EYE ON THE STATES

Industrial Strength E-Gov, the Next Wave

Thomas R. Davies

By Thomas R. Davies

A new phase in e-gov spending in the state and local government market is beginning to take shape. Not content to rest on their laurels, state and local governments are now beginning to turn their attention to using the Internet to tackle some of their most intransigent customer service problems. As a result, their e-gov needs and buying criteria will change, causing more turbulence in an already intensely competitive landscape.

Over the past five years state and local governments have demonstrated they can successfully use the Internet to improve customer service in areas such as licensing and motor vehicles registration. They have also shown they can build governmentwide portals that guide citizens to the information and services they need.

But now state and local governments are looking to the Web to fix some of their largest and most painful customer service headaches. Problems include determining eligibility for social and health care services; creating a seamless enterprise out of a fragmented state and local government organization; case management for welfare benefits and job placement; and integrating business processes, such as records management, across the entire criminal justice community.

Taking on these challenges will require state and local governments to design, build and deploy "industrial strength" Web solutions. These solutions will need to withstand the most rigorous performance and quality testing. They will need to satisfy extremely high standards for speed, scalability, robustness, interoperability and security.

As state and local officials begin planning for this next phase in e-gov, their expectations and requirements for what they need from contractors will change significantly. Skills in integrating new Web-based approaches with legacy applications will become mandatory. Consulting and business process redesign skills will be essential as state and local governments seek out fresh and innovative thinking.

Subject matter expertise in the business of state and local government will be critical. Proven project management competencies will be needed to deliver industrial strength e-gov on time and within budget. The ability to operate and maintain e-gov solutions on an on-going basis will grow in importance. And rich technical skills in telecommunications, software and systems will be key.

The size of e-gov projects will expand dramatically. The average term of an e-gov project will run for multiple years. The dollar value of the projects could easily reach a billion dollars for the largest jurisdictions. There will be multiple sources of revenue including advertising, transaction fees and billable services. Outsourcing some, or all, of the ongoing operational support for the e-gov solution will become increasingly common.

This new phase in e-gov will rapidly supplant all that has gone before it. Many of the companies that made an early, and in some cases big, splash in the state and local e-gov market will fall by the wayside. They simply do not have the skills that state and local governments will look for in choosing companies to build and deploy high-performance Web-based solutions. They will no longer be able to succeed simply by having an "e" as part of their company name.

Others will survive only as partners of larger, more established companies. Their agility, smarts and innovativeness will keep them in the game, but they will struggle to expand on their own. And they lack the sales and marketing capabilities needed to compete on a larger scale.

Those that have gained a defensible foothold in some part of the e-gov market may become good acquisition targets for larger companies. Unable to capitalize on their initial market successes due to scarce resources and other limitations, they will be better off looking for an exit strategy for their company. For most, the advantages they have today simply are not sustainable given the pace of change.

The leading integrators in this market, such as Electronic Data Systems Corp., Affiliated Computer Services Inc., Andersen Consulting, IBM Corp. and Unisys Corp. will have an opportunity to reassert themselves. Companies with software development skills, such as American Management Systems Inc. and Keane Inc., will play a critical role in bringing new application solutions to market.

Those that can contribute to management planning and analysis, such as KPMG and Deloitte Touche, will assist state and local officials in their decision-making. And companies such as Science Applications International Corp. and Lockheed Martin Corp., which have demonstrated a strong track record in carving out strongholds in this market, will be extremely competitive in selective areas.

Competition for this next phase in state and local e-gov will be more intense and much more turbulent than what the market has experienced so far. For those who have been thinking that the rivalry for e-gov in state and local was already pretty hot, stay tuned, it's just beginning to heat up.

Thomas Davies is senior vice president at Current Analysis in Sterling, Va. His e-mail address is tdavies@currentanalysis.com.

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