Any savings from the restructuring will be reinvested, not saved,  said Lauri Luht, Ministry of Justice and Digital Affairs Deputy Secretary General for the Digital State.

The government last week approved what it called the most sweeping reforms in the history of the Estonian e-state, following the announcement last month that the rationalization would be going ahead.. The e-state and e-governance in Estonia has long been showcased worldwide.

The changes will cut the number of state IT agencies from 10 to six, alongside a cut of nearly 10 percent of jobs. They will also centralize operations around the state Information System Authority (RIA) and a new digital state center.

Luht, who prepared the reforms, said the government's vision is to move from a fragmented IT structure to a more unified model, using shared platforms, data and artificial intelligence (AI).

The reform is expected to make public digital services more user-friendly, Luht said.

"The reform will reduce duplicate development and increase the use of shared data, enabling services to be developed faster and managed more efficiently. The same solution can be used by several agencies instead of each creating its own version. The result will be more consistent, reliable and user-friendly digital services across the country, and that should also be clearly visible to users," Luht outlined.

Reform focused on efficiency, not spending cuts

The state's IT sector costs amount to around €300 million. While the reform will create some savings, the funds will be redirected rather than cut, meaning there will be no direct reduction in spending.

"Things are getting more expensive around the world. The aim of the reform is not simply to cut costs, but to use every euro spent on IT more wisely. Savings are meant to allow us to redirect more money into investments and activities that create value for people," Luht said, stressing funding on tech must not fall.

"The goal is not to reduce the nearly €300 million to €200 million. That €300 million, about 1.8 percent of GDP, fully sustains digital services and provides value to both the state and local governments. That is quite remarkable and has been a great challenge. But we can do better," Luht added.

Luht noted that the National Audit Office (Riigikontroll) also pointed out last year that state IT spending had risen sharply over the past three to four years, while overall governance needed improvement.

Around 200 state IT sector positions to go

The number of positions in the state IT sector is to be cut by about 200 under the reforms.

"Operating costs have effectively doubled. At the beginning of 2019 there were 1,064 employees, while at the beginning of this year there were already 1,904. The question is how we can do things differently," Luht said.

Luht noted that investment has "essentially remained flat," something he called "worrying" as it is where growth and innovation would be expected.

More centralization around RIA

The reform will centralize state IT governance around the Information System Authority (RIA) and the new Digital State Center.

The State Information and Communication Technology Center (RIT) will merge with RIA at the beginning of next year, followed by the State Infocommunication Foundation (RIKS) by the summer of 2029. Core IT services from all other state IT agencies will also transfer to RIA.

The Centre of Registers and Information Systems (RIK) will be renamed the Digital State Center, operating internationally as GovTech Estonia. No new IT units duplicating the services of RIA or the Digital State Center can be created going forward, while the IT and Development Centre (SMIT) under the interior ministry's remit, the social affairs ministry's Health and Welfare Information Systems Center (TEHIK), the finance ministry's IT center (RMIT) and the Estonian Defense Forces' Cyber Command (KÜVJ) will remain sector-specific development centers.

A Digital Council will steer the state's information systems and technical architecture.

Together with the Ministry of Justice and Digital Affairs, the state's chief IT architect within RIA will lead day-to-day work, oversee nationwide technological and architectural decisions, steer the state away from closed technologies tied to a single supplier, and work with leading private-sector experts on the Council.

The Ministry of Justice and Digital Affairs will also comprehensively overhaul the budgeting mechanism for IT services. To prevent duplication, the state will no longer allow new information systems or services that duplicate existing central solutions.

AI and private-sector cooperation

AI also plays a key role in the reform, Luht said, saying this was "not a separate project but the next stage in the development of Estonia's digital state," adding the "best ways" needed to be found to apply the new solutions.

The reform is also expected to strengthen cooperation with the private sector.

According to Luht, instead of procuring individual pieces of code, the state should define the problem while the market provides complete solutions, supporting both the economy and exports.

The reform will also create the position of chief IT architect, responsible for shaping the digital state's overall technical architecture and ensuring agencies' systems work together, use common standards and develop in the same direction, Luht said.

Former RIA chief: Reform addresses real problems

Former RIA director general and former state secretary Taimar Peterkop said he was familiar with the problems facing the state's IT sector from his previous positions and that the reform addresses the right issues.

"Based on this debate, it seems to me that these solutions are the right ones, well thought out and thoroughly analyzed. They are not hasty decisions but proposals that have emerged from long-term analytical work," he said.

Peterkop said retaining six IT agencies was the right balance, arguing that fully centralizing IT services would distance technical delivery from service owners and risk lowering quality, while consolidating overlapping functions made sense if implemented well.

He also said competition between the IT agencies should be maintained to prevent complacency in the public sector. Rather than creating a single large IT agency, keeping six agencies competing to provide services would give the reform a better chance of succeeding, he added.

Peterkop said he also sees a growth in state IT spending as largely unavoidable. "The big picture is that the whole world's dependence on information technology is increasing and technology is becoming more expensive. So it is unlikely that this will produce any real savings; rather, we will get a better result for the same amount of money. The Ministry of Justice and Digital Affairs has also outlined the investment needs for IT — they are always greater than our means. I am skeptical that this will actually start generating savings or create additional funds somewhere," Peterkop concluded.

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