'E-government' is a simple enough term but it conceals a multiplicity of headaches for governments worldwide.

The toughest part of providing public services online is not the technology, but the need to recast the back-room procedures of government so that they can receive and supply digital information in an efficient manner.

That is to say, government acting as a whole must be able to receive and process digital information efficiently across its entire machinery; ensure departments communicate well with each other; ensure effort is not duplicated; ensure departments and their public and private sector partners work together behind the scenes to achieve the same goals; and present a single face to the public.

All these tasks are far harder than laying down a few wires: they involve changing work cultures and mindsets. In the UK, Prime Minister Tony Blair revealed after only about a year in office that he already 'bore the scars on his back' for trying to change the way the civil service thinks (he was taken to task by public service unions, but most people know what he meant).

Despite his scars Mr Blair has actually been quite successful in galvanising existing and new Cabinet Office-led policy units at the heart of government to try out new ways of planning and implementing policy. Time will tell how well this has filtered through to the backwaters of public life. The key issue here is incentive - it is all very well to urge and exhort but new financial incentives are needed across government and the public sector for bodies to work together - both budget incentives for organisations and salary incentives for individuals.

Another key financial issue - most problems boil down to money - is that of 'double-running' of public services. If you switch to online services alone, people who are not wired up are excluded, which is undesirable. On the other hand, if you run online services alongside traditional services, you end up not only missing out on efficiency savings - private sector organisations like banks shut down high street branches when they go online to realise savings - but actually increasing your costs. Something will have to give.

Then there is the problem of the protection and proper exploitation of the valuable digital assets created and owned by public sector bodies. The chances are that government departments and councils have little idea of the commercial value in the information age of the sorts of digital information they hold, how to exploit it and how to protect it against misuse. Lacking the expertise they need in this fast-changing field, they could easily miss opportunities to generate income or be conned into selling it off cheap.

The second major headache for governments worldwide is creating the right regulatory atmosphere for e-commerce.

The main difficulty here is that the digital economy is global, and so discrepancies between national regulations will be steadily exposed by international businesses - if one regime is too tight, they will simply host their business elsewhere, which these days may simply be a question of siting a computer or routing a digital signal differently.

On the other hand, governments quite reasonably want to extend normal consumer protection, criminal law and national security provisions to the online world, and will not want to wait the huge timescales that it takes to draw up international treaties to do it.

So in the meantime we will have a gradual development of law across the world in a patchwork form, mixed in with some industry self-regulation: sometimes effectively, sometimes not. Ultimately, it should settle out into a workable international formula, but in the meantime there could be severe teething problems - or even chaos.

Issues to look out for in this context include the taxation of e-commerce; the legal status of electronic signatures and contracts; and control of the use of strong cryptography.

Another vital issue is that of telecommunications regulation and pricing. All are agreed that the cheaper home telecoms costs, the healthier the digital economy becomes. But how far should governments go to force telecommunications companies to lower their prices for the latest services - no longer just ordinary internet access, which is usually now cheap, but high-bandwidth access, and mobile access - when companies may have invested significant sums in developing these services which they need to recoup?

With nationalised monopoly industries or former nationalised companies there are further issues of the speed of deregulation, and the fact that regulators are often placed in the invidious position of actually disallowing companies with potential monopolies to lower costs, for fear of pricing out competition.

Finally, to say all this is not to even begin to touch on one of the most important aspects of e-government - its potential to enhance democracy.

The word potential is used advisedly here - as the report of last year's online debate 'Boosting the Digital Economy' made clear, technology is 'democratically neutral' - "used wrongly, it could stifle diversity, or reinforce current patterns of power and debate; used well it could create new ways for people to interact, particularly at the global and local level".

We are already seeing examples of both sides of the digital force, dark and light: from the surveillance and control exercised over the internet in some parts of the world to the open debate and steps towards online voting in others.

But this battle, too, will continue to be fought: and continue to make headaches for those charged with the development of e-government. Aspirin anyone?