Doing Business

By John Makulowich

For some, the notion of the government doing business over the Internet would qualify as the paradigm case of an oxymoron. But take the concept broadly and add a pinch of National Performance Review. What you wind up with is attention to issues of productivity, overhead reduction, efficiency and effectiveness - all standard business concerns.

For example, Netscape Communications Corp. announced last May that the Defense
Logistics Agency, the Defense Department's largest agency, licensed Netscape's client and server software for its intranet and extranet applications, specifically to conduct business with customers, partners and suppliers.

Beyond the anecdotal evidence of a case for government doing business over the Internet is the quantitative support from a study conducted by International Data Corp. completed last year.

The Framingham, Mass., research firm found that the most common business-related process done over the Internet or World Wide Web among federal employees was acquiring information. Fully 93 percent of the respondents used it for that purpose. Other uses that ranked high included disseminating information (85 percent), e-mail (84 percent) and
accessing databases (79 percent).

Yet the numbers are deceiving. As the study uncovered, with the exception of disseminating information, the top four business-related uses were inward-bound operations. Turning the tables to outward-bound operations such as customer support, accepting filings, procurement traffic and electronic commerce, the study found them the four least popular business-
related uses.

In fact, the study noted, "These outwardly directed operations involve interaction with the public, vendors, and industry or state/local entities, for which survey data suggest little exchange is occurring."

Milford Sprecher, program director for IDC Government in Falls Church, Va., sees the Web as a developing arena for the government, with state and local efforts more focused on service and the federal on administrative matters.

"We are now seeing the beginnings of electronic commerce in the federal government. Remember that business transactions were not initially designed as Internet-related, but that is the way things are moving," he said.

"Look at requests for proposals, for example, and distribution of the Commerce Business Daily. In terms of actually transacting services, this is where things are going. Still, when we look at commerce, a very small percentage of agencies and government staff were performing transactions over the Web during the period of our study," notes Sprecher.

On the positive side, he points to GSA Advantage, feeling it is a big step in the direction of commerce. GSA Advantage is the General Services Administration's new online electronic shopping mall. By accessing GSA's electronic catalog, qualified federal users can check hardware and software pricing and place orders over the Web.

What's holding back deeper penetration of commerce in the government? Without hesitation, Sprecher replies, "Security."

And not just security in the sense of preventing crackers from stealing Visa card information or from penetrating servers with commercial information. There is also the problem of the difficulty that end users have in figuring out how to work with encryption applications and clients, for example.

"How much is that a
problem?" asks Sprecher, rhetorically. "The point is that developers must make security a part of the process. They need to build security into the application before they can roll it out. It can't stand alone as a separate operation."

Regardless of where they are on the business cycle, Sprecher feels that every agency needs to develop an Internet strategy, to ask the routine Business 101 questions: What can we get out of it? What is the overall benefit? What is the composition of our users? They also need to recognize that they are in the information business.

"State and local governments should find out who they do most of their transactions with. For example, where you have people over the phone answering questions, you should look to cut down on employment growth. That's part of what reinventing government is about, I would think. On the other hand, you should also be asking yourself, are you delivering the service now that you are supposed to be, that is, how can you improve? The process should be analyzed like any other business opportunity, a crosswalk between costs and opportunity," says Sprecher.

Hawking the E-Commerce Solution

Indeed, that's just the pitch of many major companies seeking to penetrate the government and to expose it to the benefits of so-called e-commerce. With great fanfare and even greater advertising dollars spread across print and broadcast, IBM is hawking its e-commerce solution with a passion.

Witness, for example, the feigned drama and pained expressions of the computer workers in those high-priced IBM ads for e-commerce when the server goes down. "Not scalable," one of the workers moans.

Or witness the flood of e-mail messages holding out the promise of thousands of dollars monthly in the quiet of your own home with simply a computer, a modem and an Internet account.

Or witness the once-in-a-lifetime opportunity, directed to "Internet Marketers/Mass E-mailers," to get "the new de facto standard in ultra high-speed e-mail list pre-processing/management" for just $99 - along with a free 37 million e-mail address CD for the first 500 customers!

Have no doubts, the entrepreneurial spirit thrives in cyberspace. In the past few months, a number of computer resellers, including MicroWarehouse and Insight, opened Web-based auction sites. Contributing to the growth is the availability of applications that let retailers establish virtual auction sites for less than $100,000. And Viaweb, an e-commerce company, teamed with Staples, the office supply outlet, and now offers clients the ability to create virtual storefronts on the Internet.

At the other extreme, the ilk of PointCast Inc., Sunnyvale, Calif., seems more on target, matching a value-added information service with animated ads targeted to viewer interests in niche markets.

Also successful seems the approach of a few government agencies, for example, the U.S. Agency for International Development, in a limited sphere to solicit bids for contract work by making its Commerce Business Daily announcements available via e-mail and its Web site.

On the state and local level, there's the innovation by Pittsburgh, which recently became the first city to sell municipal bonds over the Internet.

Through it all, though, the promise of riches looms large. A recent BT Alex. Brown, Baltimore, research report, "Business-To-Business Electronic Commerce," noted that this is a "huge potential market." The market for business-to-business electronic commerce could reach $67 billion by 2001 driven by businesses' investments in EC to reduce costs, procurement cycle times and inventories at an increasing rate."

Alan Eisen, program manager for IBM Global Government Industry e-commerce solutions marketing in Bethesda, Md., who is responsible for helping government customers develop e-business solutions, admits that it is old wine in new bottles.

"The e-commerce campaign is new, more focused now on the transition from looking at the Net as an information tool to re-engineering, leveraging and competitive advantage and rethinking how you do business," says Eisen.

Innovations in E-Commerce

Among the linchpins of the IBM approach are Lotus Notes and Domino to handle e-mail and groupware. Given that doing business on the Internet is still an emerging phenomena in the government sector, IBM is focusing some of its corporate energy on broad strategic issues, on showing federal staff how they can use the technology to implement their business strategy.

The company has set up the IBM Institute for Electronic Government in Washington for academic work, researching ways in which governments can use technology to strengthen business, for instance, in public safety and justice.

The company is also working in the trenches with agencies that show business initiative. A case in point is the deployment of secure electronic technologies or SET, in the area of financial management. IBM is working with the Treasury Department's Bureau of Public Debt to sell Treasury bonds on the Internet.

"The important contribution that IBM brought to that environment was our Net.Commerce product [a software package to build and customize a storefront or mall on the Web], which includes a cryptographic hardware adapter where all their keys are maintained in hardware and generated in hardware. Software just does not have that same level of security," says Eisen.

Like Sprecher, he finds the major challenge in implementing e-business in the federal government is the security issue. For Eisen, it covers everything from integration with back end systems through privacy concerns that surfaced with the Social Security Administration snafu all the way to qualifying individuals for different levels of clearance.

While still in the business arena, an approach on a different level is one taken by Powersim Corp. of Herndon, Va. It just launched its Metro Server, a development suite used to build and deploy complex business simulations and war games to be played on the World Wide Web.

Among its early beta users was the U.S. Department of Energy's Sandia National Laboratories, which, among other projects, designs all the non-nuclear components of the nation's nuclear weapons. In a study of China's water system, Sandia used Metro to develop a model that would lead to a better understanding of the dynamics of water availability and needs in that country, particularly in the agricultural sector.

Given that competition for water between the industrial and agricultural sectors of China's population is expected to increase as each sector approaches 800 million in size by the year 2030, China's water dynamic is important in understanding the relationship between water use and grain production in China.

Another beta user is the National Oceanic and Atmospheric Administration, whose mission is to describe and predict changes in the Earth's environment and conserve and manage the nation's coastal and marine resources to ensure sustainable economic opportunities. With reinventing government high on its list of priorities, the agency will use Metro to develop a model of Bearing Straits fishing as an aid in providing environmental information for policy makers.

Harold Oginz, sales manager for Powersim, sees a simulation development capability on every desktop in his vision of the future. The current corporate thrust is to develop a product that is easily bundled with other software and services and that affords partnering opportunities with the ilk of Andersen Consulting.

"The underlying methodology of the product is systems dynamics, which originated in the 1950s at MIT. The simulation tool can be used for a number of things, such as assisting in strategic decisions, training and education, and communication. By analyzing a specific decision, you can test a number of scenarios. For example, if you want to improve market share, you can do that any number of ways: increase your sales force, target competitors' customers or [through] merger and acquisition. All have different consequences and pros and cons, which the product helps you unravel," notes Oginz.

Increasing Efficiency

Another cutting-edge effort in the government version of doing business on the Internet comes through the Naval Hospital in San Diego, one of the largest military hospitals in the world. In the neurotology (skull-based surgery) section of the Ear, Nose & Throat Department headed by Capt. Mike O'Leary, M.D., the focus is not only on efficient use of operating rooms, but also on the larger picture of quality management and statistical process control. In most cases, the clients and servers are Microsoft products.

O'Leary highlights the two major programs in his section, the intranet and what is referred to as the Dashboard Project. The intranet runs in the EN&T Department with four key applications: operating room scheduling for the next three months; patient entry into a Microsoft Access database; utilization figures for rooms and maximally used room; and the supply database.

"A good example of increase in efficiency is in ordering. There are usually eight steps between ordering and getting the product. Now the database tracks order. In the world of day-to-day medicine, that is most efficacious. It ensures, for instance, that the correct prosthetic device will be there when you need to operate," says O'Leary.

The second program, the Dashboard Project, has just been approved to go beyond the pilot stage. Driven by quality management, the project quantifies interaction between the providers and the patients with questionnaires and sociologic tools. The bottom line is to check how patients evaluate the quality of their service and to institute continuous improvements in the processes and practices in the hospital.

Another initiative that strikes at the core of doing business on the Internet by the federal government is a program named America's Army Online. Also an intranet application, it attempts to bring to bear all the power of the Web tools and technologies currently available.

As Lt. Col. Nick Justice, automation officer in the General Officer Management Office, explains it, "We limited ourselves to two key tools, the use of electronic mail and the use of Web pages. Now we want to take advantage of news servers and chat servers and to bring that to bear in supporting the U.S. Army."

Sounding just like a person from the commercial sector, Justice says he seeks efficiencies that will yield dollar savings, savings in time and processing through layers of bureaucracy. Already, the chief of staff sends the senior leadership and general officers updates at least once a week - communicating almost exclusively through electronic mail.

"There are three target groups for prototyping and initial development of the intranet tools. First is the senior leadership and general officers. Then there's the installation and garrison commanders, with responsibility for all the real estate and property in the Army. Third is the National Performance Review teams, which will implement government change. If NPR can find ways of doing day-to-day business better, we can multiply the savings. The same applies to the installation and garrison commanders," explains Justice.

Using the Internet Explorer browser, military leaders are holding electronic conferences online weekly with general officers, bringing those scattered across Europe together with staff in the Pentagon.

"Clearly, there is a great need to communicate with our own soldiers. If you look at the geographic spread of the military, you can only keep in touch with Internet technology. It's just too difficult to manage networks and security for nearly one million military (500,000 in uniform and 500,000 civilians and reserves)," says Justice.

Building the Infrastructure

The obvious question to ask at this point is where is this all headed. One of the individuals in the best position to answer that is Ira Magaziner, senior adviser to President Bill Clinton for interactive policy development and the author of the Clinton administration's "Global Electronic Commerce - A Framework for Policy Development."

White House photo
The administration does not support entering into regulation that would limit the marketplace in the development of electronic payments.

-Ira Magaziner
Clinton adviser

On Nov. 13, courtesy of Deloitte & Touche LLP and Yahoo!,
Magaziner participated in an Internet "chat" discussion about the future of electronic commerce from his office in the White House, providing answers to questions typed in from members of the "audience."

What came across loud and clear was the number and extent of the potholes on the road to e-commerce worldwide as well as in the United States. Among the issues that stand out in the discussion were the current stage of development of infrastructure to support e-commerce outside the United States, the possible discriminatory taxation of the Internet by European Union countries, potential barriers across international boundaries that may slow the international development of the Internet, the imposition by foreign countries of withholding taxes on software and online content, the impact of proposed state tax collection by traditional mail order companies on Internet transactions and potential difficulties surrounding the question of who internationally might control the development of electronic payments.

Among his replies, Magaziner noted that infrastructure is developing quickly in most developed countries, including Scandinavia, Japan, Malaysia, Canada and Australia. Not surprisingly, in his consistently applied approach, he said the administration supports "no discriminatory taxation against the Internet. No bit taxes, no Internet access taxes and no Internet telephony taxes. We think that existing taxation could be applied in a neutral manner that is simple and uniform."

He noted that the Clinton administration has proposed a whole series of measures to eliminate barriers across international boundaries that could slow the international development of the Internet. They included proposals that governments not regulate Internet access, that they not have any barriers to Internet service provision, that there be no tariffs on the Internet and that there be no government regulations which prohibit companies from freely doing business.

Magaziner suggested that other nations must review existing laws in the United States to ensure this country does not have regulations in place that will impede electronic commerce. He also said that e-commerce would affect business in developing countries positively by helping to overcome the barriers of distribution and the high costs of distribution.

"Also, as the lower orbital satellites are deployed over the next decade, it will be possible for consumers in rural areas of poor countries to have access to information and businesses around the world. And this access will be cheaper than building telephone lines for those people. This will help overall with the economic and social development of foreign nations," Magaziner said in response to a question from the Internet audience.

On another issue, he noted that the president in July called for the achievement of a tariff free zone on the Internet by July 1, 1998. He also said the administration does not support entering into regulation that would limit the marketplace in the development of electronic payments.

"Nobody knows where it will develop. Maybe it will be traditional banks, software companies, associations of retailers? Even companies that don't exist yet. We [administration] think it would be a mistake to limit the development of e-payment. Of course, the banking authorities need to be involved to limit the possibility of fraud. We think it's premature to regulate or limit the type of payment systems that emerge or who develops them," said Magaziner.

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