E-Mall Project Headed for Expansion

E-Mall Project Headed for Expansion

David Strauss

By Steve LeSueur, Staff Writer

The Massachusetts-led Multi-State E-Mall project likely will continue after the $1.5 million pilot project wraps up Sept. 30, state and industry officials said.

"We still must have a formal approval from state officials, but all indications are that we will move forward in some fashion after the pilot," said Nancy Burke, an E-Mall government project manager.

New York, one of five states participating in the project, already has committed verbally to continue beyond the pilot, said Burke. More than 20 states are closely following the E-Mall's progress, and several have expressed interest in joining if the pilot's results are favorable.

"I believe other states will want to participate," said Dick Healy, a project manager with Science Applications International Corp., San Diego, the systems integrator for the E-Mall project.

Since its April 1998 launch, the E-Mall has generated more than $370,000 in transactions between the five states and 20 vendors participating.

The pilot project was designed to test whether states could save money and streamline purchasing by joining to buy goods and services online from a pool of vendors shared by all the participating states.

Among the benefits of cooperative purchasing, the states expect to reduce buying costs through bulk, multistate purchasing. In addition, participating states hope to reduce their infrastructure costs by sharing the technology, such as network servers, and administrative costs associated with procurement.

Idaho, Texas and Utah also participate in the project.

Massachusetts officials intend to make a decision soon after the pilot is completed, and want the E-Mall up and running as a production system by June 2000 if the program is approved, said Burke. "It will be a quick-moving activity once we decide," she said.

The decision will be made by the heads of the state's three sponsoring departments: the comptroller, the purchasing agent and the chief information officer.

One of the key issues for E-Mall sponsors will be whether to continue with the industry team that implemented the pilot project or hold a competition to allow other integrators and software companies to compete. Participating with SAIC in the E-Mall pilot are Intelisys Electronic Commerce LLC, New York, which produces e-procurement software applications, and Motorola Inc. of Schaumburg, Ill., which issued the digital certificates.

SAIC and Intelisys also are implementing an e-procurement system for San Diego State University in California, which processes an average of 30,000 purchase orders a year. The state university system views the San Diego project as a pilot for a systemwide procurement solution, according to Intelisys officials.

The two companies are collaborating on at least one other potential government project, which officials declined to discuss.

"The government sector is important to us. We have been going after it very aggressively," said David Strauss, vice president of marketing for Intelisys.

American Management Systems Inc., Fairfax, Va., is regarded as a top contender for the E-Mall if a competition is held. During the past 10 months, the company has been engaged heavily in developing an electronic commerce capability similar to the E-Mall for the public sector, and has hired the E-Mall's original project directors, Bill Kilmartin, formerly the Massachusetts state comptroller, and Gary Lambert, formerly the deputy state purchasing agent.

"The E-Mall is not just a Massachusetts phenomenon. There is widespread interest in e-procurement coast to coast," said Kilmartin, an AMS vice president for e-commerce in state and local government.

AMS next month intends to announce both its industry partners and new government contracts in e-procurement, he said.

Oracle Corp. of Redwood Shores, Calif., also would be a strong player in an E-Mall competition with its Oracle Exchange business-to-business online marketplace, said industry officials.

"We definitely have had discussions about Oracle Exchange with states that are our customers," said David Natelson, an Oracle applications sales manager for state and local government. "Some are watching the E-Mall to see what will happen."

Other companies that might be interested in competing for the E-Mall or other types of e-procurement projects with state governments include: Ariba Inc., Sunnyvale, Calif.; Commerce One, Walnut Creek, Calif.; PeopleSoft Inc., Pleasanton, Calif.; and Value America Inc., Charlottesville, Va., said observers.

The potential value of the E-Mall contract is difficult to project, because payments likely will be tied to the number of transactions performed online. That is, vendors that implement and operate the E-Mall will charge users a fee for each transaction, similar to how many online licensing systems are operated.

"The volume of transactions often doesn't materialize as quickly as people expect," said Thomas Davies, senior vice president for Internet services at Federal Sources Inc. in McLean, Va. Calling the E-Mall "an absolutely great idea," Davies said companies must plan for the long term, because immediate results may not occur.

"The cold reality is that the obstacles are not technological," said Davies. When a new system like the E-Mall is put in place, it requires changes in policies, procedures and employee behavior to achieve its full potential.

Officials hope to obtain funding to keep the E-Mall open for business after the pilot officially ends, and officials are evaluating the project. The early results are encouraging, said Burke.

Project officials do not have numbers yet for possible savings from the E-Mall project, but industry studies show that the projected cost for electronic transactions is about $3 per order, much less than the estimated $100-plus cost for each paper order, said Burke.

With more than 90,000 purchase transactions each year for commodities alone, Massachusetts would save close to $9 million annually simply on transactions costs if all its agencies bought off the E-Mall.

The system's security also appears to have worked well. "Security is not an issue at this point," said Burke. "In fact, we need to look at whether we have too much."

Massachusetts has subsidized the pilot project, so another important issue officials are examining is how to make the E-Mall self-sustaining after Sept. 30. If the participating states are required to pay a high portion of administrative costs, some may be forced to drop out.

"The E-Mall still seems like a good idea and we would like to continue," said Jan Rogerson, assistant director for purchasing and general services for Utah. "Our deciding issue will be funding. If it's going to cost us $100,000 or more to keep it running, that will be too much."

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