring expenses can jeopardize digitalization efforts, leading to underfunded systems B2. External Assessment: and unsustainable investments in digital solutions. Navigating the Digital Landscape for PES 8. GovTech (2021). PES digitalization efforts are shaped by external factors, 9. Capital expenditures (CapEx) refer to upfront costs, typically including existing service providers, government one-time investments, associated with acquiring or developing digital systems, such as software development, purchasing policies, funding opportunities, and regulatory hardware, or infrastructure investments. Operational requirements. PES must consider similar digital service expenditures (OpEx) cover ongoing costs required for the day-to- providers, alignment with national IT and e-government day functioning/maintenance of a system, such as cloud hosting, technical support, system upgrades, and other recurring expenses strategies, and legal frameworks before investing in necessary to sustain operations. new digital solutions. 32 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Early assessment can help PES identify potential assess whether similar digital services are already partnerships and ensure compliance with national in place. This includes both public and private sector regulations. It can also avoid duplication of efforts. This actors that may already be delivering employment- helps secure sustainable funding, build interoperable related digital services, offering labor market data, systems and complement broader government or or managing government IT infrastructure. This private sector initiatives. Taking these factors into helps PES avoid duplication and identify collaboration account enables PES to develop digital solutions that are opportunities. practical, well-integrated, and aligned with long-term policy objectives. It is also important to determine whether relevant expertise exists in the market to support digitalization B.2.1 Mapping Key Actors efforts. PES may need to explore options such as in- in PES Digital Ecosystem house development, international procurement, or partnerships with larger technology providers when Before investing in digital solutions, PES must first local software developers, IT firms or technology map the external landscape to determine gaps and vendors are limited or lack the required expertise. BOX 12 Key actors to consider Employment and Social Protection and Software and Labor Market Data Unemployment Services E-Government Solutions Technology Existing Digital Labor Market Social Protection Government IT and Software Employment Data Providers Agencies and e-Government Development Services Bodies Service Providers • What digital • Which statistical • What • What national • What local IT tools or services agencies, private government IT authorities, firms, software are private firms, or research bodies have digital identity vendors, or job platforms, institutions digital systems platforms, or consultants offer recruitment provide labor that manage centralized data services that agencies, or market insights? unemployment systems exist? could support career counseling • Can PES leverage benefits, social • Are there PES digitalization? providers already existing data assistance, government-led • Given the offering? sources to or pension cybersecurity capabilities • How do these strengthen its schemes? frameworks, available, should relate to PES analytics or • How should cloud hosting PES procure digitalization complement it PES align, services, or locally, seek efforts? by developing exchange data, interoperability international • Could PES relevant data or integrate with guidelines that providers, integrate with, collection these systems PES must comply or consider complement, or mechanism? to ensure with? in-house differentiate from interoperability? development? these services? 33 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions The digitalization of PES is not a standalone effort but part of a broader employment and social protection ecosystem. Existing digital employment platforms and Quick insights labor market data providers can complement PES services rather than compete with them, providing Public-private opportunities for collaboration on job matching and collaboration: Partnering workforce insights. Social protection agencies manage systems that intersect with PES functions, such as with existing service providers unemployment benefits and social assistance, making PES can unlock significant synergies by partnering integration crucial for service efficiency. with existing private-sector job matching platforms and labor market data analytics companies The availability of software development providers can rather than viewing them as competitors. These also directly shape PES digitalization options. If local platforms already serve large user bases and vendors have the necessary expertise, PES may procure leverage advanced technologies, while PES brings solutions domestically. Otherwise, international providers institutional credibility, labor market oversight, or in-house development may be required. In some cases, and access to underserved populations. Such partnerships can enhance labor intermediation by fully customizable solutions are unrealistic with limited expanding service reach, improving job-matching market capacity and require PES to explore off-the- accuracy, and strengthening labor market shelf platforms, modular approaches, or open-source intelligence. alternatives. Early assessment of market capacity helps PES determine feasible, cost-effective and sustainable digitalization strategies. BOX 13 A significant milestone in public-private collaboration came in 2011, when JobKorea, Incruit, Saramin, and Work- Net signed an agreement to share job postings. With this partnership, job seekers can now view job opportunities listed on private portals through the public platform— an initiative widely seen as a successful case of mutual benefit through data sharing. Private platforms typically focus on vacancies in large Country example: Korea’s and mid-sized companies, which are especially attractive to younger job seekers. In contrast, Work-Net—now collaboration cases with private integrated into the “Employment 24” portal as of 2024— employment portals primarily serves small businesses and self-employed individuals who lack dedicated HR capacity. In addition South Korea has a long history of both public and to job postings, Employment 24 offers integrated services private digital platforms supporting job seekers and for unemployment benefits and vocational training employers. Even before private portals emerged, the applications, positioning itself as a comprehensive public public sector had been active in job matching. In 1987, it employment service. introduced a text-based job placement system. In 1998, the government launched Work-Net, a web-based public Despite these advancements, one important limitation employment platform. Around the same time, private remains: while users can view private sector job listings employment portals like JobKorea and Incruit (both on Employment 24, applying for these jobs still requires founded in 1998), followed by Saramin in 2005, entered a separate registration on the respective private portals. the market and quickly gained popularity. This indicates that while there is ongoing collaboration between public and private employment services, full Over the years, Work-Net and private platforms have integration remains a challenge, and some level of evolved by capitalizing on their respective strengths. competition between platforms persists. 34 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions PES digital systems can benefit from being linked with other government platforms rather than functioning in isolation. Many PES services such as job matching, Quick insights unemployment benefits, and labor market analytics leverage data from social protection agencies, tax Digital Convergence authorities, and education systems. Integrating with Initiative (DCI) these systems can streamline services and allow PES to verify employment history, process benefits faster and Many governments are working toward greater enhance labor market insights. digital integration across public services through the Digital Convergence Initiative However, integration comes with challenges such as (DCI). DCI promotes interoperability between outdated systems, inconsistent data formats, and privacy social protection government programs, concerns. PES must align with national e-government ensuring smoother data exchange and more strategies and follow standardized protocols to ensure efficient service delivery. By aligning with DCI secure and efficient data exchange. Addressing system principles, PES can improve data accuracy, integration early in the digitalization process makes it reduce administrative burdens, and enhance easier to align technical requirements. It can also avoid cross-agency collaboration—leading to a more costly adjustments and ensure smoother interoperability connected and effective public sector. across platforms. B.2.2 Legal and policy frameworks for PES digitalization PES digitalization is more than a technical upgrade— These regulations have direct implications for it also includes navigating the legal and regulatory procurement models. It can influence whether PES can landscape that defines how digital solutions can be develop digital systems in-house, leverage centralized developed, procured, and operated. Whether PES builds government IT infrastructure, or engage private-sector systems in-house, collaborates with an e-government providers. Some regulatory frameworks favor public- agency, or partners with private providers, legal sector-led solutions, requiring PES to develop systems frameworks shape what is possible. Procurement internally or through a government IT agency. This rules determine who can supply digital solutions, data ensures data sovereignty, tighter security control, and protection laws govern where and how data is stored, integration with national digital strategies. In these and national e-government policies influence whether cases, procurement may be managed at the ministry PES must integrate with centralized platforms or retain level or by a central e-government body. They can operational autonomy. provide PES cloud hosting, cybersecurity frameworks, or shared IT services. While this can enhance security and standardization, it may also limit PES flexibility in choosing technology solutions, scaling innovations, or introducing customized services. 35 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions BOX 14 Country example: Bhutan’s Government-Wide Approach to Digital Development Bhutan’s digitalization journey is led by the Government Technology Agency (GovTech), established in 2022. This agency oversees all government IT and information systems, centralizing IT development and digital transformation across various ministries. The primary goal of GovTech is to streamline operations, improve coordination, and align delivery (e.g., linking social protection, health, and labor) digital services with national objectives. GovTech aims to smoother. enhance government efficiency by making public services Scale up Advanced Technologies – A dedicated more structured and user-friendly. It aims to simplify citizens’ digital agency can attract specialized tech talent, invest access to government services and ensure security of digital in innovative technologies, and create scalable solutions platforms. that benefit multiple ministries. While centralization brings many benefits, it also presents Potential limitations of a government-wide agency: opportunities for further refinement. Clarifying roles between GovTech and individual ministries, increasing flexibility in Sector-Specific Needs May Be Overlooked – A one- procurement, and strengthening engagement with the size-fits-all digital approach might not fully address the private sector can help maximize impact. unique needs and nuances of different sectors. Slower Decision-Making – Bureaucracy in a Potential advantages of a government-wide agency: centralized agency may lead to slower adaptation Consistency and Standardization – Aims for a unified to sectoral demands compared to an independent, approach to digitalization across sectors, leading to specialized body. interoperability of systems, shared infrastructure, and Limited Flexibility in Procurement – Centralized standardized policies. procurement processes may reduce opportunities for Holistic Digital Transformation – Facilitates sectoral innovation and make it harder to engage agile integration across sectors, making cross-sectoral service or local private providers. GovTech Commission Prime Minister Secretary Cabinet Secretaire CTO, Druk Holding and Investment Secretary GovTech Agency Dy Zimpon HM Secretaire Cyber Security Division Secretarial Support Services Data Science & AI Division Dzongkha Administration Telecom & Space Division Human Resources Planning Procurement Department of Digital Department of Digital Transformation Infrastructure Digital Service Transformation Emerging Technologies Government Network Division Division Division Tech Industry Digital Service O&M Division Develpment Division Cloud Service Division Digital Service Development Division Whole of Government Division 36 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions BOX 15 Country example: Saudi Arabia’s ministerial- focused approach to digital development Takamol Holding (https://takamolholding.com/en) is a government company providing various solutions and focused on the labor market development of the Kingdom of Saudi Arabia. It is an initiative of the Ministry of Human Resources and Social Development and it aims to improve and develop the Saudi labor market, for both government and Faster Implementation and Adaptability private sector, to benefit employees, employers, and – Sector-focused agencies can respond job seekers. As a holding company, Takamol operates quickly to policy changes, market trends, and multiple subsidiaries that offer a diverse range of technological advancements without going business and labor market solutions, strategically through broader government approvals positioning it at the intersection of the public and Closer Engagement with Stakeholders – private sectors to stimulate economic growth and Being embedded within a sector allows for improve labor market efficiency. better coordination with industry players, private sector, service providers, and end users Qiwa (https://www.qiwa.sa/en), by Takamol, is Encourages Innovation in the Sector – With a government platform launched in 2019 that a dedicated focus, these agencies can digitalizes key employment services while ensuring experiment with innovative solutions and best compliance with labor laws. It streamlines various practices tailored to the sector’s needs aspects of recruitment and employment in the private sector, offering services such as electronic Potential disadvantages of a sectoral-focused contract management, work permit issuance, digital strategy: employee training programs, etc. Higher Costs – Without economies of scale, Potential advantages of a sectoral-focused sector-based agencies may require larger digital strategy: budgets to develop and maintain their own IT systems. Tailored Solutions for the Sector – Weaker Coordination Across Sectors – Specialized agencies understand sector- Multiple agencies developing digital solutions specific challenges, allowing them to develop independently can lead to inefficiencies, more targeted and relevant digital solutions. redundancies, and a lack of interoperability between government systems. Both entities, GovTech (in Bhutan’s case) and Takamol These examples showcase that the digital approach (in Saudi Arabia’s case), contribute to their countries’ will directly depend on the government’s priorities digital development through technology and innovation. and capacity. If the goal is inclined towards efficiency, GovTech’s role is to enhance the overall government standardization, and cost savings, a government-wide services and digital infrastructure in Bhutan, whereas agency could be a preferable option. However, a sector- Takamol focuses on developing digital solutions to focused agency may be the better choice if the country specifically empower the labor market in Saudi Arabia. has resources and if the priority is sector-specific Each entity brings unique strengths aligned with their innovation, speed, and flexibility. national priorities and institutional structures. 37 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Some more developed governments adopt a hybrid technology firms. However, legal restrictions on foreign model, where a central digital agency sets broad technology providers, cross-border data transfers, and standards and infrastructure, but sectoral agencies cloud-based solutions can limit outsourcing options. have autonomy in implementation. Singapore is a good Some countries require personal identifiable information example of a country implementing a hybrid approach (PII) to be stored within national borders, excluding to digitalization. It has a centralized digital agency, international Software as a Service (SaaS) providers GovTech Singapore, which sets national digital policies, that do not offer local data hosting. Others mandate that provides shared digital infrastructure, and ensures government agencies retain full ownership of digital interoperability and cybersecurity across government systems, which can affect licensing agreements with services. However, individual ministries and sector- external providers that don’t permit ownership transfer. focused agencies retain autonomy to develop specialized digital solutions tailored to their needs. Understanding these legal and regulatory frameworks early helps PES choose the right procurement model, Other regulations may enable private-sector mitigate risks, and ensure that digitalization efforts align involvement, allowing PES to contract software vendors, with both legal requirements and long-term operational cloud service providers, or specialized labor market goals. BOX 16 Key questions for PES digitalization: Legal, policy and procurement considerations Before moving forward with digitalization, PES should assess key legal, policy, and regulatory factors to ensure compliance, feasibility, and sustainability. The following questions can help guide decision-making: Data Protection and Privacy Are there any regulations that oblige PES data to be stored within national borders? Do regulations allow PES to use cloud-based services, or is on-premises hosting required? How can PES ensure user consent, data security, and compliance with national and international privacy laws (e.g., GDPR-equivalent regulations)? Procurement and Vendor Selection Does PES manage its own procurement, or is this handled at the ministerial or central e-government level? Are there restrictions on foreign technology providers or preferred vendor lists PES must adhere to? Are there any laws or regulations governing ownership of intellectual property (IP) for outsourced digital solutions (e.g., must the government retain full ownership of the code)? Can PES procure pre-existing platforms (Commercial Off-the-Shelf Software, Software as a Service) or must it develop custom solutions? System Integration and Government IT Policies Are there interoperability requirements for PES to connect with social protection, tax, or education systems? Does the national e-government strategy provide centralized hosting or IT infrastructure that PES must use? What cybersecurity standards and risk management protocols must PES comply with? By addressing these questions early in the digitalization process, PES can ensure legal compliance, smooth procurement, and long-term adaptability of its digital solutions. 38 Assessing A. PES Objectives and Challenges Identification B.the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions MODULE C. Defining the Digitalization Scope The digitalization of Public Employment Services (PES) How can PES define a digitalization requires careful alignment with the organization’s ? vision, strategic priorities, and operational capacity. scope that aligns with strategy, Defining the scope of a digitalization project is a capacity, and long-term goals foundational step that sets the direction for the entire initiative. This module provides practical guidance for PES managers to define the scope and objectives of digitalization—clarifying priorities, establishing a realistic timeline, and translating these decisions into actionable project documents. How can PES navigate the trade-offs between different digitalization ? Building on insights from earlier modules—such as assessments of PES’s mission, strategic goals, objectives to maximize impact challenges, and capacity—this module emphasizes the importance of translating these insights into a well-scoped digitalization initiative. A clearly defined scope serves as a roadmap: it outlines key objectives, identifies deliverables, sets boundaries, and aligns stakeholders. It also lays the groundwork for one of the What factors should PES consider most critical project documents, the Terms of Reference when determining the pace and sequencing of its digitalization efforts ? (ToR), which translates the vision into clear, concrete, and implementable instructions for procurement and execution. Even in cases where digitalization is led by in- house teams, a ToR or equivalent project specification remains vital to guide digitalization efforts. 39 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions A well-crafted ToR ensures that the digitalization initiative remains focused, technically sound, and Quick insights manageable. It reduces the risk of misalignment, delays, or project failure due to vague or incomplete specifications. Whether issued as single document or Defining Scope and a set of complementary ones, the ToR acts as a bridge Priorities—An Iterative Process between strategic ambition and operational delivery. Defining the scope, boundaries, and objectives of a digitalization project is an iterative and dynamic This module equips PES managers with the tools to process. These elements are complementary: the design a digitalization initiative that is both strategic scope determines what the project addresses, and actionable—defining scope, prioritizing objectives, the boundaries define its limits, and the objectives outlining implementation timelines, and preparing the provide measurable outcomes. ToR. Together, these actions ensure alignment with long-term goals while laying the foundation for Module Key Insights: D, which focuses on evaluating technical approaches Refining Over Time: The process begins with a and selecting a digital solution. broad vision (e.g., improve job seeker experience) and then narrows down as clarity emerges, becoming more focused and actionable. C1. Setting the Priorities: Measurable Indicators: Defining success in of PES Digitalization measurable terms (e.g., reducing processing time by 40%) helps transform general goals into concrete outcomes. These indicators can Digitalization can serve multiple purposes, each with its inform the Terms of Reference (ToR) by defining expected outcomes and success measures. own set of benefits, challenges, and requirements. While Scope Guides Solutions: Jumping to technical many objectives of digitalization are interconnected solutions too early—before the scope and and can reinforce one another, identifying a primary objectives are clear—can lead to costly focus is critical to ensure clarity and effective resource redesigns. Clarifying the “why” and “what” first allocation. Attempting to tackle too many goals at once ensures that the “how” is fit for purpose. might lead to diluted impact. This process should not be treated as static; rather, it requires ongoing reassessment and adjustment The objective categories outlined below are not as new insights emerge, to ensure the project mutually exclusive, and digitalization efforts may remains clear and achievable. address multiple goals simultaneously. However, distinguishing a clear starting point helps make early phases of implementation more targeted and manageable. Establishing a dominant objective also lays a stronger foundation for prioritizing features, engaging stakeholders, and shaping the Terms of Reference or a similar guiding document. The following are three common objectives observed in Data-focused Operational- Client-focused PES digitalization initiatives, each offering a different objective: focused objective: entry point, with distinct implications and potential Enhancing data objective: Enhancing user prioritizations. analytics for Improving experience better labor internal through market insights. efficiency accessible and and service responsive capacity. services. 40 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions C.1.1 Data-focused objective: Enhancing data strengthen data collection through formal data- sharing analytics for better labor market insights agreements that define standards, responsibilities, and rights regarding data access and use. A data-focused objective supports evidence-based decision-making by strengthening the collection, Indicators of success: processing, and analysis of labor market data. This includes enhancing analytics on employment trends, Producing of new or improved labor market reports, skills gaps, labor demand and supply, and emerging more frequent reporting, increased use of data in PES sectors. The digital system that enables these functions decision-making, improved data quality across sources, is usually referred to as a Labor Market Information and increased number of interoperable or integrated System (LMIS). data systems. PES managers with a data-focused C.1.2 Operational-focused objective: objective need to prioritize: Improving internal efficiency and service capacity 1) Establishing robust mechanisms to collect and integrate data from different sources. An operational-focused objective emphasizes 2) Standardizing data through developing or updating streamlining internal PES processes to improve taxonomies, ensuring data is properly categorized efficiency, reduce administrative burdens, and improve across different sources. overall organizational performance. By digitalizing 3) Investing in advanced data analytics tools to back-office workflows, PES can automate routine interpret and visualize labor market trends tasks, reduce duplication, and improve operational effectively. responsiveness. The focus on optimizing internal systems to create a more coordinate, efficient, The primary users of a data-focused digitalization effort and adaptable PES will result in more effective and are policymakers, PES managers, and analysts who responsive front-line services. rely on timely and reliable labor market information to inform decisions, guide planning, and improve service PES managers with an operational-focused delivery. Job counselors also use this information to objective will need to prioritize: better guide job seekers toward suitable opportunities and support services. 1) Conducting detailed process mapping to identify inefficiencies, redundancies, and areas for These priorities will have implications on several improvement. areas: 2) Investing in tools that support workflow automation, such as case management systems or workflow Human resources: Strengthening analytical management platforms. capacity may require hiring or upskilling staff in 3) Redesigning internal procedures to align with data science, statistics, or visualization. digital tools, minimizing disruption and enabling Data quality standards: Introducing or updating smoother implementation. data quality frameworks, including guidelines for accuracy, completeness, timeliness, and It is important to integrate user-centric design consistency, as well as processes for regular data principles when considering digitalization of internal auditing and validation. systems. In this case, the primary users are job Interoperability requirements: Ensuring seamless counselors, caseworkers, PES managers, and other data integration with other systems, such as administrative staff who will rely on these tools in their social protection and education, by investing in daily work. interoperability standards and APIs. Data security and compliance: Ensuring compliance Implications to consider: with data privacy laws, such as GDPR or other national regulations, by implementing secure Change management: Resistance from staff data handling, encryption, and other measures to accustomed to manual processes is a common protect sensitive information. challenge. Early engagement, clear communication, Data sharing agreements: Collaborating with and comprehensive training are essential to government bodies, private firms, and NGOs to ensuring buy-in. 41 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Incremental deployment: A phased approach Indicators of success: allows for testing and refinement without disrupting ongoing operations. Reduced administrative processing times (e.g., System reliability: Automation tools must be robust shorter client wait times, faster response time) and well-maintained to avoid operational downtimes Cost savings per service offered (e.g., reduced cost or errors. per job placement) Resource shifts: Staff time freed up through Increased staff productivity (e.g., higher client-to- automation should be strategically reallocated to caseworker ratios, increased capacity to handle high-impact areas, such as client-facing roles or larger caseloads or more personalized services innovation initiatives. offers) Quick insights What Are User-Centric Design Principles? User-centric design focuses on building digital solutions around the needs, preferences, and experiences of the people who will use them. In the PES context, this includes a wide range of users—caseworkers, job seekers, employers, or policymakers—each with distinct expectations and usage patterns. This means designing tools and platforms that are intuitive, accessible, and tailored to the specific needs of each user group. Why It Matters: Encourages adoption and sustained use by making solutions easier to use. Reduces the risk of costly redesigns by incorporating user feedback early. Improves outcomes, as tools aligned with user needs are more effective in achieving their goals. How to Implement: Engage Users Early: Use methods like surveys, focus groups, or user interviews to gather insights. Prototype and Test: Apply iterative design processes, providing early testing solutions with real users Leverage Best Practices: Refer to frameworks like Design Thinking, the Double Diamond Model, or tools like personas and journey mapping. Ensure Accessibility: Follow standards like the Web Content Accessibility Guidelines (WCAG) for inclusivity. By applying these principles and leveraging established tools, PES agencies can create solutions that are practical, impactful, and widely adopted. 42 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions C.1.3 Client-focused objective: Enhancing Implications to consider: user experience through accessible and responsive services User support capacity: As more services shift online, PES may need to scale up helpdesk, chatbot, A client-focused objective centers on expanding and or call center functions to assist users who face improving the digital channels through which PES delivers issues with navigation, logins, or errors. services to job seekers and employers. By creating Accessibility and inclusivity: Platforms must accessible and user-friendly digital platforms, PES can accommodate users with varying literacy streamline service delivery, enhance user engagement, levels, languages, or digital devices. Adhering to and extend their reach to underserved populations. accessibility standards (e.g., WCAG) and conducting inclusive user testing are critical. Digital delivery channels, such as online job-matching Behavioral change and adoption: Encouraging platforms or self-service portals, can offer faster and more job seekers and employers to adopt new digital convenient access to PES services while reducing reliance services, may require awareness and adoption on physical offices. However, the effectiveness of these campaigns, and support services. front-end channels heavily depends on a robust backend Competition and overlap with existing digital that ensures up-to-date job and applicant information, platforms: In contexts where private digital smooth registration and applications processes, accurate platforms already serve job matching or recruitment matching tools, and stable system performance. These functions, PES agencies must clearly define their backend capabilities directly affect how clients experience unique value and explore complementary roles the platform—determining whether services feel smooth, rather than duplicating or competing with existing useful, and trustworthy. providers. PES managers with a client-focused objective will Indicators of success: need to prioritize: Number or percentage of job seekers and employers 1) User-centric design in developing intuitive and actively using the digital platform user-friendly interfaces for digital platforms to Share of PES services accessed through digital ensure a smooth experience for job seekers and channels (e.g., percentage of registrations employers. completed online) 2) Data security and privacy standards to protect Percentage of users completing key tasks (e.g., sensitive user information in a public-facing digital registration, job applications) without abandoning platform. the process 3) Investment in hosting solutions capable of handling User-reported satisfaction scores collected large user volumes for high uptime and reliability. through surveys or in-app ratings 4) Allocation of resources for ongoing maintenance, Platform performance metrics (e.g., system uptime, updates, and feature enhancements to allow a fully- average page load time) functioning and constantly improving platform. A clear goal for digitalization provides a solid foundation As highlighted earlier, it is important to consider user- for defining deliverables and guiding decision-making. centric design principles when developing the digital Whether the objective is to develop a caseworker solution. In this case, the primary users are job seekers management system, a LMIS, or an online job-matching and employers who will interact directly with the system to platform, this clarity ensures alignment with organizational access services. priorities and resource allocation. It is important to recognize that these objectives are not mutually exclusive; a digitalization effort may address multiple objectives simultaneously or incrementally. However, identifying the primary goal allows PES managers to establish clear priorities and focus their efforts on the right target audience and required expertise—providing the most suitable digital solution. 43 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions BOX 17 Country example: Bhutan’s shift to a client-focused objective Bhutan recently modernized its online digital platform to improve backend systems, such as database connectivity. However, a clear challenge was identified beyond system fragmentation or the need for better interoperability between platforms—these are common issues in digital service delivery. Bhutan’s interesting approach focused on the user experience problem, particularly jobseekers, who were required to visit multiple websites to access different services. For jobseekers, this fragmented experience created Information System (BLMIS) (https://www.blmis.gov.bt/) – unnecessary complexity, as they had to navigate Bhutan aimed to provide jobseekers with one unified entry various portals for employment services, skills programs, point for all the services they needed. and training opportunities. This transition began in 2018-2019 with the support of the Recognizing the importance of a seamless user Asian Development Bank and additional funding through experience, Bhutan shifted its focus towards a more user- the World Bank’s ongoing Program-for-Results (PforR) centric approach. Rather than just improving backend lending. The integrated platform now offers a centralized integration and interoperability, the government gateway to multiple Active Labor Market Programs (ALMPs) centered its efforts on simplifying and enhancing the managed by various ministries, including TVET, skills user journey. By consolidating all essential services into development programs, entrepreneurship support, and a a single, integrated platform—the Bhutan Labor Market job vacancy platform. C2. Defining the Timeline The timeline for digitalization is a critical consideration Phasing digitalization over time allows PES managers in defining the scope of the project. Rather than to ensure financing, infrastructure, and capacity- approaching digitalization as a one-time effort, it building efforts are appropriately allocated without should be treated as a phased journey to ensure that overwhelming the organization. It also provides each stage is manageable, practical, and aligned with flexibility to respond to changes in labor market the organization’s capacity. demands, technological developments, or government priorities. Clear, incremental progress helps maintain Breaking the project into phases allows PES managers stakeholder engagement and support, ensuring that to prioritize specific components, test solutions the digitalization journey remains both focused and incrementally, and adjust plans as necessary based adaptive. on evolving circumstances. Each phase builds on the previous one, enabling lessons learned to be Box 18 outlines common implementation approaches incorporated. It also reduces risks and allows the that PES can consider. However, this list is not organization to see tangible progress in each step of the exhaustive, and in many cases, PES agencies adopt process. In addition, this incremental approach helps hybrid approaches that blend elements from multiple minimize internal resistance to change and reduces the methods to suit their specific needs and contexts. likelihood of heavy pushback that often accompanies sudden, large-scale changes. 44 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions BOX 18 Implementation approaches for PES digitalization 1. Big Bang Approach Description: Implement all planned digital components simultaneously across the entire PES agency. This rapid and comprehensive rollout aims to transform all processes at once, providing immediate modernization. It requires organization-wide readiness, including infrastructure, staff training, and strong change management mechanisms. Pros: Immediate transformation, quick visible results Cons: High risk of disruption. Requires significant resources and readiness. There is also a high potential for resistance if change management is weak. Best for high-resource settings with strong capacity and readiness for change. 2. Phased Approach Description: Introduce digital components step-by-step, focusing on one area at a time. Each phase builds on the previous one, allowing for steady progress and capacity building. Pros: Lower risk, easier capacity building, allows adjustments Cons: Slower realization of benefits, requires careful sequencing Best for limited capacity environments that need gradual, steady transformation. 3. Pilot Approach Description: Test new digital solutions in a small, controlled area before scaling up to the entire PES agency. This helps identify and address potential issues before scaling. Pros: Low risk, provides opportunity for refining solutions Cons: Limited initial impact, scaling may present additional challenges Best for testing innovative tools or high-risk solutions before wider implementation. 4. Parallel Adoption Description: Run the new system alongside the existing one to ensure continuity while gradually transitioning. Staff have time to adapt to the new system, reducing risks during the changeover. Pros: Reduces risk by ensuring continuity if issues arise in the new system Cons: Double workload for staff, potential confusion with two systems Best for ensuring uninterrupted service during high-risk transitions. Choosing the right approach: Lessons learned can be particularly useful in complex contexts that from practice require strong stakeholder coordination or involve iterative development processes. However, other Selecting the appropriate implementation approach approaches—such as pilot testing or parallel adoption— depends on the nature and magnitude of the may be better suited to specific contexts, especially digitalization effort, as well as PES’s capacity and when introducing innovative tools, managing sensitive readiness. For instance, the big bang approach can transitions, or working with fixed political or funding be appealing because of the promise of immediate windows. transformation. However, experience with PES projects globally shows that it carries significant risks. These Despite its advantages, the phased approach can risks are especially pronounced in environments be sometimes overlooked due to pressure for quick with limited capacity or resources, where the lack of results or time-bound funding for digitalization. The preparation and readiness can lead to disruptions and choice of implementation strategy should align with the diminished outcomes. PES’s priorities, constraints, and readiness. While some situations may call for rapid action, others could benefit The phased approach is often favored in such settings, from strategic sequencing and planning. A realistic as it allows for incremental progress, enabling assessment of capacity and resources is essential to organizations to refine processes, address new minimize risks, achieve steady progress, and secure challenges, and build on past successes. This approach long-term success. 45 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Quick insights Drafting an Effective ToR: Essentials and Pitfalls Once the scope of the digitalization initiative is defined, along with clear objectives, priorities, and a realistic timeline, the next step is to translate these decisions into a Terms of Reference or an equivalent project document. For outsourced services, the ToR serves as the formal foundation for procurement, and it connects strategic goals to concrete actions, guiding implementers on what needs to be done, by whom, and how success will be measured. WHAT ARE ESSENTIAL ELEMENTS OF A GOOD TOR? Project Background and Rationale: This section typically outlines the strategic and operational motivations for digitalization, often drawing on prior assessments, pilot experiences, or consultations. Objectives and Scope: The ToR should specify the overall objective (data-, efficiency-, or client-focused), and define the scope clearly. Distinctions between core requirements and optional features are often helpful, especially when timelines or budgets are constrained. Deliverables and Timelines: Clearly stated deliverables, accompanied by associated milestones and acceptance criteria, help track progress and accountability. Timelines may be structured in phases, especially in cases involving pilots or iterative development. Technical10 and Integration Requirements: A summary of the expected technical environment, interoperability needs, data standards, and compliance requirements (e.g., security, privacy, accessibility) are typically included. Roles and Responsibilities: Governance arrangements are usually detailed, outlining responsibilities across the PES and any external stakeholders. This may include decision-making authority, quality assurance, and coordination with other ministries or partners. Budget and Payment Terms: Information on cost structure (e.g., milestone-based payments or licensing models) is typically provided, along with any known funding constraints or conditions. Monitoring and Reporting Mechanisms: The ToR should describe how implementation will be monitored, how performance will be evaluated, and what mechanisms are in place for adjustment or escalation. WHAT ARE COMMON PITFALLS IN DRAFTING TORS? Vague or Broad Requirements: When requirements are underspecified and quality assurance criteria are missing, deliverables can become inconsistent or misaligned. ToRs should define clear, measurable functionalities and specify how outputs will be tested and validated. Unclear Intellectual Property Provisions: The absence of guidance on ownership of source code, data, or documentation may create legal or operational risks, particularly if future modifications are needed. Lack of Maintenance or Handover Planning: Without clear provisions for post-launch support, training, and handover, systems may become difficult to sustain or scale. Insufficient Risk Management Measures: Missing clauses related to escalation paths, penalties, or dispute resolution can undermine accountability when delays, cost overruns, or disagreements arise. By clearly articulating these elements, a ToR supports consistency, transparency, and alignment between design and delivery—whether the digitalization effort is procured externally or developed in-house. A well-structured ToR is an important enabling tool for successful, sustainable implementation. 10. Technical requirements typically include functional requirements (what the system should do, e.g., job matching, profiling, or sending notifications) and non-functional requirements (how the system performs, e.g., security, ease of use, or scalability) 46 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions MODULE D. Deciding the Software Development Strategy: In-house versus Outsourcing As Public Employment Services move from designing What development options their digitalization scope toward implementation, one are available to PES—in-house, of the most critical decisions faced by PES managers ? outsourced, or hybrid—and what is how to develop the digital solution itself. Should the system be built internally using government capacity, distinguishes them from each other or should development be outsourced to an external provider? Each option carries important trade-offs that affect not only timelines and costs, but also level of control, flexibility, and sustainability over the long term. This module provides a structured approach to help What factors should guide the ? PES managers assess whether to pursue in-house choice in approaches (e.g., internal versus outsourced software development. It outlines key capacity, vendor availability, timeline) factors to consider, such as internal IT capacity, funding flexibility, and the availability of qualified vendors. It also offers practical guidance to support informed decision- making that aligns with each PES’s institutional context and digitalization goals. What are the key trade-offs Understanding In-house and Outsourced ? Software Development in terms of control, cost, sustainability, and adaptability To support decision-making, this section uses the two broad categories, in-house development and outsourced development, as reference points to compare typical trade-offs and capacity requirements. These categories help PES managers evaluate key differences in control, staffing, and long-term sustainability. 47 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions In practice, however, many PES managers pursue internal and external teams. These blended approaches options that fall between these two poles, such as are touched on later, but the side-by-side comparison outsourcing development with full intellectual property below provides a useful starting point for assessing transfer, adopting open-source tools, or combining primary development strategies. In-House Software Development Outsourced Software Development involves building the digital solution using internal involves hiring an external provider to create the resources, such as an IT team from PES, a line ministry, digital solution. This approach is ideal for PES agencies or a central government unit. This approach enables lacking internal IT capacity, as it provides access to closer alignment with institutional workflows, reduces specialized expertise, accelerates development, and vendor dependency, and helps build long-term leverages best practices. While outsourcing allows institutional capacity. However, it requires significant PES to focus on its core functions, it requires strong upfront investment in staffing, infrastructure, and vendor management to ensure quality, alignment time, as well as attracting and retaining talent with needs, and retention of intellectual property capable of managing the complexities of software rights through clear contracts. Outsourcing may development and maintenance. reduce the burden of building internal IT capacity but might offer less direct control, making effective oversight essential. Table 2 provides an overview of key factors to consider when deciding between in-house and outsourced software development, offering a side-by-side comparison to help PES managers make informed, context-specific decisions. TABLE 2 Key considerations for evaluating development options Key Considerations In-House Development Outsourced Development Internal Capacity • Significant internal IT expertise required • Minimal internal IT capacity required Requirements • Possible through recruitment or sustained • Reliance on vendor expertise investment in IT staff capacity building Time to Design and • Longer in case of limited internal capacity • Generally faster; vendor’s expertise and Deploy existing capabilities can accelerate the process Control Over • Higher control over all development • Depends on the service agreement, but Development aspects, including timelines and features will be bound by the vendor’s capacity and schedule Future Modifications • Easier to adapt and modify as • Flexibility may be limited by vendor contracts organizational needs evolve • Additional costs for modifications and updates required Vendor Dependence • Minimal dependence on external parties, • Potential dependence on vendor for support, greater institutional ownership and updates, and maintenance (unless internal autonomy IT staff or local partners are equipped to take over) Intellectual Property • Full ownership of intellectual property • Intellectual property may be fully transferred Ownership or owned by the vendor, depending on contract terms 48 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions D1. In-house Development maintenance. This internal capacity may be housed within the PES itself, within a parent ministry’s IT department, or embedded in a centralized government digital agency Choosing in-house development requires a realistic or GovTech unit that supports digitalization across assessment of the internal capacity, particularly the public services. Wherever it resides, this capacity must availability of IT staff and organizational structures include not just software development skills, but also the to support the full software lifecycle. This approach ability to manage system integration, documentation, offers several advantages, including greater control and continuous updates. It is also essential to assess over design and implementation, closer alignment whether internal teams can uphold high standards of with internal workflows, and better use of institutional cybersecurity and data privacy. Managing sensitive knowledge. In-house teams often have direct exposure job seeker and employer data requires not only secure to PES processes, regulations, and user challenges, system design, but also robust data governance enabling them to tailor solutions more effectively. frameworks and ongoing protection against cyber The close proximity between PES staff and internal threats. developers also facilitates faster feedback loops and smoother communication. In addition, in-house Before proceeding with in-house development, PES development provides flexibility for future adaptations managers should also consider two critical factors. without the need for formal change requests or vendor First, internal technical capacity must be sustained negotiations. In contexts of policy shifts or urgent new over time—not just for initial software development, directives, internal teams can often pivot more quickly but for ongoing adaptation, user support, and system than external vendors. Another key benefit is that all upgrades. High staff turnover or loss of key personnel data remains within the organization, reducing exposure can pose risks to system continuity. Second, strong to external parties and enhancing data security. project management capacity is essential to set realistic milestones, manage risks, and ensure the digital solution However, this model also demands a stable and well- remains aligned with evolving service delivery needs. qualified team with the capacity to manage design, Without these foundations, even technically sound development, testing, deployment, and long-term initiatives may struggle to deliver lasting impact. BOX 19 Country example: Brazil’s in-house development with a state-owned enterprise Brazil is currently making effort to digitize its PES and presents an interesting example of leveraging in-house IT capacity. It works with a state-owned enterprise, DataPrev (https://www.dataprev.gov.br/), to build and maintain its digital tools and systems. This relationship gives Brazil greater control over PES innovations, allows process may require an extra effort from the Ministry of for better data integration across different ministries, Labor to set and communicate clear priorities and keep and mitigates the risks often associated with “vendor track of the system’s development process. Nevertheless, lock-in.” This approach also allows for closer alignment the Ministry is actively working to address any gaps in with government objectives and national priorities and system functionality and enhance its internal capabilities, makes budget more manageable and predictable for aiming to better respond to the evolving needs of the Ministry of Labor. PES delivery while reducing its reliance on third-party solutions. While the state-owned enterprise has capacity, the Ministry of Labor is still working on building a stronger Ultimately, while Brazil’s in-house model offers control, it internal IT expertise and refining a clear digitalization requires ongoing efforts to enhance internal IT expertise roadmap. This development process may be slower as and improve agility to keep pace with technological the state-owned enterprise serves many requests from advancements and meet the dynamic needs of the different government agencies. Hence, the digitalization labor market. 49 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions D2. Outsourced Development Outsourcing software development can offer PES access advisable. These include regulatory, market, and funding to specialized expertise, faster implementation timelines, conditions that may affect the practicality of different and solutions built on established best practices. It is development paths: often a practical option for PES with limited internal technical capacity. However, outsourcing also introduces Availability of external vendors with the right important considerations around sustainability, vendor expertise: The presence of qualified local vendors management, and long-term ownership of the system. with relevant skills and expertise is crucial when considering outsourcing. Limited availability of A critical early step is deciding who will manage local firms with relevant experience in employment and oversee the development process. Even when services or government systems may restrict external vendors handle the technical build, PES options, increase costs, or require more extensive remains responsible for ensuring the solution meets vendor onboarding. In such cases, PES may need to functional needs and aligns with institutional goals. explore regional or international providers. If internal project management or quality assurance capacity is limited, PES may need to engage specialized Vendor availability for smaller-scale projects: consultants or firms to fill this role. This helps maintain Some international software development oversight, coordination between stakeholders, and risk companies may be less inclined to take on smaller management throughout the development lifecycle. digitalization projects, particularly in small labor markets with fewer job seekers and employers, if Planning after delivery is equally important including the commercial potential is perceived to be low. This decisions on system maintenance, update and support. can significantly influence the decision between in- PES may choose to gradually build internal capacity to house development and outsourcing. manage the platform or continue relying on the vendor, or a third-party provider, for long-term technical support. Government policy and regulatory compliance: Each option carries implications for cost, sustainability, Policies on digital procurement and compliance staffing, and system evolution. These considerations with data privacy and storage regulations may should be factored early in the planning and budgeting favor one approach over the other. This includes process, rather than deferred after implementation. alignment with national digitalization strategies that may require working with local providers or To ensure long-term clarity and minimize risks utilizing in-house capabilities. throughout the development and maintenance lifecycle, service contracts with vendors should be carefully Availability of qualified local talent: The decision drafted from the beginning—outlining roles and to develop in-house may be influenced by the responsibilities, deliverables and timelines, performance availability of skilled local developers. It may be indicators, quality assurance processes, governance challenging to build necessary internal capacity arrangements, IP ownership, maintenance obligations, if local talent is limited. Sometimes, there are also handover requirements, and dispute resolution constraints in competitive compensation offers due mechanisms. Where appropriate, these contracts can to government remuneration policies that fall short also include provisions for the full transfer of source of market rates. This often makes outsourcing a code and intellectual property to the PES, enabling more viable choice. similar post-development autonomy and flexibility as in- house development. Budget flexibility and funding constraints: External funding, grants, or earmarked budgets may In addition to internal considerations, several external influence the decision, particularly if such funding factors—often outside PES’s direct control—can is specifically tied to using external vendors or significantly shape whether outsourcing is feasible or adopting in-house development. 50 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Quick insights Exploring Open-Source Options for PES Digitalization Open-source software refers to digital solutions whose source code is publicly available, allowing developers to freely access, modify, and adapt the software to their needs. While open-source may not always be the priority as a digitalization option, it does offer significant advantages, particularly for in-house development. Open-source solutions provide a robust foundation that can be customized to meet specific needs, avoiding the cost and time of building a system entirely from scratch. By leveraging these tools, PES can benefit from reduced development costs, greater transparency, and the flexibility to tailor functionalities without vendor-imposed restrictions. Moreover, open-source software fosters collaboration, allowing PES to take advantage of a broader community of developers and experts contributing to improvements and innovations. A notable example of open-source tools is Tabiya12, non-profit building digital public goods for youth employment in low- and middle-income countries. Tabiya aims to create labor markets where all talents thrive by emphasizing skills over credentials, particularly those gained through informal work. Their tools include: 1. Inclusive Livelihoods Taxonomy: A flexible framework mapping jobs and skills, recognizing informal and non- traditional work. 2. Inclusive Livelihoods Classifier: A tool using natural language processing to map job vacancy data to the taxonomy, improving job matching and analysis. 3. Compass: An AI-driven tool helping job seekers articulate skills gained from all types of work, creating standardized profiles to connect to opportunities. However, opting for open-source also has important implications—such as the need for dedicated IT expertise to adapt and maintain the software, potential vulnerabilities if security patches are not kept up to date, and reliance on community-driven support rather than vendor-backed guarantees. Despite these challenges, open-source tools offer a high degree of adaptability and cost-effectiveness, making them an attractive choice for PES, particularly where budgets are constrained and customization is a priority. As such, open-source solutions can offer PES many of the advantages often associated with in-house development, such as flexibility, customization, and independence from long-term vendor contracts, even when the initial development is done externally. 12. See Tabiya: Open Technology and Data to Connect Youth with Work for more information. 51 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Considering a Hybrid Approach for PES Digitalization A hybrid approach combines elements of both in-house as increased coordination complexity with effective and outsourced software development, offering PES collaboration between in-house and outsourced the ability to leverage internal capacity while accessing teams being difficult to manage. Integration issues specialized external expertise. This approach can may also arise, particularly when teams use different enhance digitalization outcomes by allowing PES to technologies or development practices, leading to delays focus in-house to focus in-house efforts on components or incompatibility. that do not require advanced or specialized technical capacity. More complex or technical elements, such A clear and well-structured ToR can address some of as backend infrastructure or advanced AI-driven job these challenges by defining roles, aligning technologies, matching algorithms, can be outsourced to specialized and incorporating capacity-building requirements (for vendors, ensuring effective and efficient development. internal IT staff) to ensure seamless integration and smooth collaboration. Establishing clear ownership The hybrid model helps mitigate risks like vendor and careful planning are essential to navigate these dependency and high outsourcing costs while optimizing challenges successfully, allowing the hybrid approach to resource use. However, it also brings challenges such deliver a cost-effective and comprehensive solution. BOX 20 Country example: Malaysia’s hybrid approach to PES digitalization—balancing vendor expertise with internal capacity Malaysia’s experience in digitalizing its PES highlights key lessons on multiple aspects of vendor selection, system customization, and internal capacity-building. During its digitalization journey, Malaysia initially partnered with a vendor that lacked specific PES expertise. The limited results of this collaboration led By engaging multiple vendors on specific tasks, and to a shift towards considering an off-the-shelf product strengthening internal IT capacity, Malaysia has enhanced from a specialized international vendor. Malaysia’s Social flexibility and reduced dependency on a unique vendor. Security Organization (SOCSO) and the Employment This shift illustrates the importance of balancing vendor Services Division ultimately chose to outsource certain expertise and support with internal capacity-building digital developments based on the specialized vendor’s to avoid long-term lock-in while ensuring high-quality international expertise in PES systems. This PES-specific service delivery. knowledge enabled the rapid deployment of the functional portal, MyFutureJobs. However, as Malaysia’s SOCSO’s journey offers key lessons for PES digitalization, unique needs became clearer, greater levels of emphasizing the importance of careful vendor selection, customization were required. choosing partners with a deep understanding of PES systems, establishing clear contractual terms, and Over time, some challenges with API integration and prioritizing knowledge transfer to achieve sustainable, limited flexibility of off-the-shelf products led Malaysia to adaptable, and effective systems. This transition to a diversify its digitalization approach. The government has hybrid approach—starting with an off-the-shelf product gradually taken increasing ownership of the digitalization and later incorporating in-house development—allowed process by developing interfaces, chatbots, and event Malaysia to balance the efficiency of vendor solutions portals with local vendors. with the flexibility of tailored digital tools. 52 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions This module has explored the factors to consider when deciding between in-house and outsourced software development for PES digitalization. The suitability of in-house development versus outsourced development depends on specific circumstances such as internal capacity, needs, time constraints and budget. When In-House Development is When Outsourced Development is Suitable: Suitable: 1. Strong Internal IT Capacity: If there is an existing 1. Limited Internal IT Expertise: If there is insufficient IT team capable of managing development and internal capacity or expertise to manage software long-term maintenance. development. 2. Limited Vendor Availability: If there are few 2. Specialized Skills Required: For projects involving reliable external vendors or reducing external advanced technologies such as AI or complex dependency is a priority. integrations. 3. Budget Control: If PES wants to retain control over 3. Funding Availability: When funding is available development costs by utilizing internal resources specifically for external contracts, providing clear and avoiding vendor contracts. budget management. 53 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions MODULE E. Outsourcing and Selecting the Best Digital Path Outsourcing offers a spectrum of approaches and How can PES choose between models, such as building solutions from scratch or custom-built software and implementing various pre-packaged products, each ? pre-packaged solutions based with specific trade-offs related to cost, flexibility, speed of deployment, and long-term sustainability. on needs, timelines, and budget This module is designed to support PES managers who have opted to engage external providers for digitalization and need guidance on how to proceed effectively. It outlines the key distinctions between custom-built, pre- packaged, and hybrid solutions that combine elements What are the practical considerations ? of both. It also unpacks the features and trade-offs of and risks when combining different types of pre-packaged systems, particularly both options in a hybrid approach Commercial Off-the-Shelf (COTS) software and Software as a Service (SaaS) models. Finally, it provides guidance on hosting and deployment decisions, helping PES managers assess options through the lens of data security, regulatory compliance, and the reliability of existing digital infrastructure. How should PES choose a hosting model that aligns with technical, financial, and regulatory constraints ? 54 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions E1. Building from Scratch versus digital tools but differ significantly in how they are Pre-packaged Solutions developed, deployed, and adapted to meet PES needs. This submodule will explain each digital solution and outline the key differences to help PES managers make The choice of digital solution will shape the direction of one of the most important decisions in their digitalization digitalization. Both approaches provide the necessary journey. TABLE 3 Custom software development versus pre-packaged solutions Custom Software Development Pre-packaged Solutions (building from scratch) (using existing products) Overview This is a software development option that In this approach, PES will leverage pre-built software involves creating a digital solution tailored solutions developed by third party vendors. These specifically to the unique needs and objective solutions are designed to meet the common needs of PES. This method involves building the of a broader audience and are readily available for software from the ground up, ensuring that deployment. While they may not fully align with the every feature and function is designed to unique operational requirements of every PES, they align with the PES’s operational requirements, typically offer some level of configuration to better fit workflows, and service delivery goals. specific needs. Key features • Purpose-built Solution: Designed • Pre-built features: Off-the-shelf solutions come specifically to meet PES’s operational with pre-defined features and workflows, usually needs and entirely shaped by its functional designed based on experiences working with requirements. It is highly customizable to different PES. They enable rapid deployment with address specific challenges and workflows. minimal development effort. • Full ownership and control: Custom- • Licensing and vendor ownership: Ownership built solutions provide PES with complete terms depend on the contract, but typically the ownership over the software, including its software is usually owned by the vendor. While PES source code, architecture, and data. This may obtainusually obtains a license to use it, they gives PES managers more autonomy and typically do not own the underlyingthe system, control over modifications and updates. while the vendor retains the source code orand • Slower development and thorough intellectual property, limiting theirPES’s ability testing: Custom-built solutions often require to modify the systemsolution without vendor significant time for design, development, involvement. and rigorous testing to ensure they perform • Faster deployment: Pre-packaged solutions effectively in real-world environments before are thoroughly tested across multiple PES clients, deployment. ensuring reliability and reducing the likelihood of major system failures. Their pre-built nature allows for significantly faster deployment, enabling PES to go live quickly. This Guidance Note highlights the primary approaches This detailed comparison of the operational processes commonly utilized for PES digitalization rather than associated with custom-built and pre-packaged attempting to exhaustively cover every option. It solutions covers key stages such as initial planning, provides a high-level comparison of custom-built vendor selection, deployment, and maintenance. The and pre-packaged solutions, helping PES managers breakdown emphasizes the practical considerations understand the fundamental distinctions between the and trade-offs PES managers need to address for each two approaches. PES managers can gain a clearer approach, providing insights to support more informed understanding of the trade-offs involved by focusing decision-making. on these main approaches. However, it is important to recognize that these categories are not mutually exclusive, and hybrid approaches or adapted strategies are also viable, offering further flexibility depending on specific needs and resources. 55 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Comparison of operational processes: Custom-built versus pre-packaged solutions Custom Software Development How it works? Pre-packaged Solutions (building from scratch) (using existing products) Begins with gathering detailed requirements, Similarly starts by gathering requirements but which are used to design and develop the Process Initiation additionally includes mapping available market software from scratch. products to identify the solutions that best align with PES needs. • The emphasis is on evaluating and selecting • While evaluating the vendor remains the vendor, prioritizing their expertise, reliability, important, the emphasis is on evaluating and and ability to deliver a solution aligned with Vendor/Product selecting the product, ensuring it aligns with PES needs. Selection PES requirements. • Assessment focuses on the vendor’s • Assessment emphasizes features, scalability, track record, technical capacity, and configuration options, and user experience. communication skills. Category What They Can Offer PES Example Companies13 Key Differentiator Specialized PES Tailored tools for job matching, WCC Group, SkillLab, Deep expertise in PES-specific Solution Providers skills mapping, and labor market JANZZ.technology, needs and technologies. analytics to improve service SeeMeCV, etc. delivery. Enterprise Software Scalable platforms for managing SAP, Oracle, Microsoft, Focus on large-scale and Providers HR processes, workflow automation, etc. modular solutions with and data analytics, supporting PES advanced integration capacity. operations. International IT Comprehensive project Deloitte, Accenture, IBM Broad expertise in managing Consulting and management and integration of Consulting, PwC, KPMG, complex digital transformation Systems Integrators diverse IT solutions for seamless PES Infosys, etc. projects involving diverse users digital transformation. and systems. Labor Market Real-time labor market data, SkyHive, Lightcast, etc. Advanced analytics Analytics and workforce skills analysis, and trend capabilities and AI-driven Workforce forecasting to inform PES decision- insights for labor market trends making. and workforce planning. Intelligence Providers Local Software Cost-effective software Region-specific firms Proximity to clients and Development development adapted to the local understanding of local Companies context. regulations and contexts. 13. This list offers some examples of companies operating in this field; however, it is not a Contiues in te next page comprehensive list and this is not in any way an endorsement of the companies mentioned. 56 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Comparison of operational processes: Custom-built versus pre-packaged solutions (cont.) Custom Software Development How it works? Pre-packaged Solutions (building from scratch) (using existing products) • Involves close collaboration between • Vendors configure pre-built PES and the vendor’s development features and workflows to align team to translate needs into with PES processes, prioritizing functionalities. rapid deployment and minimal • Often using iterative methods, development effort, while offering enabling continuous feedback and Design and minimal customization. refinement throughout the project Development • These solutions are often the result of lifecycle. iterative refinements across multiple • The success of this approach relies PES deployments, ensuring stability heavily on having clear specifications. and reliability. PES must conduct thorough • While some pre-packaged solutions assessments of their workflows allow for considerable customization and requirements to guide the to better meet specific PES development process effectively. requirements, this added flexibility often results in higher development costs and longer timelines. • Tailored to integrate easily with • Can offer built-in features designed existing digital systems, enabling deep to make integration with other digital and precise integration with existing systems relatively easier. digital infrastructure. Integration and • While not as deeply customizable, • Seamless data flow and compatibility Interoperability they are designed to connect with across platforms. common systems and databases through APIs or predefined modules. • Deployment follows thorough testing • Deployment is quicker due to prebuilt to confirm the software meets PES features, often requiring only basic specifications and operational needs. configuration before becoming • Being a first-time implementation, the Solution Deployment operational. process may involve extra validation • This shorter timeline makes it ideal for and fine-tuning to ensure readiness PES that need a faster rollout. for live use. • PES has significant control over • The vendor manages updates, bug maintenance and updates — their fixes, and feature enhancements, timing, scope and priority. reducing internal IT workload but • This allows modifications based on Maintenance and limiting control over the timing and changing needs without being tied to Updates nature of updates. a specific vendor. • In some cases, vendors can offer training to a local IT team (PES-based team or a local IT vendor) to handle basic maintenance needs. 57 Contiues in te next page A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Quick insights Who Maintains the System? modifications but requires significant internal capacity and expertise. Options for Managing PES Software For pre-packaged solutions, PES typically does not have Maintenance access to the source code, limiting their ability to fully modify or control the underlying system. In such cases, Software maintenance and updates are critical aspects PES-led maintenance may only extend to managing of any digital solution, whether custom-built or pre- configurations, workflows, or user settings, with core packaged. PES must decide how maintenance will be updates and fixes remaining under vendor control. handled post-deployment. Typically, there are three PES must evaluate its internal IT capacity and the level scenarios for managing maintenance and updates: of access granted by the vendor when considering this model. 1. Vendor-led Maintenance: The vendor is responsible for ongoing maintenance 3. Hybrid Model: and updates, ensuring the system remains PES handles minor updates, such as routine operational and up-to-date. maintenance, user-facing adjustments, or localized PES retains control over prioritizing changes and configurations, while relying on the vendor for major scheduling updates but relies on the vendor to updates, bug fixes, or system enhancements. execute them. This model balances control and vendor dependency, This approach is common for both custom-built and ensuring flexibility for PES while leveraging vendor pre-packaged solutions, as vendors often include expertise for complex issues. maintenance as part of their service agreement. Hybrid maintenance can apply to both custom-built and pre-packaged solutions, depending on the service 2. PES-led Maintenance: agreement and PES’s capacity. For custom-built solutions, PES can take full responsibility for maintenance if they have access Regardless of the chosen maintenance model, PES should to the source code and a skilled in-house IT team. include specific terms in their contract or ToR to clarify roles, This gives PES complete autonomy over updates and access, and expectations for maintenance and support. Comparison of operational processes: Custom-built versus pre-packaged solutions (cont.) Custom Software Development How it works? Pre-packaged Solutions (building from scratch) (using existing products) • Requires significant involvement from • Since the product is pre-built, PES staff PES staff at every stage, including involvement is focused on product Internal Staff defining requirements, reviewing configuration and its integration with Involvement prototypes, providing iterative existing systems. feedback, and managing the • With relatively shorter project timelines, deployment process. the intensity and duration of staff involvement are typically lower. • Lower vendor dependency, as PES • High vendor dependency, as PES relies owns the software and retains control Vendor heavily on the vendor for updates, after development. Dependency maintenance, and enhancements. • While vendors may still be involved • The system’s evolution and continued in updates or maintenance, PES has functionality depend on the vendor’s greater autonomy in choosing how support and priorities. and when to manage the system. 58 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions While this illustrates distinct processes and trade-offs This strategy enables PES to balance operational for custom-built and pre-packaged solutions, PES are needs, budget constraints, and technological not limited to these two categories. A hybrid approach ambitions by leveraging the proven robustness of pre- offers a flexible and adaptable middle ground, allowing packaged solutions alongside the cost-efficiency and PES to combine the strengths of both models. For customizability of locally developed components. A example, a PES might adopt pre-packaged modules for hybrid approach can also be applied at the contracting advanced functionalities like AI-powered job matching level. For instance, procuring a pre-packaged solution or labor market analytics, while developing custom- but with a time-bound vendor maintenance plan, while built components for job seeker case management or simultaneously building internal capacity to gradually reporting tools. take over system support. In both software selection and contracting, hybrid arrangements can provide tailored solutions that better align with each PES’s specific needs and context. BOX 21 Country example: Tunisia’s hybrid approach in action Tunisia’s ANETI launched a request for proposal (RfP) for a comprehensive digital employment solution, prioritizing the development of two main components: i) a job matching system (JMS) – a specialized engine to match job seekers with employers based on skills; ii) and an Information System (IS) – to handle both the functionalities for PES staff (e.g., caseworker tools, reporting tools, dashboards, etc.) and job seekers and employers (e.g., online registration, searching for jobs and job seekers, etc.). This hybrid approach allowed ANETI to: Ensure Technical Feasibility: The matching engine However, the initial RfP was not fully successful due to the required specialized expertise including natural lack of vendors capable of delivering both components at language processing, AI-based recommendation the required level of sophistication. While an internationally algorithms, and development of skills and occupation renowned software company was identified to develop taxonomies. By focusing an RfP solely on this the matching engine, it could not accommodate all the component, Tunisia was able to secure a high-quality customizations needed for the system. solution. Improve Customization and Cost Efficiency: In response to these challenges, ANETI restructured the e The front-end and back-end MIS functions were procurement into two distinct RfPs: technically less complex but required a higher level A specialized, pre-packaged job-matching engine of customization, which could be handled more by an international company specialized in job- effectively, at a lower cost, by a local provider. matching technologies. Additionally, opting to develop the MIS through A custom-built Information System by a different local vendors can reduce dependency on a single vendor. international vendor Implementing a hybrid model requires careful attention an external IT vendor specializing in aligning multiple to challenges such as vendor cooperation and integration solutions into one cohesive system) if internal capacity complexity. For instance, PES must ensure that pre- is insufficient. Addressing these challenges enables packaged solution providers are open to integrating PES to unlock the benefits of a hybrid approach while their modules with locally developed components and maintaining operational flexibility. may need to engage a systems integration company (i.e., 59 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions The hybrid approach offers several advantages: In addition to hybrid models, PES can explore a range Cost efficiency: It can reduce reliance on costly pre- of alternative approaches. These include low-code packaged solutions by enabling technically easier platforms, customization of open-source software, or components to be developed locally, while more shared development models with other government advanced or specialized modules can be procured agencies. Each of these options provides unique in pre-packaged form. This makes it particularly opportunities to tailor digital solutions to specific needs suitable for PES with tight budgets. and constraints. Enhanced customizability: In a hybrid approach, custom-built components can complement In addressing challenges carefully and considering all pre-packaged solutions by addressing unique available options, PES can design digitalization strategies workflows and requirements that the pre-packaged that are adaptable, cost-effective, and aligned with their modules cannot fully accommodate, ensuring long-term objectives. greater alignment with PES-specific needs. Access to advanced technology: Pre-packaged Context Matters: Identifying the Right Path for modules provide robust solutions that might be PES Digitalization difficult to develop in-house or locally. Determining the most suitable approach involves However, implementing a hybrid model requires careful aligning the unique context of a PES with the strengths consideration of key challenges: and potential drawbacks of custom-built or pre- Vendor cooperation: Successful implementation packaged solutions. Each PES will have its own reasons relies on finding capable vendors and ensuring for choosing one approach over the other, driven by that pre-packaged solution providers are open to specific needs, priorities, and constraints. Factors such integrating their modules with these components. as workflow complexity, the need for system ownership, Integration complexity: Managing the integration available resources, and integration requirements often of multiple systems requires robust IT capabilities play a decisive role. Here are some examples of contexts or support from external consultants to address where each approach could be more suitable, offering technical challenges. practical guidance to help managers navigate this critical decision. When a Custom-Built When a Pre-packaged Solution is Suitable: Solutions is Suitable: 1. Full Ownership and Autonomy: Ideal for PES 1. Limited Time to Deploy: Suitable for PES that need prioritizing complete ownership of the software, a quick rollout to address immediate operational including source code and data, and full control needs. over updates, modifications, and long-term 2. Minimal IT Capacity: Could be useful for contexts scalability. with limited IT capacity, as vendors can manage 2. Evolving Workflows: Best suited for PES with most technical aspects. evolving workflows that require tailoring and 3. Advanced Technology: Best for PES looking flexibility to adapt as processes change over time.. for tested, ready-to-use tools, with advanced 3. Flexible timeline: Best for PES that can technologies that may be challenging to develop accommodate longer development and in-house. implementation timelines to ensure the solution is 4. Budgeting Choices: Pricing models like upfront fully customized to their needs. payments or subscriptions offer flexibility for PES to 4. Alignment with digital strategies: Suitable align cost structures with their financial planning. for PES aiming to integrate their systems into a With most vendors being international, this government’s broader digital strategy, requiring suits PES that can manage payments in foreign compatibility with specific IT standards, policies, currencies. and interoperability frameworks. 5. Simple and Common Workflows: Best for PES with 5. Unique workflows: Best for PES with specialized straightforward, standardized processes that align or non-standard workflows needs that require with pre-defined software features. tailored solutions. 60 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions E1.1. Custom-built software solution aspects to evaluate include their experience with Key Considerations similar projects, technical capabilities, and ability to understand and adapt to the PES’s specific context. For PES managers who determine that building a custom c) Planning realistic timelines: Custom-built solutions system is the most suitable choice, whether to retain often take longer to design, develop, and test. Setting full control over design, ensure complete ownership, realistic timelines with clearly defined milestones or accommodate workflows that are too unique for off- can help keep the project on track. the-shelf options, there are several key considerations d) Intellectual property and control: It is essential to to guide the development process. These considerations clearly define intellectual property (IP) rights when help ensure that the final software aligns with both engaging with a vendor. Securing full ownership strategic goals and operational needs. allows PES to maintain control over future updates, modifications, and enhancements. It also provides a) Clear requirements and specifications: PES flexibility to engage other vendors if needed, managers need to establish detailed specifications reducing dependency on a single provider. for the desired solution. Custom software e) Product quality review: Custom systems development demands a well-defined vision of need thorough testing to confirm they meet the functionalities and features that need to be requirements. If in-house IT teams are limited, PES designed to effectively support PES operations. may engage third-party quality assurance firms or b) Vendor selection: With no pre-built product to consultants to verify functionality, compliance, and evaluate, the emphasis shifts to vendor vetting. Key performance before final acceptance. Quick insights Ensuring a Proper Software Handover A successful software handover ensures the PES can effectively manage and maintain the system after development. The following practices can help: 1. Comprehensive Documentation: Vendors should provide detailed documentation, including system architecture, coding standards, user manuals, and troubleshooting guides, aligned with recognized software documentation guidelines such as ISO/IEC 26514 or industry best practices. 2. Source Code Access: PES must ensure that the vendor hands over the complete and up-to-date source code, along with any necessary dependencies or libraries. 3. Knowledge Transfer Sessions: It is important to arrange training sessions where the vendor equips the PES technical team with knowledge about system operations, maintenance, and troubleshooting. 4. Test Environment and Tools: A functioning test environment and any necessary tools or credentials for testing and updates should be included in the handover. 61 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions E1.2. Pre-packaged solution Service offers a customizable environment for building and deploying applications, while subscription-based While there are advantages and drawbacks of both managed services combine software with operational custom-built and pre-packaged software solutions, some support and ongoing management. These alternatives PES managers may still opt to explore pre-packaged may suit specific needs but are less commonly adopted solutions as a faster-to-deploy and potentially more in the PES context. specialized alternative. In this scenario, the focus shifts from designing tailored systems to selecting a product Off-the-shelf software and SaaS remain the two most that aligns with the agency’s operational and strategic prevalent models. Off-the-shelf solutions provide needs. The challenge lies in identifying a solution that standalone functionality but may require additional effectively balances cost, functionality, and adaptability configuration or updates to remain effective over to the unique context of each PES. time. SaaS, on the other hand, offers a subscription- based, cloud-hosted model with continuous updates Pre-packaged software solutions for PES digitalization but can raise concerns around data ownership generally fall into two main categories: Off-the-shelf and long-term costs. These two options is further software and Software as a Service. However, other explored in detail to guide PES managers in making approaches also exist. For instance, Platform as a an informed decision. TABLE 4 Overview of Off-the-Shelf software and Software as a Service Commercial Off-the-Shelf (COTS) Software as a Service (SaaS) Overview Commercial Off-the-shelf software is pre- SaaS solutions are cloud-based platforms developed to address common needs delivered as a service by the vendor, within specific industries, including PES. providing PES with access to software These solutions are designed with standard through the internet. This model is functionalities, such as job matching, case particularly attractive for agencies that management, or labor market analytics, and lack significant IT infrastructure or technical offer some level of configuration to align with capacity. the unique needs of individual PES. The key differences between COTS and SaaS solutions The comparison table shows that one of the most primarily revolve around ownership and control, hosting significant differences between COTS and SaaS lies and infrastructure, updates and maintenance, and cost in software hosting. But what does software hosting models. These distinctions shape how each option aligns really mean, and how does it affect PES operations? with the unique needs and capacities of PES. This concept is further explored in detail, examining its implications for infrastructure, data management, and operational efficiency. 62 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions TABLE 5 COTS versus SaaS COTS SaaS Ownership and Control Licensed or owned by PES, with significant Ownership remains with the vendor, limiting control over configuration and hosting. PES control but reducing IT complexity. • COTS offers PES greater flexibility and control to align the system with specific workflows but requires managing hosting and maintenance. • SaaS reduces IT complexity by leaving ownership and control with the vendor, making it ideal for agencies with limited technical capacity. Hosting and Can be hosted on-premises or in the cloud, Fully hosted in the cloud, eliminating Infrastructure depending on PES infrastructure and needs. the need for PES-managed servers or infrastructure. • COTS allows PES to choose between on-premises (for more control) or cloud hosting (to ease infrastructure demands). • SaaS tends to be fully cloud-based, simplifying management but may pose challenges in areas with poor connectivity or strict data regulations. Updates and Maintenance Managed by PES or outsourced to the vendor. Updates and maintenance are handled by Requires active involvement in updates and the vendor, ensuring the system is always maintenance. up-to-date. • COTS provides the option for PES to manage updates, offering control but demanding resources. • SaaS ensures automatic updates by the vendor, minimizing effort but potentially causing misalignment with specific PES workflows. E2. Hosting the Digital Solution equipment, etc.) that stores the digital solution within its facilities. PES is responsible for security, updates, and maintenance. The question about where to host the digital solution Cloud hosting: A third-party provider stores and is an important one, often having many implications manages the digital solution in an off-site data on data security and privacy, operational costs, center. PES accesses the software, data, and among others. Below is a brief explanation of applications via the internet. Maintenance and hosting, the available options and the implications updates are handled by the provider. of each option. 3. What are the main implications of each option? 1. What is meant by hosting? There are significant implications affecting security, Hosting is where the digital solution “lives” i.e. scalability, and costs that come with each option. the physical space where the software, data, and applications are stored. Who manages this storage On-premises hosting: and where it is located gives rise to two broad Data security and control: PES is fully responsible hosting models: on-premises hosting and cloud for every aspect of the security and privacy of hosting. sensitive information, having complete control over the data. 2. What are on-premises and cloud hosting? Infrastructure: Requires significant investment in This storage can be physically located within PES data servers, storage, and networking equipment, or a government unit usually referred to as hosted as well as having a secure facility to house them. “on-premises”, or it can remotely be hosted by an Human resources: Needs in-house IT expertise external provider, commonly referred to as “cloud to configure, monitor, and maintain both the hosting.” infrastructure and software. On-premises hosting: PES or a government Scalability: Scaling-up is constrained by the unit owns and has full control over the physical capacity of the existing physical infrastructure, infrastructure (data servers, networking requiring additional investments to expand. 63 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Cloud hosting: 4. How can PES decide on the best fitting option? Data security and control: PES relies on third-party The choice between on-premises and cloud hosting will providers to implement and enforce data security primarily depend on the specific context of PES. This and privacy measures, in compliance with national includes the results of internal assessments of existing regulations. digital infrastructure and the agency’s human and Ease of operation: Eliminates the need for financial capacity, as well as external factors such as investment in physical infrastructure or extensive legal and regulatory requirements. The answers to the in-house IT management. Scaling up can be following questions should help PES managers decide on achieved quickly with less effort. the best-fitting option: Internet dependence: Requires a reliable internet connection to access the software without 1. Does the country have data security and privacy interruptions. regulations that require all data to remain on-site? Updates and maintenance: The provider handles Governments have different regulations in this area. regular updates to the software, including security Some require data to be hosted on government- patches, feature enhancements, and performance run infrastructure, while others allow data to be improvements. managed by providers operating within the country or stored abroad if strict data security standards are met. 2. Does PES have the financial and human resources needed to host on-premises? Hosting on-premises requires significant investment in both physical infrastructure and the hiring and training of Quick insights in-house IT staff for maintenance. While PES can handle this independently, it could also be achieved through a ministry- or government-wide Alternative hosting collaboration. By contrast, cloud hosting shifts options for PES these responsibilities to the provider, reducing the burden on PES. Third-party cloud vendors offer a range of deployment models to address regulatory, 3. Do PES offices have reliable internet connectivity performance, and data sovereignty requirements. to support cloud access? Reliable internet These can include outpost services, where data connectivity is crucial to ensure uninterrupted servers are physically installed on-premises or access to cloud-hosted software. Without a stable within the country specifically for the project. While connection, the solution becomes inaccessible, often associated with large-scale systems, such significantly impacting operations. setups can also be viable for smaller initiatives— 4. Does PES need a digital solution that is capable especially when supported by government or sector-specific partnerships. of scaling quickly? Cloud hosting provides rapid scalability, making it ideal for agencies anticipating Vendors also offer sovereign or government- short-term growth in the usage of the solution. specific cloud environments tailored to public sector needs. These are typically hybrid cloud models, combining private infrastructure with public cloud platforms to help PES balance flexibility, scalability, and data security. Alternatively, some governments are developing their own national cloud infrastructure. In such cases, PES may rely on government-provided cloud services for hosting and data management. 64 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E.Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Quick insights Why data security and privacy matters in PES digitalization As governments increasingly adopt digital technologies to deliver public services, the threat of cyber incidents also rises, making it challenging to leverage digital systems while safeguarding against this growing wave of cyber threats. Recent research highlights that the frequency and sophistication of cyber incidents are surging globally, increasing at an average annual rate of 21% between 2014 and 2023. Low- and middle-income countries account for 30% of disclosed incidents, driven by increased digitalization and lower cybersecurity commitments, with incidents often concentrated in public administration. 14 Robust cybersecurity is highly important for PES, which increasingly rely on digital tools for job matching, labor market analytics, and service delivery. PES are prime targets for cyber threats, as they handle highly sensitive information, including job seekers’ personal details, employment histories, and employer records. A data breach could not only harm individuals but also erode public trust in these essential services. According to a recent report Cybersecurity Economics for Emerging Markets, cyber incidents can have devastating impacts on public services and data security. In Ecuador, a 2019 data breach compromised a third-party system, exposing the personal information of nearly 18 million individuals, including minors. Sensitive data such as names, birthdates, addresses, and financial details were leaked, increasing risks of identity theft and fraud, while also prompting swift legislative action on data protection. Similarly, a ransomware attack in Costa Rica shut down key government systems, including tax collection and customs operations, and cost the economy an estimated 2.4% of its annual gross domestic product (GDP). General Implications for PES Digitalization: The choices of software development approaches—whether to develop in-house or outsource, and the type of digital solution (custom-built, COTS, or SaaS)—must be strongly influenced by which option provides the highest data security standards. Strict national and international data protection regulations, such as the GDPR in the EU, require PES to implement robust security measures, particularly in countries with stringent privacy laws. Ensuring secure and resilient systems is not only essential for regulatory compliance and operational continuity but also for maintaining the trust of job seekers, employers, and other stakeholders. 14. Vergara Cobos, Estefania (2024). Cybersecurity Economics for Emerging Markets. Washington, DC: World Bank. doi:10.1596/978-1- 4648-2120-2. License: Creative Commons Attribution CC BY 3.0 IGO 65 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions MODULE F. Pricing Structures for Digital Solutions Deciding how to price and pay for a new software What pricing models are commonly solution is one of the most critical aspects of any used for digital solutions digitalization effort by PES. Pricing determines not only ? (e.g., custom-built, off-the- the immediate affordability of a chosen solution but also shapes the longevity, scalability, and sustainability of a shelf, SaaS), and how do they differ digital platform. If a pricing model is poorly understood or misaligned with needs and budget cycles, digital solutions can be difficult to maintain over time and opportunities for future upgrades are limited. What are the key cost components PES managers face a complex array of pricing models ? —both upfront and recurring— when selecting digital solutions, each with implications for short- and long-term costs. These models vary widely that PES should plan under each model in terms of licensing structures, upfront investments, recurring fees, including pricing of additional services such as onboarding, training, and customization. To navigate this complexity, PES managers must weigh their options carefully and consider factors like funding availability, cost predictability, and the flexibility to How can PES ensure scale solutions with evolving needs. This section draws ? that digital solutions remain on insights from interviews with software providers, highlighting diverse approaches and considerations PES financially sustainable over time must address to align pricing models with their financial planning. 66 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions This module provides a detailed breakdown15 of pricing and complexity of the project. The key cost drivers for structures for custom-built solutions, COTS products, custom-built solutions are development costs, which are and SaaS platforms. Each category is examined in terms typically billed as time and materials (T&M) or as a fixed of its cost components, trade-offs, and opportunities for price for clearly defined deliverables. PES to optimize expenditures. Maintenance costs can be managed internally by PES, F1. Common Pricing Structures potentially reducing long-term expenses, or outsourced to the vendor under a separate agreement. Hosting costs are similarly flexible: PES can deploy the software on F1.1. Custom-built solutions their own infrastructure or pay extra for vendor-hosted services. While custom-built solutions have higher Custom-built solutions are designed specifically to upfront costs, they offer ownership of the source code, meet the unique needs of PES, making their pricing potentially saving on licensing fees in the long term. highly dependent on the scope, development effort, TABLE 6 Cost drivers for custom-built solutions Aspect Details Pricing Structures • T&M: The PES pays for actual hours worked (e.g., development, testing, project management). • Fixed Price: A one-time or staged project fee based on a well-defined scope. • Hybrid: Some components under fixed fee, with other aspects billed as T&M for flexibility. Maintenance Options • Vendor-Provided: Ongoing retainer or contract for bug fixes, updates, and enhancements. • Internal PES IT Teams: PES may reduce recurring costs by assuming some or all maintenance tasks after handover. However, this requires robust internal IT staffing. Hosting Options • On-Premises Hosting: No additional vendor charges if PES uses its own infrastructure or government servers. • Vendor-Hosted: Additional charges apply if the vendor provides hosting. Pros and Cons • Pros: Tailored pricing based on specific needs; potential long-term savings if PES owns the code and handles maintenance. • Cons: High initial investment, cost overruns if scope changes, potentially expensive for ongoing updates without in-house capacity. F1.2. Commercial Off-the-Shelf Unlike custom-built solutions, most COTS products include configuration costs in the licensing or onboarding COTS solutions follow a more standardized pricing fee, while deeper customizations are charged as structure, with costs typically divided into licensing professional services on a T&M basis. Hosting costs fees, implementation costs, and maintenance contracts. depend on the deployment model: PES can save costs Licensing can be perpetual (one-time payment) or by hosting the solution on their own infrastructure or term-based (renewable), often supplemented by annual incur additional vendor-hosting fees. COTS solutions are maintenance fees (a percentage of the license cost) for suitable for PES agencies seeking predictable pricing, updates, bug fixes, and security patches. though recurring fees for licensing and maintenance can accumulate over time. 15. This breakdown of pricing options is based specifically on observations and insights gathered from the digitalization efforts of Public Employment Services and interviews with vendors within this industry. As such, it reflects pricing structures unique to PES digitalization and should not be interpreted as a general comparison of how products are priced across industries. 67 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions TABLE 7 Cost drivers for COTS solutions Aspect Details Pricing Structures • Term License: A license valid for a specific duration (e.g., 3-5 years), typically renewed at an agreed-upon rate. • Perpetual License: A one-time fee to own the software license indefinitely. The license cost is usually based on number of users or “matching objects”. This includes job seekers, employers, training providers, or any other user of the digital solution. Deployment Costs • Often labeled as Implementation Fee, Onboarding Services, or Setup Fee. Covers initial installation, integration with PES or government systems, and staff training. Customization • Significant customizations (like building new modules) usually priced separately, often as a professional services add-on (T&M or fixed fee). Maintenance Options • Typically included as part of the annual maintenance (a percentage of license fee). • PES with adequate internal IT resources might handle minor updates, system configuration, or user support, reducing reliance on vendor support. Hosting Options • On-Premises: No vendor hosting costs if PES opts to install the software on their own servers or government servers. • Vendor-Hosted: Some vendors provide hosting at an extra recurrent cost. Pros and Cons • Pros: Predictable licensing fees, lower upfront costs compared to custom-built solutions, faster deployment reducing time-to-value. • Cons: Recurring maintenance fees, additional costs for customizations, potential for vendor lock-in with limited flexibility. F1.3. Software as a Service SaaS platforms primarily feature a subscription-based While SaaS solutions are typically hosted in the cloud, pricing model, offering predictable recurring costs some of the interviewed vendors mentioned their based on usage metrics such as the number of users. ability to accommodate on-premises deployments in The subscription fee typically includes hosting, basic specific cases, although this is generally not preferred. maintenance, and system updates, which can significantly Furthermore, some SaaS providers also offer perpetual reduce upfront expenses compared to other models. licensing options, allowing PES to make a one-time However, customization options can be limited, and payment for long-term use in scenarios where recurring additional services, such as specialized configurations subscriptions are less viable. or integrations, are often billed separately on a T&M basis. Implementation costs, charged as an onboarding fee, cover data migration, system configuration, and training. 68 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions TABLE 8 Cost drivers for COTS solutions Aspect Details Pricing Structures • Subscription: Monthly or annual fees, often based on the number of users or “matching objects”. This can also include the volume of transactions, or specific usage metrics, depending on the specific service offered. Deployment Costs • Separately billed Onboarding fee or setup fee; covers data migration, initial configuration, integration, and training. Customization Costs • Generally limited; any additional customizations are billed as an add-on service, often on a T&M basis. Maintenance Costs • Included in the subscription fee for most plans Hosting Options • Hosting is included in the subscription fee, though deployment on PES or government servers may involve additional vendor charges. Pros and Cons • Pros: Lower upfront costs, predictable ongoing expenses, automatic updates and maintenance included in most subscription plans. • Cons: Costs can scale up significantly as usage grows; limited flexibility in pricing for smaller agencies with specific needs. F2. Special Pricing Arrangements F2.2. Bundled Packages Some software providers offer bundled packages that Some PES may benefit from special pricing arrangements combine perpetual licenses or multi-year subscriptions depending on their chosen digitalization approach. with several years of maintenance, onboarding, and Some vendors offer different types of solutions, such support at a discounted rate. This option is particularly as modular systems or bundled packages that include useful for PES that secure grants or loans and wish to multiple features at a discounted price. The key front-load expenses to ensure predictable costs over consideration for PES managers is to select a pricing an extended period. Providers may also offer prepaid model that best suits their customization needs and professional service hours, which the PES can use budget. as needed for customization, integration, or ongoing support, providing flexibility while managing costs. F2.1. Modular COTS or SaaS F2.3. Cost Considerations for PES Some software providers design their software as Digitalization a modular system, split into functional components such as job matching, case management, or labor Cost considerations play a critical role in shaping the market analytics which can be offered separately. This success and sustainability of PES digitalization efforts. approach allows PES to adopt critical modules first, then While initial pricing may appear straightforward, the add others as financial resources become available full cost picture often includes recurring expenses and or as demand increases. Each module typically has its hidden components that can significantly impact long- own licensing or subscription fee, which can reduce term affordability. Below are some key cost dimensions upfront costs. However, managers should be aware that that PES managers should assess to support informed adopting multiple modules over time may lead to higher financial planning for PES digitalization. aggregate expenses. 69 A. PES Objectives and Challenges Identification B. Assessing the Readiness C. Defining the Digitalization Scope D. Deciding the Software Development Strategy E. Outsourcing and Selecting the Best Digital Path F. Pricing Structures for Digital Solutions Evaluating the total cost of ownership is Maintenance and updates can vary significantly essential for PES managers to avoid unexpected between solutions. For COTS and SaaS, recurring financial burdens. While upfront costs may seem fees usually cover these services, but PES straightforward, hidden expenses like data managers should verify the scope to avoid migration, integrating with other government unexpected charges. Custom-built solutions, on the systems, training staff, and potential future other hand, require explicit agreements on post- expansions can significantly inflate budgets. Proper deployment support, which could add substantial planning ensures that all aspects of ownership costs over the system’s lifecycle. are accounted for, preventing cost overruns and enabling better financial planning. Scalability and future costs must be factored into initial decisions. Expanding systems to Considering internal capabilities can influence cost accommodate more users, add new modules, or decisions. A PES with a strong IT team may reduce enhance capabilities often leads to incremental long-term costs by managing configurations, minor expenses. Modular solutions like COTS or SaaS updates, or system maintenance in-house. Where can distribute costs over time, but PES managers technical expertise is limited, relying on SaaS or should assess whether the aggregate expenses vendor-managed solutions may be more practical, align with long-term budgets. even if it involves recurring costs, as these options often include built-in support and reliability. Hosting options significantly influence cost structures. PES with access to government data Determining licensing or ownership models is a centers or existing infrastructure may save crucial decision that can affect long-term financial significantly by hosting systems on-premises, even sustainability. Choosing between perpetual when using COTS or SaaS solutions. PES without licenses, source code ownership for custom- such infrastructure should weigh the costs of built solutions, or recurring subscription models vendor-hosted options against the investment requires a careful evaluation of the PES’s long- required to develop in-house capabilities. term needs and budget. Ownership might offer more control, while subscriptions could lower initial costs but increase cumulative expenses. Assessing customization needs is key to selecting the right digital solution. High levels of customization often increase costs when using COTS or SaaS solutions, which are typically designed for standardized use. While offering a certain degree of configuration, major customizations will require additional T&M contracts, adding substantial expenses. If the customizations needed are critical and extensive, it may be more practical to opt for a custom-built solution, which can be tailored precisely to the PES’s unique operational requirements. 70 Concluding Reflection and Key Insights This Guidance Note was developed to support Public to priorities. Choosing the right pace—through Employment Services in navigating complex decisions phased, pilot, or parallel approaches—helps reduce involved in digitalizing employment services. As the risk and accommodate institutional constraints. role of PES evolves with the need to balance expanded mandates with limited resources, digitalization presents Selecting the right development strategy. In-house an opportunity to strengthen service delivery, enhance development provides greater control but requires operational efficiency, and improve access for job seekers significant capacity. Outsourcing can accelerate and employers. However, successful implementation delivery but demands strong procurement and depends on more than just introducing new technology. vendor management. Many PES benefit from hybrid It requires strategic alignment, institutional readiness, approaches that combine local ownership with and careful planning at every stage of the process. specialized external expertise. This Note offers a practical framework to guide that Matching solution types and hosting models journey, combining structured decision-making tools, to context. Custom-built systems allow for full country examples, and insights drawn from a broad tailoring but come with higher complexity and costs. range of experiences. While every PES operates in a Pre-packaged solutions are faster to deploy but unique context, a number of cross-cutting lessons and may limit flexibility. Hosting decisions, on-premises recommendations emerge from the modules: or cloud-based, should consider data governance, scalability, and infrastructure readiness. Importance of clearly defined objectives. Not all service delivery challenges require a technological Planning for financial sustainability. A clear fix. Diagnostic tools such as root-cause analysis and understanding of the total cost of ownership is business process mapping help identify whether critical. This includes not only initial development digitalization is the right response—and where it or licensing fees but also recurring costs for can add the most value. maintenance, upgrades, and user support. Different pricing structures, such as fixed-price, time-and- Assessing internal readiness and external materials, or subscription models, require careful conditions. A realistic evaluation of internal evaluation to align with budget realities. IT capacity, infrastructure, human resources, and financing is essential to define the feasible Digital transformation is not a singular event but a long- scope of a digitalization effort. External factors term process. As PES increasingly rely on digital tools such as data regulations, vendor markets, and to deliver services and inform policy, systems must be broader e-government strategies also influence flexible and adaptable to effectively connect job seekers implementation options. to opportunities. This Note aims to provide a foundation for that transformation, grounded in practical experience Defining a clear and focused digitalization scope. and adapted to the diverse realities in which PES operate. Whether the primary goal is to enhance data analytics, improve internal efficiency, or expand By applying these insights, PES can take informed steps digital access for users, a well-scoped project sets towards building digital solutions that are not only manageable expectations and aligns resources functional, but truly transformative. 71 About this series Social Protection & Labor Discussion Papers are published to communicate the results of The World Bank’s work to the development community with the least possible delay. This paper therefore has not been prepared in accordance with the procedures appropriate for formally edited texts. For more information, please visit us online at www.worldbank.org/socialprotection 72