The policy report titled “The Economics of Shared Digital Infrastructures: A framework for assessing societal value,” published by UCL Institute for Innovation and Public Purpose (IIPP), explores the limitations of traditional approaches in measuring the value of digital systems.
The paper argues for a shift in perspective, viewing digital systems as foundational “digital public infrastructure” (DPI), similar to physical infrastructure like roads and energy grids.
Authored by David Eaves, Beatriz Vasconcellos, and Sumedha Deshmukh, the report provides a framework for understanding the long-term societal value of DPI, moving beyond conventional cost-benefit analyses to consider indirect, systemic effects over time.
Defining Digital Public Infrastructure (DPI)
DPI is defined as “shared, reusable systems that facilitate interoperability, efficiency, and innovation,” built on modular software components that enable broad participation in society and markets.
Three widely recognized foundational capabilities of DPI are:
- Digital identity and authentication
- Secure data exchange
- Real-time digital payments
However, the report takes a broader view, considering all digital systems with public infrastructural characteristics as DPI.
The key difference from traditional digitization efforts is DPI’s systemic approach, as a “collective means to many ends”—rather than single-use government IT project.
“DPI enables a fundamental shift from fragmented digitalisation towards shared infrastructure that underpins both public and private services, crystallising gains from integration across sectors and users.”
Examples of DPI include India’s Aadhaar, Estonia’s X-Road, and Tanzania’s TIPS.
Rethinking Digital Systems as Public Infrastructure
The report argues that current approaches fail to recognize and measure the horizontal, foundational nature of digital systems that enable interactions across government, markets, and society. Traditional evaluation tools like cost-benefit analyses or value-for-money metrics are poorly suited to capture the long-term benefits of DPI.
It frames infrastructure as a “capacity deemed essential to the functioning of society and thus of deep interest to and possibly a core responsibility of the state.”
Unlike earlier digitization efforts, which often resulted in fragmented and inefficient IT solutions, DPI avoids:
- High duplication costs
- Vendor lock-in
- Limited scalability
- High transaction costs
- Information asymmetry
“For decades, government digitalisation efforts have focused on modernising individual services. Ministries and agencies often developed isolated IT solutions, leading to fragmented, inefficient and costly digital environments.”Advertisements
Characteristics of DPI:
The report identifies five key design characteristics that define DPI’s value creation:
- Standardisation: Standardisation involves creating and adopting shared rules, formats, and protocols. These common rules may result in transnational and compliance costs and also prevent vendor lock-in. Vendor lock-in refers to the dependence on the vendor for services.
- Interoperability: Ensuring systems and organizations can exchange and use data across sectors—breaking down silos, reducing redundancy, and enabling innovation.
- Minimal and reusable building blocks: Using modular digital components that can be repurposed across services, reducing costs, supporting scalability, and enabling rapid innovation.
“Minimal and reusable building blocks enable digital infrastructure components to be repurposed across multiple services, reducing duplication and supporting scalable solutions.”
For instance, GOV.UK Notify allows public sector service teams to send emails, texts, and letters within 10 seconds—without deep technical expertise.
- Data as a high-value input: DPI should establish trustworthy data systems that serve as economic and governance assets, enhance public accountability, and protect citizens’ rights.
The report warns of the risks of data invisibility, citing Ranjit Singh and Steven Jackson:
“The ‘spectrum of visibility’ could lead to an environment where the ‘rights and entitlements of… ‘high-resolution citizens’ are expanded, while those of ‘low-resolution citizens’ are curtailed.”
- Public governance and oversight: Mechanisms must be in place to ensure DPI operates in the public interest. This involves balancing private sector involvement with equitable access, accountability, and fair market conditions.
A Public Value Measurement for DPI Evaluation:
The report proposes a structured framework for assessing DPI’s impact, going beyond traditional cost-benefit analysis to consider systemic roles.
The framework evaluates three categories of effects across the public sector, individuals, and industry:
- Direct Effects: Immediate benefits such as automation efficiencies, faster authentication, and cost savings.
- Dynamic Effects: Spillover benefits and the evolution of new use cases—e.g., improved supply chain resilience through data sharing.
- Market-Shaping Effects: Structural shifts in industries and governance—e.g., DPI’s role in enhancing competition, or in reinforcing existing market concentrations.
The framework emphasizes that these categories are not rigid, and some effects can span multiple categories.
It provides examples of metrics for each type of effect, considering reach, quality, impact, and value for money.
- Reach: What are the citizen adoption rates and the extent of interoperability?
- Quality: How reliable is the infrastructure in terms of accessibility and quality of data?
- Impact: How much time has been reduced? What is the GDP impact and efficiency of service?
- Value for Money: Did DPI reduce the operational costs and add any profits?
Trade-offs Impacting Value Creation:
The report identifies additional enablers that affect the value created by DPI, including trust in data, inclusive adoption and scale, and local accountability.
Key trade-offs in DPI:
- DPI implementation should find the right balance between sovereignty and dependency. The state should be careful about who is controlling the ownership and what is the extent of reliance on private technology for DPI’s capacity building.
- DPIs have the potential to lower entry barriers. (For example, NPCI’s UPI in India enabled everyone with a smartphone to accept and make digital payments.) So, the potential of DPIs in reinforcing market concentration needs a thoughtful policy analysis to make businesses more inclusive of everyone.
Also Read:
- How Not To Screw Up Your Digital Public Infrastructure
- Experts at Global DPI Summit Discuss the Future of Digital Public Infra
- MeitY Suggests Indian Startups to Build on Foundational Models
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