Dot-coms Build Clientele as E-permitting Comes of Age

Dot-coms Build Clientele as E-permitting Comes of Age

Jon Fisher

By Lisa Terry, Contributing Writer

A host of companies are attempting to grab a slice of the emerging e-government market by moving online the process for obtaining construction permits.

These companies are delivering application service provider solutions that aim to bring convenience and time savings to contractors while relieving local permit-issuing organizations of much of the burden of manually processing building permit applications.

One market leader in back-end permit management software, of South San Francisco, Calif., officially will launch its Web-based permit approval system early this month. Beta testing of complementary application hosting services is to begin shortly afterward. is being joined in the e-permitting market space by government software players that include CRW Associates, San Diego; Tidemark Computer Systems, Seattle; and VC3, Columbia, S.C.

Approaching the problem with a contractor focus is NetClerk, South San Francisco, whose ASP offering includes delivery of contractors' permit application information to permit issuers no matter what their level of technical sophistication ? even if NetClerk has to do it by courier.

To start, e-permitting services aim to automate as much as possible the processes associated with obtaining basic "over-the-counter" permits ? those that require no plan submissions, such as for plumbing work or chimney repair ? which make up about half of all building permits. Traditionally, contractor personnel must drive to local offices to stand in line and file the appropriate paperwork, then wait for processing.

Using e-permitting, they instead complete applications online and submit them electronically, sometimes obtaining approval within minutes. Sites typically are funded by transaction fees, either paid by the contractor or by the government agency outsourcing the application, which may or may not pass along those costs.

Research by vendors has shown that contractors are willing to foot the bill to gain efficiencies. The next step for e-permitting vendors will be to address more complex permits such as those involving plan submissions.

"There is a tremendous need for an intermediary and aggregator," said Jon Fisher, chief executive officer at NetClerk. "What this space needs is one standardized solution."

According to Forrester Research, a Cambridge, Mass., market research firm, it is rare for e-government sites to be integrated with back-end government applications, or they are linked via once-a-day batch transmissions. Lack of real-time integration makes it hard to justify the fees.

According to Maury Blackman, vice president of corporate development at, VelocityHall offers such full integration, enabling real-time database queries that allow contractors, for example, to check the status of applications and access up-to-date inspection schedules. Blackman said this market advantage will extend to its small government ASP customers, since the company will host back-end applications and data on their behalf.

About 34,000 government entities issue some sort of permit in the United States, 17,000 of these primarily for construction, according to Most are small cities. Together, they spend about $16 billion annually to administer 100 million building permits ? about $160 a permit ? a task that can consume 50 percent to 85 percent of staff time.

VelocityHall will save staff about 10 percent of their counter time for the Department of Development Services in San Bernardino, Calif., said June Durr, director of marketing and public affairs officer for the city. The ASP solution was deployed there to improve services to business and contend with a rising tide of construction projects.

"It frees up staff for projects that are more complex, which improves services there as well," Durr said. The community also enjoys residual cost savings, such as reduced traffic resulting from fewer contractor trips to the permit office. San Bernardino already had's back-end permit product in place.

Companies marketing e-permitting services to local government face a number of hurdles, said Tom Davies, senior vice president at Current Analysis, a Sterling, Va., market research firm. They include low penetration of PCs and Internet access in the contractor and local government markets, a fragmented market that reduces the chance for a de facto standard to emerge, variations and ongoing changes in processes among jurisdictions, and cultural and turf issues within government over how departments should alter their business processes or shift worker responsibilities.

"They're giving up some flexibility because they have to standardize on the way the ASP operates," Davies said.

Selling local government on the ASP model is yet another challenge, said NetClerk's Fisher. "Getting a city that's used to doing business over the counter to accept doing it over the Web is a big step."

Most companies appear to be selling their ASP solutions via direct sales forces, but also are seeking alliances with software developers in building portal sites such as, Buildernet and RedLadder, and also alliances with government systems integrators. works with Environmental Systems Research Institute, IBM Corp., Informix Corp., Oracle Corp. and Sybase Inc., among others.

Companies that succeed will be those with positive customer relationships, a strong track record, rich site functionality and a winning value proposition, Davies noted. "Companies with a good installed base of customers are already well-positioned to test the marketplace and bring in the ASP model," he said, because local governments with an existing back-end solution are likely to want to build an Internet interface onto that application. has more than 300 jurisdictions using its back-end permit software, which the company says accounts for 20 percent of permits issued in the United States and a 50 percent market share in permitting systems. To date, 68 agencies have signed letters of intent for VelocityHall, according to's Blackman.

In large cities and counties, e-permitting firms will compete ? or align ? with large systems integrators in building a range of e-government solutions under master contracts. In small markets they will go up against traditional small government software application providers.

The privately held was created in 1999 through the three-way merger of Sierra Computer Systems Inc., OpenData Systems and Corp. Officials at the 125-employee company said it turns a profit and will do $10 million in revenue this year.

NetClerk, with 65 employees, was incorporated in 1999, and has attracted $11 million in equity funding to date.

According to Forrester Research, two models for e-government sites will evolve: task specific and full service. E-permitting sites represent the task-specific tack and will seek to replicate the success of vertically oriented business-to-business marketplaces.

State, local and federal spending for
e-government will explode from $1.5 billion in 2000 to more than $6.2 billion by 2005, according to GartnerGroup Inc. analysts at Gartner's Spring Symposium/ITxpo 2000 conference in San Diego last month. These projected figures include the costs of hardware, software, internal labor and external service.

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