Eye on the States

By Thomas R. DaviesState and local governments rarely are confused with dot-com enterprises. Unlike Internet start-ups, they are rarely fast, nimble, entrepreneurial or risk-taking. And while some clearly get it, most state and local governments still operate on government, not Internet, time.That is not to say that Internet initiatives under way in the states are less attractive than those found elsewhere. It just means that state and local governments' priority is to integrate the Internet into their traditional legacy businesses, not create dot-com enterprises from the ground up.During the next few years, state and local buyers will commit significant resources to building Web-based solutions that are ready for prime time. These solutions will incorporate the best of the traditional brick-and-mortar and the dot-com worlds. While state and local buyers will look for solutions that are as accessible and responsive as the Web, they also want them as secure, reliable and maintainable as legacy systems. This is no small undertaking. Legacy systems in state and local governments, as revealed in their year 2000 assessments, are extremely large, complex and old. Consider, for example, eligibility determination for social services and health care. Surveys show that most computer systems built to determine who is eligible for benefits are based on software and hardware architectures built more than 20 years ago.Eligibility determination is like many other legacy areas of state and local government. Tax collection, dispatching, offender tracking, financial and personnel management and constituent relations are just some of the many legacy systems targeted for industrial strength Web-based solutions. And, as is the case with eligibility determination, they are based on outdated technologies.How are integrators positioned to assist the states in transitioning from bricks to clicks with their legacy systems? The leading integrators in state and local government, such as Advanced Communication Systems, American Management Systems, Andersen Consulting, Electronic Data Systems, IBM, Lockheed Martin and Unisys bring much to the table. Besides their historical commitment to the market, these companies have broad knowledge of state and local government enterprises, as well as a deep understanding of the legacy applications. They also have a consultative sales model that enables them to sell the business value of new Web-based solutions to the highest levels of government.Integrators also can assemble a portfolio of capabilities and technologies under a single corporate banner. This will be especially important as it becomes clearer that even the largest integrators lack all the requisite resources needed to deliver end-to-end Web solutions.One significant challenge facing the integrators is speed. Some are struggling to identify the bricks-to-clicks opportunities and bring proven solutions to market. A surprising number of integrators have not been particularly proactive, perhaps attributable to their focus on Y2K. Regardless, their pace will need to hasten over the course of this year.Another hurdle for integrators is internal. While they struggle to put in place new organizational structures, leadership, capabilities and strategies to support e-business, they are experiencing tremendous disruptions. This is causing many to take their eye off the customer.As a result, many integrators are playing catch-up. To do so quickly, they must form partnerships and alliances as well as make acquisitions. Going solo is simply not an option if they wish to remain competitive.Today, integrators are most vulnerable to companies that have a foothold in the state and local enterprise portal market and are now rapidly expanding capabilities. Such portal companies also have proven themselves equal to, if not better than, the largest integrators in head-to-head competition.Companies that lack earnings-driven business models pose another challenge. Venture funded for the most part, and with an eye on future market capitalization, these companies are adopting a "build it and they will come" approach to the state and local government market.While it is too early to gauge their success, the number of companies coming to market with a pay-as-you-go business model is impressive. For no money down and in exchange for long-term contracts, state and local governments can offer their citizens Web-based government services.Thomas Davies is senior vice president at Current Analysis Inc., a next-generation business intelligence company in Sterling, Va. He can be reached at tdavies@currentanalysis.com.