EYE ON THE STATES
Companies Have Hands Full In Sizing E-Gov Market
by Thomas Davies
Companies that aim to avoid missing out on the next wave of information technology spending by the states are working overtime to develop reliable roadmaps to e-government. And as they begin preparing their strategic e-gov market plans, those companies face the same challenge: how to estimate the size and growth rate of the state and local e-gov market.
Without good numbers to guide them, many companies are finding themselves up the proverbial creek without a paddle.
Accurate market size estimates are one of the pillars of planning. To chart a course for e-gov, companies need access to reliable estimates of spending at the national level as well as for individual cities, counties and states. Moreover, they need e-gov spending numbers for the different program areas in state and local arenas, such as transportation, social services and education.
What makes the e-gov market so difficult for companies to get their arms around? Many say it is primarily because e-gov is just too new. Few companies have the experience or the capability to construct reliable market size estimates for an opportunity that has no precedent.
Another complicating factor is there is no widely agreed-upon definition of e-gov. This leads to a huge variation in estimates of e-gov spending, depending on what is being counted.
For example, some jurisdictions are under tremendous pressure to show quick progress in e-gov. One way of doing so is to develop Web interfaces to legacy applications. This approach has been used by many first movers in the state market in areas such as licensing and registration.
But when it comes to determining how much is being spent for e-gov, it is not just the cost of the Web interface that is being counted in the e-gov column. Rather, the entire IT budget for the licensing and registration application is counted as spending. In taking this approach, states are able to show e-gov spending growing dramatically simply as a result of counting IT dollars differently.
The lack of uniform definitions is not the only challenge. The attention being given to e-gov has revealed a little-known secret: namely, many states don't know exactly how much they spend on IT, let alone the e-gov portion of it.
Study after study has shown that surveying, which is the traditional means of measuring IT spending in the states, is inadequate. Surveys have an impossible task in measuring reliably how much is being spent on IT, by whom and for what. All too often, especially in the larger states that account for most of the spending, what passes for reported IT spending estimates are educated guesses.
The underlying problem is that the systems the states use to manage IT ? appropriations, budgeting, planning, procurement and accounting ? do not capture IT spending either in a uniform manner or with sufficient granularity of detail. As a result, it is not unheard of for state leaders to discover that their vendors have the best understanding of how much money is being spent, primarily because the companies are the recipients of the spending.
Unfortunately for market planners and their senior executives who must make decisions about how fast to ramp up spending to win business, the e-gov numbers gap is a painful reality. How can a company cope with the uncertainty and risk that goes with e-gov?
Here are a few practices that companies have adopted to clear the danger zone.
One common practice is to develop multiple sources of information on the growth and size of the e-gov marketplace. It is extremely risky to rely on just one, regardless of how authoritative the source may be. This is especially true if the source relies primarily on surveys of the states as the sole basis for market sizing. Experienced top state officials know surveys have serious weaknesses and that they cannot always count on the accuracy of responses.
Companies should compare answers from various sources to reach the best possible estimate. Governors learn this when trying to find out what is going on in their states. Companies do the same.
A second strategy is to avoid using only "top-down" spending estimates. Such estimates are those that aggregate spending for e-gov at a national level but fail to break out spending estimates on a state-by-state basis. These are the estimates that typically garner the most publicity and are the most widely reported.
Without the state breakouts, no one is ever really sure whether the estimates are grounded in budget reality. Top-down estimates need to be reconciled with bottom up actual spending commitments. If the estimated spending for e-gov in state government is reported on a national basis, for example, companies should demand to know how much of that is coming from individual states such as California, Florida and Texas.
A third practice is to apply tests of reasonableness. Incremental state budget practices and competing budget needs make it difficult to turn state spending on a dime. It is rare for any new wave of technology, regardless how appealing, to make a dramatic short-term impact on the status quo. States assimilate new technologies slowly but, once adopted, stay the course much longer than often expected.
Finally, find the right source of market intelligence for the problem at hand. Strategic marketing decisions, such as whether to enter the e-governmental portal market, require strategic market intelligence.
On the other hand, tactical decisions, such as how much and where to invest sales resources for e-gov in the southeast part of the United States, require tactical market intelligence. For the former, the acceptable margin of error on spending estimates will be much greater.
Over the next year, companies will hear a lot more about the ambitious e-gov spending plans of the states. Once the 2000 elections this fall are concluded and the new governors have a chance to shape their budgets, e-gov will take on even greater importance.
Now is the time for companies to be equally ambitious with their market planning for e-gov. Thomas Davies is senior vice president at Current Analysis Inc., a next-generation business intelligence and analysis company in Sterling, Va. His e-mail address is email@example.com.