GovConnect Climbs Market With Secure Toehold

At a time when many young companies are struggling to survive in the highly competitive state and local government market, GovConnect Inc. has not only found a firm toehold, it has managed to thrive.By focusing on key verticals, such as tax and revenue, and health and human services, the company has managed to increase revenue dramatically in the past several years. GovConnect grew at a rate of 30 percent last year and will post revenue of between $48 million to $50 million in fiscal 2001."Our biggest challenge is to continue to focus on markets where we have expertise, and not stray too far from them," said Paul Doty, chief operating officer of the Cincinnati-based company.GovConnect, formerly known as Renaissance Government Solutions Inc., learned a hard lesson about straying too far from its core competencies when it invested in portal technology last year, Doty said. The company made a substantial investment in portal technology, but pulled out after four months when it realized the self-funded business model wasn't sustainable."We went a few steps too far," he said. So GovConnect refocused on its core competency, which is connecting citizens and businesses to government services. The company's expertise is wiring the front end of legacy systems "and making them usable and accessible to a wider variety of people," Doty said. Among its solutions, the company provides citizens and government employees with integrated access to information through the Internet, telephone, fax and other products. The company also provides e-services center support.The advanced telephone and e-mail solutions take advantage of emerging technologies. For example, advanced telephone access might involve voice recognition. Doty said the company has a long history of providing solutions to state agencies and departments responsible for labor, tax and revenue, and health and human services. The company has contracts in 42 states.In the labor area, GovConnect processes unemployment claims and installs and operates service centers; in the tax and revenue area, the company installs integrated voice response and Web-based filing systems; and in the health and human services area, the company provides solutions ranging from Medicaid eligibility verification to child support enforcement applications. While the company has some local government contracts, the smaller volume associated with this part of the market makes the business difficult to justify from a profitability standpoint, he said.The company would like to expand its connectivity solutions to federal agencies and departments such as the Internal Revenue Service and Social Security Administration, Doty said. Because integrators are likely to win large, enterprisewide federal contracts, GovConnect wants to work on those opportunities with them, he said. Tom Davies, senior vice president at Current Analysis Inc., Sterling, Va., said GovConnect was one of the first companies to see the market opportunity for solutions that connect government to citizens. When the company first opened its doors for business as Renaissance Government Solutions in 1997, it had a good product but was trying "to go it alone" without forming partnerships with integrators and other technology companies, Davies said."Over time, they realized that partnering with the integrators was a way to expand their market share and get to market quickly," he said. Doty said GovConnect will be looking to expand its client service centers business throughout both state and federal government in the coming year. "Our vision is to see progressively larger interactive centers that [provide] ways for people to reach government 24/7 through whatever vehicle they have access to for that purpose," he said.The company is also looking closely at an emerging opportunity to provide "change centers" to health and human services operations. A change center would allow recipients of benefits or assistance to notify the government when changes occur in their households, Doty said."It historically has been the bane of government's existence to keep up with the volume of changes that come," he said. "We believe that we have the technology to make those changes come in through either touch-tone phones or the Web."Doty said this would allow government to spread out the workload and allow workers and supervisors more control over when they address those kinds of changes. GovConnect is a subsidiary of Renaissance Worldwide Inc. of Waltham, Mass., a publicly traded IT consulting firm with 3,000 employees and estimated revenue of $300 million for fiscal 2001. The subsidiary traces its roots back to Ficke & Associates Inc. of Cincinnati, which was established in 1978. Ficke & Associates, which was renamed International Public Access Technologies Inc., merged with Eligibility Management Systems Inc. in 1997 to form Renaissance Government Solutions. RGS changed its name to GovConnect in spring 2000.Davies said GovConnect has a lot of potential for growth in both the domestic and international government IT markets. GovConnect has already picked up one significant enterprise project as a subcontractor in Georgia. The company is part of a team, led by Affiliated Computer Services Inc. of Dallas, that was selected in July to administer a health care benefit system that will provide services to Medicaid, state employees and higher education beneficiaries. Doty said GovConnect will receive between $4 million and $5 million to provide a call center that would serve as a cornerstone of the system.GovConnect won a similar contract this year, valued at about the same amount, with the Alabama Department of Industrial Relations' Unemployment Compensation Agency, Doty said.The call centers will help the agency provide faster and better customer service to employers and the unemployed, said Lee Oswalt, special assistant for unemployment compensation and project manager at the Alabama Unemployment Compensation Agency."Developing four call centers in a virtual environment was one of the best solutions for us," he said. "When the project is completed early next year, we anticipate being better able to use our employees and [to see] an increase in the quality of our work."One of the company's largest wins this year was a contract valued at between $23 million and $25 million to process and verify accounts for a Women, Infant and Children Program jointly established by Texas and New Mexico, said Doty.In Texas, GovConnect is providing the Texas Department of Social Services with a 211 system for $500,000 that allows citizens to phone for information and referrals related to social services. GovConnect will host the Web-based system and provide technical support. Meanwhile, Drew Conway, Renaissance Worldwide's chairman and chief executive officer, is hoping to take the company private by the end of the year, a move that would be welcomed by GovConnect, Doty said. "Going private would be liberating," he said. Being under the harsh lighting of the stock market makes it "very difficult to stay focused on internal growth and expectations."