Cost of Government Portals to Rise

Mass. Takes E-Gov to New Level<@VM>E-Gov Bonds<@VM>Portal Builders

Edward Meekins

Gary Miglicco

Carolyn Purcell

When it comes to e-gov portals, many state and local government officials are finding there's no such thing as a free lunch, or a cheap one, either.

While the initial portals for delivering government services were relatively inexpensive and often used a transaction-based funding model, the true e-government transformation envisioned by government officials is not going to be available at bargain prices, according to analysts and industry officials.

"The implementation of e-government is more costly and complex than was first estimated," said Edward "Russ" Meekins, a partner with Accenture Ltd. of Hamilton, Bermuda.

The higher price is the cost of creating an integrated or enterprise portal, a Web site where services and information flow back and forth between a government and its citizens. The enterprise portal goes well beyond the simple government Web site that provides information and perhaps a few services.

Governments are going to find themselves having to make large cash outlays to cross the threshold from the early stages of e-government to the more advanced stages that involve connecting front-end transactions to back-end or legacy systems and integrating them across agencies, according to analysts and industry officials.

One major difference between a government portal and a conventional Web site, they said, is that the portal requires electronic security measures to protect private information.

This means that state and local governments, which up until now have paid $2 million to $3 million for a portal project, may soon find themselves looking for ways to finance enterprise portals that cost upward of $90 million to $100 million.

"You can get away with that [low level of spending] for a small project, but in order to get real transformation, it will cost tens or hundreds of millions of dollars," said John Goggin, vice president for electronic government strategic service at the market research firm Meta Group, Stamford, Conn.

A strategic study by Accenture for Massachusetts places the estimated cost of an enterprise portal for the state at $93 million.

Analyst Tom Davies agreed with these assessments, saying the first e-government projects required very modest investments.

But "the thinking in Massachusetts is closer to what is coming down the pike," said Davies, a senior vice president with the business intelligence firm Current Analysis, Sterling, Va.

However, Gary Miglicco, managing director for public services at KPMG Consulting Inc. of McLean, Va., said he is not convinced that it will cost tens of millions of dollars to wire portals for transactions and connect front-end services to back-end processing systems.

"The large cost is in integrating and modernizing legacy systems," he said.

State chief information officers interviewed for this article don't dispute the transformation will cost hundreds of millions of dollars. But they believe the precise costs will be hard to calculate, because the transformation will be accomplished over decades and the costs spread out over many programs.

"It's very difficult to estimate, with a reasonable amount of accuracy, the full cost of moving state government services online," said Charles Gerhards, Pennsylvania's deputy secretary for information technology.

"In my opinion, this is not the sort of effort that should be concentrated into a year or two, but is a longer-term project that is best addressed in measured phases," he said.

Gerhards said Pennsylvania Gov. Tom Ridge has earmarked $20 million for bringing additional services online in fiscal 2001.

The online transformation of government will not happen quickly, said Carolyn Purcell, executive director of the Texas Department of Information Resources.

"Only after decades will we see the results of what is initiated today," she said. "The costs will be difficult to assess, as they may not be incurred under the specific guise of transformation."

Val Asbedian

The enterprise portal project out for bid in Massachusetts could be a harbinger of what's to come.

The project involves bringing 16 applications online at a cost of $93 million over six years, according to Val Asbedian, director of the strategic planning group, Massachusetts Information Technology Division.

The project is based on an e-government strategic plan developed for Massachusetts by Accenture. The state paid Accenture $833,000 for the study, which identified 110 possible projects.

Among the 16 applications either under development or planned are portal development, security, customer relationship management, child support enforcement, professional license renewal and electronic procurement.

Asbedian noted that the state is planning to issue bonds to finance the portal work. "We're setting aside sufficient money to do the whole project," he said.

While some applications can be done in as little as four to six months, others may take five to six years, he said. The state plans to issue separate requests for quotations for different phases of the project.

Once the project is implemented, Massachusetts stands to realize savings and benefits of $250 million, Accenture said.

Among the major systems integrators that have expressed an interest in the project are Accenture, American Management Systems Inc. of Fairfax, Va., Electronic Data Systems Corp. of Plano, Texas, and KPMG Consulting.

David White

Systems integrators are helping states get beyond the early stages of portal development and advance to the more sophisticated levels that produce more substantial benefits.

While all 50 states have some level of online interaction with constituents, not all of them have mastered the art of Web transactions through their portals or have the necessary infrastructure to support e-government, said industry officials and analysts.

For e-government efforts to succeed, state and local governments need to have the proper infrastructure, said David White, director of solution and business partner sales for IBM Corp. of Armonk, N.Y.

The basic elements of this infrastructure are common databases, software linking disparate systems and applications written on open platforms.

For its part, Accenture is telling its government clients that ultimately, they should bring nearly half of all services online, said Meekins. But even if this many transactions are placed online, governments will still have to raise the level of usage to produce substantial cost savings and allow for redeployment of personnel, he said.

Accenture is implementing or operating portals in Delaware, North Carolina, Wyoming, New York City and Broward County, Fla, said Meekins. The company has a strategic alliance with Yahoo! Inc. of Santa Clara, Calif., for portal operation.

KPMG Consulting has constructed a portal in Texas and is a subcontractor to IBM on portal projects in Arizona and Mississippi, said Miglicco.

IBM has portal projects in Arizona, Michigan, Mississippi and Miami and Dade counties in Florida, said White. The company also is looking at new opportunities in about a half dozen other states, he said.

The company has a strategic alliance with EzGov Inc. of Atlanta for portal operations.

National Information Consortium Inc. of Overland Park, Kan., which markets a self-funding model, manages and operates 19 state and local government portals.

The value of the projects undertaken by these companies ranges between no initial cost to the state and upward of $7 million, which is the amount Michigan will pay IBM for portal services and hosting.

Although the dollars associated with most of these projects are small in comparison to large state and local IT contracts, they are a valuable part of the integrators' long-term strategy for the e-government marketplace.

"If we get in on the front end of the job, and do good work [on the project], then we earn the right to become a strong contender for the follow-on work," White said.

About the Author

William Welsh is a freelance writer covering IT and defense technology.

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