Technology Industry Strengthens State-Level Lobbying

In Search of Future Market Leaders

Market leadership in state and local government has become a strategic imperative for many companies and for obvious reasons. Leaders in this market enjoy significant competitive advantages and the lion's share of the profits. While today's leaders capitalize on their favorable market position, the seeds for future market leadership also are being planted.

Who will be the future leaders in the state and local market? To identify these leaders it is necessary to look beyond traditional measures of market leadership such as market share. While such measures are informative, they typically reflect what has happened in the past rather than what will occur in the future.

One key to future market leadership in state and local government is found by looking at which buyers companies are doing business with. Quite simply, leading sellers want to do business with leading buyers. In the many small, emerging market niches of state and local government, future leadership has more to do with who your customers are than it does with how much business you are doing. Today's market share is, in part, the outcome of earlier marketing decisions regarding which customers to do business with. Knowing where to focus, whom to do business with and when to invest is all part of building the base for future leadership.

Experienced sales and marketing executives have learned not to simply follow the crowd; they time their market entry and expansion strategies to the movements of state and local government buyers. These executives know that these government buyers often move in predictable ways. They know that being first has its advantages, and that when certain buyers move it can establish a trend for the remainder of the market.

For companies, the marketing challenge becomes one of identifying buyers who will lead and set the standard for the market. These leading buyers provide the market with guidance, insight and recommendations on which companies to do business with and, just as importantly, how business should be done.

Identifying leading buyers is easier said than done for most companies. State and local buyers are not a monolithic group. They vary significantly in their capabilities, skills, risk propensities, leadership, access to capital, reputation and aspirations. These and other qualities often determine which buyers will lead, and which will follow, in setting the course for a new market direction.

Leading buyers will rarely be the same across the different vertical market niches such as transportation, public safety, education and health care.

Consider, for example, the adoption of automated fingerprint identification systems for non-law enforcement purposes. The first use of this technology to support welfare eligibility determination took place in Los Angeles County in the early 1990s. Once the technology was proven, its cost benefit established and the potential political obstacles overcome, other jurisdictions then began to take it seriously.

Another example is the use of point-of-sale technology for hunting and fishing licenses, which was pioneered by the state of Michigan and is now rapidly spreading across the United States. The state of Maryland was the early leader in the implementation of electronic-benefits-transfer systems for food stamp benefit issuance. Similarly, the state of Oklahoma had the first certified implementation of a Statewide Automated Child Welfare System, and it became the basis for many other similar state systems. And New York City was the first to use photo-imaging technology for identifying drivers who run red lights.

Not all leadership among state and local buyers is based on technology. Leadership often is founded on innovative management practices.

For example, the widespread movement to data center consolidation in state and local government was fueled by the early success of Michigan. The CIO governance model being widely adopted in state and local government - with a cabinet level officer responsible for governmentwide information technology policy, planning and oversight - was first adopted by the state of Florida in the early 1980s. Performance-based contracting - especially shared risks and shared rewards - was pioneered by the state of Texas more than 20 years ago in its underwritten approach to Medicaid claims processing. The state of Georgia has been a leader in establishing revenue-generating enterprises for the selling of state data. And the state of California has led in the creative use of state term contracts and schedules for the purchasing of information technology services.

While leading buyers are often the first to adopt a new innovation, this is not always the case. There are many other considerations that go into establishing leadership among buyers. The location of the buyer, its national reputation, how well its leaders are thought of by peers, whether its successes are well publicized, the timing of its innovation and the transferability of its solution all significantly influence whether early adoption will translate into leadership.

Leading companies need to know who the leading buyers are in each market niche. Doing business with the leading buyers is often what first distinguishes future market leaders from followers. As many companies who aspire to leadership positions in state and local government are learning, there are no shortcuts to gaining this knowledge.

Thomas R. Davies is vice president of Federal Sources state and local government consulting practice in McLean, Va. He can be reached at daviest@fedsources.com. Dave DeBrandt contributed to this article.

Technology Industry Strengthens State-Level Lobbying

By Neil Munro
Staff Writer

Information technology companies are beefing up their lobbying clout in the 50 states as state legislatures consider a variety of laws that will shape the future of the high-tech industry.

In Sacramento, Calif., the American Electronics Association has doubled its lobbying strength to three full-time lobbyists, while several high-tech companies may soon hire local lobbyists, said Teresa Casazza, the AEA's director of state-level issues and manager of the AEA's Sacramento office.

Ten of the largest high-tech companies, including California-based Intel Corp., Apple Computer Corp. and Oracle Corp., already have Sacramento-based lobbyists. Despite their marketplace rivalry, these companies often cooperate on common policy issues, such as the taxation of online commerce, said Casazza.

In addition, executives from smaller companies are taking a larger role in meeting with legislators and regulators, said Casazza. "We're seeing much more of that happening. Executives are interested and are willing to spend the time on state public policy issues," she said.

State-level lobbying is being bolstered by the Washington-based U.S. Internet Council, which organized a November meeting in Colorado Springs, Colo., for 58 legislators from 30 states and 60 industry officials. During the session, they discussed high-tech policy issues including encryption, privacy, online taxation and communications capacity.

"There is precious little of a positive agenda to advance the Internet in the states," said Bill Myers, the council's chief executive officer. The council has support from 400 state legislators and will likely receive $1 million in industry funding during 1998, he said.

"To the extent they are successful, [the council] gives us a direct entree into the legislatures," said Harris Miller, executive director of the Arlington, Va.-based Information Technology Association of America. Because of growing concern by its members, including Microsoft Corp., Redmond, Wash., and IBM Corp., Armonk, N.Y., Miller said the ITAA would try to increase its state-level lobbying.

ITAA photo

"The primary reason is the growth of the Inter-net, and the danger that if individual states take individual action, it could lead to a Balkanization of the Internet." -Harris Miller Information Technology Association of America

"The primary reason is the growth of the Internet, and the danger that if individual states take individual action, it could lead to a Balkanization of the Internet," said Miller.

Casazza identified her top three lobbying priorities during 1998 as education reform, promotion of electronic commerce and legal reform.

One of the hottest issues in electronic commerce concerns the taxation of online commerce, she said. Already, the AEA is backing a draft bill that would sharply restrict taxation of online commerce by the states' 58 counties, even as industry executives back a weaker, nationwide bill being drafted in Congress, she said.

The federal lobbying effort is bolstered by the state lobbying campaigns, said Josh Tenuta, the AEA's Washington-based director of technology policy. Every state tax board, legislature and governor that votes against taxing online commerce helps persuade Congress to vote against such taxation, he said.

Cooperation between state and federal lobbying efforts is exemplified in the long-running battle over so-called "strike suits," in which lawyers sue companies for economic damages when their stock value lurches downward.

After the information-technology spending of $40 million during 1995 and 1996 trying to defeat statewide ballot initiatives that would have eased such lawsuits, the industry is now backing a congressional law that would restrict such lawsuits in state courts, said Tenuta.

That federal lobbying effort is matched by defensive tactics in California, where AEA lobbyists helped kill off a draft bill that would have eased such lawsuits in California's courts, said Casazza.

"This is a critical period ... when governments, whether federal, state or international institutions, are looking at how they will deal with the Internet," said Miller.