From...

September 22, 1999
Web posted at: 11:18 a.m. EDT (1518 GMT)

by Elizabeth Wasserman

(IDG) -- Politicians in Georgia's DeKalb County wanted to offer their 554,000 residents a way to use the Internet to pay property taxes, register automobiles and transact other business with the government.

Catch was, they didn't want taxpayers to absorb the up-front design, installation and maintenance costs.

So DeKalb officials entered into an agreement with one of a growing number of companies willing to build the infrastructure and applications for putting government online, in exchange fo r a cut of the transaction fees. In August, DeKalb unveiled a system developed by Ezgov.com of Atlanta, which lets citizens transact business on the Internet. On the docket are such online services as traffic-ticket payments and water-bill payments.

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"There's a great demand for this from the public," says Jeanette Rozier, clerk of DeKalb County Superior Court and one of the officials behind the county's move into what's being called "e-government."

"We're not charging the public anything for th e information," Rozier says. "Our taxpayers haven't paid a dime for this system yet. If they want, they can pay their taxes with an electronic check and pay a $3 transaction fee."

Ed Trimble, a former technology specialist with Andersen Consulting, wh o started Ezgov in April with partner Brian Mundy, says the company currently generates revenues from the services it provides the government through transaction fees. In the future, it will be able to generate advanced reports using the online data that will be targeted primarily at business users – such as real estate attorneys and mortgage brokers – for whom there will be additional fees.

Trimble, Ezgov's president and CEO, foresees the market for e-government services growing rapidly as many of th e 30,000 different jurisdictions in the United States respond to a groundswell of interest from residents.

"People are ordering books and tickets online, so it's only natural that they want to transact with their local government online, too," he says .

A growing number of companies have recognized the possibilities.

IBM (IBM) developed a motor-vehicle-registration program for Arizona and now operates it with a $1 fee per transaction plus a percentage of revenues.

SDR Technologies – whose p resident, G. Don Smeltzer, and CEO, Kelly Kimball, helped to develop Michigan's online vehicle-registration system and the electronic campaign-contribution filing system for the Federal Election Commission – recently changed its business model and started talking to municipalities about paying for systems via transaction fees.

"We had to come up with a strategic way for governments to purchase systems so they were not so tied into worrying about technology refreshment," says Kimball. "Usually governme nts buy systems that have a shelf life of 20 years. For them to go back to the funding body for updates every year is not feasible. This way, we become stakeholders in the process. If people don't use it, we don't get paid a dime."

And National Inform ation Consortium, of Overland Park, Kan., which went public in July, counts partnerships with nine states to operate portals, offering services ranging from the State Council on Human Rights to the State Department of Motor Vehicles. For each partnership, the company arranged to put 90-odd state services online, only two or three of which produce revenues.

National Information debuted these partnerships eight years ago in the state of Kansas, which established a policy for advancing e-government servi ces. The company then worked with the state to address such issues as privacy, security and statutes. They developed the model for providing government services without the need for appropriations or tax dollars. "We look at governments as our partners, a nd citizens and businesses as our customers," says Jim Dodd, president of National Information.

While the companies that provide these systems say they see growing interest from state and local governments, observers warn that they are not risk-free. Citizens (CIBC) may balk at paying fees they didn't have to pay in the paper world. And it's possible that the per-transaction fees may total more than the cost of licensing the system outright.

"There's a lot of concern about where the appropriate li ne is," says Bill Wyman, an analyst with Legg Mason (LM) Precursor Group. "You can see this as outsourcing and it's no big deal. But that's if it's done under contract. When it's an open-ended operation, there's no telling how much money they can make off a public resource."