US movie-goers have been discussing Startup.com, the latest offering from docu mentary film makers Jehane Noujaim and Chris Hegedus. The film tracks the story of GovWorks - a company that helped citizens to make government transactions online.

Cameras follow the founders as the $60m they raised is burnt away and workers are laid off. But what the film does not explain is that the software developed by GovWorks is still used in cities such as Boston, Memphis and New York.

GovWorks was acquired by eOne, part of First Data Corporation, an Atlanta-based payment services company. But the fact that this failed dotcom found a ready buyer is hardly surprising.

IT suppliers are pricking up their ears as the world's governments busy themselves with what is possibly their most ambitious project yet - e-government, whereby technology will enable departments to communicate with each other (G2G) and with the business community (G2B), and citizens will be able to access public services (G2C).

But while e-government really refers to electronic transactions, not just to online services, it is the internet's open standards that are driving the public sector towards the sort of transformation experienced by the private sector over the past ten years.

Changes in the private sector - bringing improved delivery of products and services - are providing part of the pressure for government to step up its own levels of service. If people can bank and shop online, they may want to pay taxes, register a marriage or apply for a parking permit in the same way.

Many governments have responded to this demand. The UK government, for example, wants to get 100 per cent of its services online by 2005. In the US, President George W. Bush has earmarked $100m to help citizens communicate with the government via the internet. And 75 per cent of Australians now file their income tax returns over the internet, according to Douglas Holmes, whose book eGOV: e-business Strategies for Government* is published this month.

Technology enabling these transactions is readily available. The internet can connect everyone and eliminate the need to produce software for individual departments, while systems facilitating e-procurement, payment and knowledge management can be bought off the shelf.

As the world's governments turn to technology to help transform what they do, suppliers of equipment and services are keen to sign up what could be their best customer yet: national governments - usually the biggest organisations in their countries, employing millions of people and spending vast sums of money.

But what is becoming clear is that the process of putting public services online is about much more than IT. It demands fundamental changes in the public sector's traditional structures and practices and in the relationship between the state and its citizens.

"Successful e-government is, at most, 20 per cent about technology, and 80 per cent about people and organisations," says Kito de Boer, director of McKinsey in Dubai. "It is a mechanism that turns governments on their heads, from being producer-led, ministerially confined, departmentally-blinkered institutions to being customer-oriented service providers."

Take online one-stop-shops. If the state wants to offer entrepreneurs an easy way of starting a business, it can create a website where, instead of running round to different departments to pay your taxes and get the necessary licences and permits, you can simply click on a button marked "my business".

But behind the visual simplicity of this device is a web of organisational complexity requiring the different departments involved to co-ordinate their efforts - something agencies and ministries have rarely done until recently.

Another potential stumbling block is the relationship between private sector IT suppliers and their public sector customers. David Cleevely, managing director of Analysys, a telecommunications consultancy, says government contracts are often too rigid.

"Government is very concerned with conflict of interest and subversion of the process," he says. "It takes the view that the contract is the most important thing and that no one can be trusted. And that creates a divide."

Given the potential for turf wars, both between departments and in partnerships between the public and private sector, it is perhaps unsurprising that e-government has so far tended to take off fastest where smaller units are involved. Singapore - a small city state - operates 150 public services from one website and is frequently cited as a model of e-government.

In the US, e-government has taken root at a state, rather than federal, level. The state of Virginia created a cabinet post for technology in 1998 and others have followed its example. Donald Upson, Virginia's secretary of technology, believes e-government is most powerful at the local level.

"States are doing far more, and citizens are far closer to local government than federal government," he says. "Nobody I know wakes up and says: 'Oh boy, I really need to access the federal government portal today'."

When it comes to e-government, administrations in less developed countries also have an advantage over those managing mature economies and sophisticated democratic systems - they can leapfrog technological developments. For countries struggling to catch up with the rest of the world, e-government is an extremely exciting prospect.

Some reckon that, for governments with deeply entrenched administrative structures, a totally joined-up approach may be unattainable. Matthew Oakley of Accenture believes that much integration could take place outside government, at the hands of the private sector or bodies such as citizens' advice bureaux and organisations for the disabled.

"Perhaps the answer is to keep the separate modules but create interfaces that allow integration to take place according to citizens' demands," he says. "Government isn't necessarily best placed to understand what to integrate and what not to integrate."

One area in which the private sector can help link disparate corners of government is in security. In the US, for example, Entrust Technologies is establishing a "federal bridge" -a patchwork of security architectures - to manage and rationalise security agreements between government agencies.

Financial services companies can also play a part. An online bank might, for example, decide to add value to its website by offering a link enabling users to pay their taxes online. With the private sector coming up with initiatives such as this, integration of public services may well take place whether or not administrations decide to engage in joined-up government. But however the integration of public services is achieved, the reasons for persevering with e-government initiatives are compelling.

First, the citizen gets a service that is more convenient and faster, sometimes surprisingly so. "We had a situation where the police stopped a car for driving with its licence plates suspended," says Frank McKenna, former premier of the state of New Brunswick in Canada.

"While the police officer was writing out a ticket, the driver got on his cell phone and had his car registered before the policeman could give him the ticket."

Business, which needs to deal with government much more frequently than the citizen, stands to benefit even more from such convenience.

Concerns about privacy and security continue to linger. However, the sheer ease of paying government bills online seems likely to override such concerns. A report published by KPMG Consulting found 62 per cent of those surveyed expressed a preference for online transactions.

And the potential for the state to save money is vast. For example, the state of Arizona's motor vehicle division was reported to be saving nearly $2m a year, even though only 15 per cent of vehicle registration renewals were being carried out online. Those savings will increase as more people renew over the web.

But above all, e-government represents a chance for government to reinvent itself and bring greater simplicity and transparency to its relationship with business and the public.

"This is the best opportunity that has come along since the second world war to change things and make them better," says Mr Holmes. "Just to write this opportunity off would be foolish."

* Nicholas Brealey Publishing www.nbrealey-books.com; price, £19.99/$29.95