When he was an investment banker working with San Diego’s mass transit system about 10 years ago, Rick Aland devised a way to buy rail cars at a discount.
By combining San Diego’s purchase with those of two other cities, Aland could buy in bulk.
Later, he wanted to turn that experience into a business that would allow cities to buy all sorts of goods in bulk, but he couldn’t find an efficient way to do it.
“There was no mechanism. There was a void, and for years I’ve been looking for the best way to fill that void,” Aland said. “Now we can do it with the Internet.”
The Internet allowed Aland to start a Dallas-based company, PurchasePooling.com. It’s among a host of firms founded in the last few years that uses the Internet’s speed and efficiency to streamline government services.
Analysts call them business-to-government, or B2G, companies.
There’s a lot of potential in what the B2G market can do, said Jeremy Sharrard, who has studied the growth of e-government at Forrester Research Inc.
“It’ll be a slow process, but it has the potential to really change the way governments are structured,” Sharrard said.
Local and state governments have taken baby steps in building online services, starting with motor vehicle registrations and parking ticket payment, Sharrard said.
The future lies in more complex endeavors, such as government’s interactions with businesses. And eventually, he said, B2G might force governments to reorganize their bureaucracies to make them more accessible to a data-hungry public.
But there are real obstacles before that happens, said Kaleil Isaza Tuzman, chief executive of New York-based GovWorks.com. His company designs e-services for local and state governments.
B2G companies, much like their e-commerce cousins, must convince potential customers that their services can save money, Isaza Tuzman said. And, he said, the companies must calm fears that they will sell information about customers to marketing companies.
“Selling customer data is a recipe for disaster,” Isaza Tuzman said. “Users of the Internet have shown they don’t like to use sites that do it, and one day it’ll blow up if they don’t stop it now.”
GovWorks has contracts with seven city governments in Texas. Although most of the contracts involve just software sales, the company created Huntsville’s e-services department.
“We’ve had focus group meetings with local citizens to get input about what services they want from our Web site,” said J.D. Schindler, director of community services for Huntsville’s municipal courts. “We’re in look-see mode, but I think something could really come of this in the future.”
GovWorks also has ventured outside the United States, winning a contract to build a Web portal for the Colombian government. Smaller countries are pioneers in e-government because they have smaller, centralized governments that are easy to convert to the Web, Isaza Tuzman said.
Bigger countries are venturing onto the Web as well. In July, Dallas-based Electronic Data Systems Corp. won an e-government contract with the United Kingdom’s Department of Social Services.
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EDS also is bidding to develop the U.S. Navy and Marine Corps’ Intranet.
Connecticut-based Official Payments Corp. is one of the few B2G companies that has a contract with a U.S. government agency, the Internal Revenue Service.
Official Payments had experience handling Web-based property tax collections in California when it got a similar job for the IRS, said Bruce J. Zanca, a company senior vice president.
“We’ve developed a great core competency,” he said. “What governments and taxpayers are looking for is someone who’s executing and doing a good job.”
The City of Dallas also is looking for a B2G contractor and has narrowed its list to three finalists, said Dan McFarland, the city’s chief information officer.
He said he was not allowed to identify the finalists during the bidding process.
“We are looking for the ability to do the jobs at the cost they’ve been estimated to be done, so experience counts,” McFarland said.
The Texas state government chose professional services firm KPMG to build its Web portal.
“We were looking for someone who could build an infrastructure using state-of-the-art technology and security measures,” said Phil Barrett, director of e-government for the Department of Information Services. “KPMG offered the best solution and the best deal for the state.”
It’s difficult for B2G companies to get a foot in the door, said Aland of PurchasePooling.com. He has assembled a sales force of former government employees and travels to at least one government contractor trade show a month.
Like many B2G company leaders, he is hoping his idea will set him apart from the pack.
“People are working on different entrees into B2G, just not in purchasing,” he said. “We’re just filling some needs all governments have.”