Three Firms Thrive On Changes in Fed Business Practices

Three Firms Thrive On Changes in Fed Business Practices

By Richard McCaffery
Staff Writer

Business is booming for at least three electronic commerce companies in the Washington region seeking to help the federal government and industry buy goods and services over the Internet.

Electric Press Inc., Integration Technologies Group Inc., and Compusearch Software Systems Inc. are thriving as procurement reform and efforts to streamline government force federal agencies to change the way they do business.

Duffy Mazan

Officials at Falls Church, Va.-based ITG expect revenues to swell from $16 million in 1997 to $18 million in 1998, and are poised to enter the state and local market in August.

In June, McLean, Va-based Compusearch saw its backlog skyrocket from $500,000 to $11.2 million, thanks to contracts from the Army and the Department of Transportation, according to Henry Frain, president of Compusearch.

"It's a niche that really makes sense," Frain said.

The three privately held software makers were among 200 companies that exhibited computer products at the Electronic Government 1998 conference in Washington, July 7-10. About 35 percent of those companies are based in the Washington area, said Charles Lockard, co-chair of the conference and chief executive officer of I.T. Direct Inc., Reston.

"I think we've reached a point where the technology is showing a lot of payback and efficiency," Lockard said. "The stuff is working."

The conference was aimed at putting government customers together with electronic commerce companies. Twenty-five government entities participated, including NASA, the Department of Transportation and Veterans Affairs, which showed off electronic commerce products that improve efficiency.

Is Washington hot for electronic commerce? The region ranks in the top five nationwide in terms of the number of companies offering procurement services, according to Neeraj Vohra, an electronic commerce analyst at Friedman, Billings, Ramsey Group Inc., Arlington, Va.

"There's certainly an increasing number of electronic commerce companies in our backyard," Vohra said. Silicon Valley, Calif., leads the way, and another hot spot is Atlanta. It's difficult to say how many electronic commerce companies are in operation since the phrase has become an industry buzzword, Vohra said. But there are some 680 companies nationwide, he added.

Internet-related companies in the Washington region such as America Online Inc., Dulles, Va., and PSINet, Herndon, Va., are helping lead the charge, Vohra said. "As these pipe companies get bigger and bigger, a lot of people in management leave to start their own companies," he said. Electronic commerce is a natural spinoff because the technology is based on the Internet.

Indeed, estimates by FBR, the online media research firm Jupiter Communications LLC, New York and the Department of Commerce estimate the business-to-business electronic commerce market will grow from $1 billion in 1996 to $300 billion in 2002.

"We're very bullish on electronic commerce," Vohra said. "There's a lot of efficiency you can drive into the system. I think that's exactly what's going to happen."

Electric Press was founded in 1994 by four scientists from the National Academy of Sciences who used the Internet as a way of getting researchers to collaborate, said Duffy Mazan, the company's chief executive officer and one of its founders.

"I saw it as an interesting business opportunity," said Mazan. "During the first couple of years we were basically educating people about what the Internet was and how they could use it."

Now, Electric Press has three types of electronic procurement products, each aimed at a different customer. eFed pools together lists of vendors, products and contract vehicles for procurement officers and automates the buying process. Government customers include NASA and the Army.

Electric Press does 30 percent of its business with the government, and Lee expects this number to quickly grow to 50 percent as federal agencies continue streamlining the procurement process.

"It's a real commercial off-the-shelf product," Lee said. "We can have it running in two days, whereas a systems integrator would have to build one for you."

The company also makes procurement software for businesses throughout the manufacturing industry and for publishers. It has 37 employees and expects to increase its revenues to $30 million over the next five years, Lee said.

Ninety percent of ITG's business is done with the federal government, said Ron Dimon, director of software products. Its flagship product, Procure, provides everything government contract officers need to buy products, and the software automatically tracks the process, Dimon said.

ITG, which has 70 employees and was founded in 1984, has two main government customers, the Department of Defense, where it sells products to the Navy and the DoD's Inspector General's office, and the State Department.

Dimon declined to provide revenue goals but said the company now expects to sign eight new federal clients each quarter, which would quickly more than double its customer base.

ITG is also developing procurement software to chase the state and local government markets. The product is being tested, and ITG expects to start selling it in August.

"The software is 80 percent the same," for federal and state and local governments, he said. The company received its own GSA schedule in April.

Compusearch is also pushing into state and local markets with its procurement products, Frain said. The company's main software product, Prism, is designed to provide agencies with everything they need to do business electronically.

The company had revenues of $2.7 million in 1997 and is on pace to hit $4.5 million this year, said Frain, who believes the electronic commerce business is ready to explode.

"There are so many opportunities," he said. "If we do our homework in the right way, there's no reason we can't be at $100 million in revenues in five years."

In June, the company won a 7-year contract worth up to $4 million to provide the Army with Prism software.

All of Compusearch's business is with the government. Its customers include the departments of Justice, Labor and Health and Human Services.

The company, founded in 1983, has 40 employees. Frain expects to hire another 12 by the end of September.