In this dissertation, digital transformation is studied from the perspective of a municipal IT department (see Figure 1). In Finland, municipalities are self-governing public bodies responsible for various statutory services, such as education and healthcare. Finnish municipalities have their own taxation rights, and their decision-making is centralized in a municipal council that is selected through elections every four years. The day-to-day operations are managed, with few exceptions, by a public official appointed by the municipal council, who is responsible for managing the various business units providing statutory services to the residents of the municipality. In relation to other public bodies, municipalities are a key provider of Finnish public services and public sector governance, which also includes state administration (parliament and president), local state administration, and regional administration. From the perspective of the municipalities, the state administration governs the municipalities with legislation and official recommendations, whereas the local state administration consists of official authorities such as the police and tax office. The regional administration is then responsible for monitoring the implementation of law in its appointed areas. (Suomi.fi 2021)
In recent years, many Finish municipalities have faced challenges related to the provision of services with their limited resources. For example, due to its location and small size, Finland is vulnerable to global economic forces such as the 2008 downturn, which had a great impact on municipal finances. Moreover, many Finnish municipalities are suffering from resident migration to large cities, which, when combined with the aging population, has created a multitude of socio-economical struggles for the municipalities. (Pollitt and Bouckaert 2011)
The case municipality of this dissertation had its struggles as well. The operational environment of the municipality was transforming due to the growing number of residents as well as the straitened economic situation. Consequently, the municipality and its centralized IT department were facing pressure to improve their operations.
While this transformation pressure concerned the entire municipality, the main focus here is on the IT department, which was facing new operational demands as the municipality was transforming and introducing new digital technologies at an ever-increasing pace.
Figure 1. The research context of the dissertation.
IT departments in the public sector are traditionally considered as a support function, enabling cost-cutting and citizen participation (Davison et al. 2005). While the operational environment of municipalities has become more turbulent, IT departments are now facing pressure to improve their capabilities to respond to the needs of municipal business units in a more agile manner (Janssen and van der Voort 2016). The IT departments are struggling with the upkeep of organizational legacy systems and have limited resources to respond to these new demands (Châlons and Dufft 2016, pp. 18–19). Thus, there is a clear need for IT departments to transform.
Despite their struggles, IT departments have long been promoters of innovation and business development, especially in the context of digitalization (Matt et al.
2015). They are also seen as drivers of transformations brought about by digital technologies (Leonhardt et al. 2017; Tanriverdi et al. 2010). Consequently, IT departments, which have the potential to become drivers of digital transformation (Hansen et al. 2011), are also facing pressure to transform even while possessing the potential to start this transformation. This makes them an interesting context in which to study digital transformation.
While this dissertation focuses on digital transformation initiated and advanced by a municipal IT department, it acknowledges that the municipality, its business units, and other factors external to the municipality influence and are influenced by the transformation process. Therefore, they cannot be excluded from this dissertation, although these aspects are studied from the perspective of the IT department.
IT departments are typically responsible for a multitude of different tasks, including the administration of computers, maintaining old systems, supporting the development and acquisition of new systems, developing organizational architecture, as well as setting a strategy and identifying business requirements (McNurlin and Spraque 2006). Here the focus is on IT development, i.e., the process followed to meet increasing customer needs. This process begins when a new IT-related need is identified. This is followed by a definition of the need and identification of suitable solutions. In cases where there are viable solutions and satisfactory reasons to obtain funding for the suggested solution, funding is approved, after which a project is created that either takes responsibility for the creation of the solution or its acquisition from an outside provider. The process ends when the new IT solution is implemented. As the digital transformation in the IT department was initiated through a transformation of an IT development process, the analyzed transformation centers on the transformation of this key process. This research focus is justified as although IT departments are responsible for multiple other tasks, IT development is the process that enables the organization to discover and introduce new digitalized solutions to their operations.
This dissertation studies the phenomenon of digital transformation from a grassroots perspective, where the unit of analysis is a centralized IT department of a municipality. The study focuses on the transformation of an IT development process occurring inside the IT department and its impact within the IT department and the municipality. While the study focuses on transformation occurring at a unit level, it is also acknowledged that digital transformation is a fundamental transformation of which the influence is not limited to a unit level. Instead, the effects of the IT
department’s transformation have ripple effects that are also considered in this dissertation, although they have not been studied in detail.