Eye on the States

By Thomas R. DaviesCompanies that market to state and local governments are preparing for the anticipated post year-2000 wave of e-government buying. Convinced that the states are going to shift their attention ? and spending ? to electronic commerce, industry leaders are ready to place their bets on the future.As with any major market transition, companies are finding it extremely challenging to get a clear read on the direction of state and local government. Fluid market dynamics, reflecting a shifting market landscape, are keeping companies guessing about the future.Among the unanswered questions surrounding the e-gov market opportunity are: the potential size of the market; how much will be available in the next year; how fast the market will grow; what applications will first take hold; which buyers will move first; who in the customer's organization will make the buying decisions; the business and technical requirements; what procurement methodology buyers will use; where the funding for e-gov initiatives will come from; and, what part will be contracted out.Adding to the confusion is the reality that the e-gov market is highly dynamic. What appear to be market trends today can turn out to be someone's wishful thinking tomorrow. Separating e-gov fact from fiction is one of the major challenges facing both buyers and sellers.How companies respond to such market dynamics will certainly help determine their fate. It is in times such as these, where the road map to success is hazy, that those who adopt a wait-and-see position will miss out. Those who stick to proven market-planning practices, more appropriate for mature markets, will waste energy and resources. Precision and certainty are not the hallmarks of the e-gov market at this time. Better to learn by responding to and creating market opportunities than jumping through internal corporate planning hurdles.So what are the critical marketing imperatives for companies that want to take advantage of e-gov spending? First, they must bring to market state and local specific solutions. While initially it may appear that technology is driving spending, this is a temporary phase often evident in the early stages of a new market opportunity.Second, they must be first to market with a sustainable campaign. This will be a challenge for many of the companies that dominate the state and local market today whose primary interest is to protect their current market share and sources of profit. Third, companies must pick carefully the niches to target. Not all niches are created equal, nor are all business models equally attractive. Putting a great deal of forethought into how replicable and scalable the e-gov solution is will pay off handsomely in the years ahead.Fourth, companies must avoid prematurely closing off options, and by all means avoid extrapolating too much into the future from just one or two data points. The e-gov market in state and local will be very diverse. Some buyers will approach e-gov as a service to be purchased. They will be puzzled by other governments that will purchase technology and build a custom solution. Count on state and local governments living up to their reputation as laboratories. Perhaps just as importantly, e-gov will redefine the boundaries of industry and government. It also will cause governments to rethink what is conventionally thought of as inherently governmental. Finally, companies shouldn't pick e-gov winners and losers from the traditional lineup of players. Every new major market opportunity in state and local has altered the competitive landscape. E-gov is doing the same. The state and local market is being targeted by portal companies, Internet application solution companies and others that are just an IPO away from national recognition. Many of these eventually will become attractive acquisition candidates.Navigating the unchartered waters of e-gov in state and local government will test even the most experienced industry executive. One well-known marketing guru recently advised companies to "prepare for the eventuality of anything" in a digital world. We will soon learn who has done his or her homework.Thomas Davies is senior vice president for Internet services at Federal Sources Inc. in McLean, Va.