E-Gov Momentum Hits Small City Hall

By Steve LeSueur, EditorThe city of Conyers, Ga., a small bedroom community of 8,000 people about 30 miles east of Atlanta, does not have a budget large enough to build the sophisticated e-government applications many of the nation's states and larger cities now are bringing online. The city does not even have an information services staff.Nevertheless, in January Conyers went live with a new Web site that not only contains current information about the city and events, but includes virtual government services that allow citizens to obtain city permits and pay taxes and utility bills online. The city plans to add other services, such as paying for permits and traffic tickets online."Essentially, we took City Hall to the Web," said Stacy Jones, Conyers' director of public affairs. More people visited the new site in its first two months of operation than visited the older, static site in the previous year, she said.The city purchased the Internet applications for less than $100,000 from VC3 Inc., a small, Columbia, S.C., company that already has begun replicating its e-government solutions in other small cities."The small and medium-sized governments have been underserved," said David Dunn, chief executive officer of VC3. Other industry officials echoed Dunn's views. It is primarily the states and large cities that possess the technology staffs and budget resources necessary to attract the attention of companies that design and build the new online services. The smaller government market largely has been an afterthought."No one has brought to market a solution and marketing program to serve that [small government] space," said Thomas Davies, a senior vice president for Current Analysis Inc., a Sterling, Va., research firm.But that is about to change. Along with VC3, companies such as American Management Systems Inc., Arthur Andersen, ezgov.com inc., govWorks Inc., Microsoft Corp. and Unisys Corp. are forming new partnerships and devising business models aimed at serving smaller government entities.While industry analysts have yet to measure the possible size of the market, they say the potential for selling e-government solutions to city and county governments is enormous. There are, for example, more than 19,000 cities and counties of all sizes in the United States. The nation's 80,000 water districts also are candidates for online services. And citizens and businesses pay about $450 billion annually in fines and fees to local governments, according to Forrester Research Inc., Cambridge, Mass."This is a huge space with room for a lot of companies," said Kaleil Tuzman, chairman and chief executive officer of govWorks, an e-government portal offering a variety of e-government solutions.The New York-based govWorks recently signed separate partnership arrangements with AMS and Arthur Andersen, companies that both have a large base of local government customers. The Arthur Andersen partnership is especially aimed at smaller governments, Tuzman said."Arthur Andersen is, by far, the largest public-sector auditor in the country and is familiar with the systems in many cities," he said.GovWorks, which today has about 30 government clients, expects to announce 120 states and cities as customers in June as a result of its AMS agreement, Tuzman said.Ezgov, one of govWorks' chief competitors, also intends to bring its solutions to smaller governments, said Ed Trimble, president and CEO of the Atlanta-based company. Although many of the early adopters of ezgov solutions have been larger counties, "our solution will work well for smaller governments and agencies," he said.The company recently received $28 million in investment financing from Warburg, Pincus Ventures of New York and expects to add soon about 20 new county customers to its stable of three, he said. The company also will announce partnerships with major systems integrators during the next two months.Both ezgov and govWorks offer a variety of e-government solutions, such as paying for licenses, taxes, fines and other fees.Microsoft and Pennsylvania have devised a unique way to serve that state's smaller governments. As part of a recently signed agreement with Pennsylvania, Microsoft will offer Web services to cities and counties for a low annual subscription fee. While the precise details and costs of this program are still being worked out, the goal is for Microsoft to provide the basic Web services necessary to small cities and counties that otherwise could not afford to begin the e-government transformation.As for VC3, the company intends to build on its successes in Conyers and two other small cities where it subsequently installed e-government solutions, said Dunn.On April 10, the company announced the creation of a new division, GovHost.com, that will offer a suite of 13 virtual government modules from which governments can select. GovHost.com will be an application service provider and host the Web services, which include requesting government services and paying of permits, licenses, utility bills, property taxes and traffic citations. The company is targeting cities with populations under 100,000 and small government entities, such as water districts.On the same day, VC3 also announced that Berryman & Henigar Inc., a municipal professional services firm in San Diego, had agreed to become a value-added reseller of the GovHost.com virtual government solutions. Berryman & Henigar, with approximately 300 employees and $35 million in annual revenue, has provided engineering and outsourcing services to more than 400 local governments in four states.VC3 officials said they need the partnership with Berryman & Henigar because the cost of selling to small governments outside their own region is just too high relative to the payoff. And Berryman & Henigar, they said, understands the needs and business processes of their government clients."We sometimes see the opportunities to implement solutions even before an agency staff does," said Jon Rodriguez, chief financial officer with Berryman & Henigar.VC3 plans to announce 15 new government customers within the next month and 50 to 75 customers by the end of the year. "We expect to be over $6 million in the virtual government market this year," Dunn said. The company had 1999 revenue of $4 million, with about half coming from the public sector.Companies that want to take their e-government products to smaller cities need to tap vendors like Arthur Andersen and Berryman & Henigar, which have valuable established relationships with local governments, according to analysts."There's definitely a market for smaller governments, but it's a fragmented market that doesn't open itself up for a national provider," said Jeremy Sharrard, a research associate with Forrester.Davies agreed, saying that smaller cities often prefer to work with local vendors, making it difficult for the national companies to garner significant contracts. The larger systems integrators have dabbled in the small city and county market, but have been disappointed with the results, he said."At the end of the day, the goal of the big guys is the large, project-based business," he said.