State & Local - Small Towns, Big Profits

By Dennis McCafferty (VARBusiness)
Wed. Apr. 28, 2004

Before the year 2000, election night in Monroe County, N.Y., was a marathon. Election officials at every polling venue started counting votes at 9 p.m. and inputted the results into the creaky 15-year-old mainframe system used to gather voting data. Because of the cumbersome quality of the process, election officials stayed up until 2 a.m. to finally declare the winners.

But in seeking a system overhaul to ensure Y2K compliancy, the county ended up with a Web-based solution that boosted ease-of-use, efficiency and speed in the process. And the solution, from Hamer Enterprises, a McAllen, Texas-based VAR, was able to handle much more data than the old system's parameters of election registration information and results.

Hamer's browser-based technology from IBM tracked critical data relating to absentee ballots, campaign-financing information and much more. And, because it was Web-based, the timely results could be viewed in real-time--by an interested audience that extended far beyond Monroe County.

"You can see the actual votes come in as soon as they're being reported," according to Steve Kelly, an IT Customer Services Manager for Monroe County.

"Anybody in the world can see them as soon as we see them. We have people from all over New York state logging on and checking us out, especially for the key state and congressional races. And the process is so much quicker. We're not staying until 2 a.m. anymore. We're home in time for the 11 o'clock news," he adds.

With satisfying results like this, Hamer and other VAR's are finding that sales opportunities--from Bedminster, N.J., to an affluent county in California--within the well of small, local government customers is seemingly bottomless, with strong prospects for impressive revenue growth. VAR's are needed to provide better solutions, whether it be getting local detectives on the beat to communicate with emergency workers after a shootout, installing better Web-filtering software for school libraries or integrating systems that help local officials keep better track of building code and zoning requirements.

As a whole, this virtual universe presents myriad potential contract wins for the industry--but remains one that presents unique challenges as well.

The positives are many, as channel opportunities are on the rise, with much promise of repeat business: Homeland Security funding is trickling down to the smaller municipalities now, and local schools are spending to meet No Child Left Behind mandates. Resellers say that dealing with smaller communities allows them to interact and sell directly to the people who will actually use the technology solutions purchased--their offices are often too thinly staffed to afford layers of bureaucracy in the procurement process. Strapped by funding woes, they're often eager for solutions that have demonstrated the ability to save costs. And once proven as a bottom-line reliever, a VAR is often warmly encouraged to launch similar efforts for other agencies within the jurisdiction. Ultimately, in dealing with a smaller city, VAR's feel more connected than ever with the ultimate customer: the taxpayer.

Getting In
The biggest challenge, however, is getting in the door--an effort that requires a finely tuned approach to networking and hands-on follow-up. But the efforts are reaping dividends and should continue to do so. Local government IT spending is projected to increase from $18 billion in 2004 to $27 billion by 2009, according to Reston, Va.-based Input, a government IT spending research company. The top three areas of spending? Hardware accounted for 37 percent of local government capital IT purchases in 2003, according to Stamford, Conn.-based Gartner Research, with software accounting for 17.4 percent of purchases and networking/telecom accounting for 16.8 percent. Of those three categories, software is forecast to increase the most, to 22.1 percent of purchases in 2004, Gartner reports.

From an integrator's perspective, there are considerable, new needs at all levels of local government, beyond what are called the "NFL cities," or large towns that are big enough to have a pro football team, says Thomas Handabaka, director of sales for state and local government for Bedminster, N.J.-based AT&T.

Small-town customers are well aware of the 21st century tools out there, and they want them. But selling to this kind of customer requires special hands-on attention and knowledge, as many local governments and towns don't have CIOs. Some have only one or two employees who review contracts, so in-depth consultation and face-time is needed. With that kind of consultation available, AT&T is building information safety portals in small communities to link emergency, police, fire, courts and hospital communications together. "There is a growing need even at the county, township and municipal levels for better communications," Handabaka says. "They require strategic focus on creative solutions since the legacy phone systems of most local governments weren't built with convergence in mind."

VAR's expertise is needed to network these systems together, Handabaka says. "This is a new age that requires constant connectivity. It's the age of networks. Videoconferencing is important. So is video security and surveillance. Some municipalities are moving toward video arraignments for suspects--even video trials are being tested."

These kinds of solutions will save on not having to transport a prisoner or using police manpower, vans and court officers for every single court appearance, he says.

Be Creative
It's not all about cops, robbers, lawyers and judges, either. There are tax departments, social services and building/construction/zoning offices to consider. Needing to connect with the latter, Asheville, N.C.-based reseller BuildeRadius has found that nonprofit and trade groups are a great way to establish itself as a resource for solutions. Otherwise, it's difficult to contact each local government's building office individually. Small-town building agencies have small staffs, and often use such groups as central resources for good information. This gives BuildeRadius the chance to promote its BluePrince software, a tool to increase office efficiency. BuildeRadius has adapted its business model for this kind of customer, too, realizing that smaller jurisdiction building departments can't afford $100,000 or more for software. So BuildeRadius supplies it for free, and sells its services to community members who regularly use the local government building office as a resource, such as contractors, homeowners and realtors.

"We sell affordable services to area contractors, ranging from $9.95 to $29.95 a month," says Holly Tachovsky, director of business development for BuildeRadius. "So they can apply for permits and inspections online, and check the status of those permits and inspections anytime and anywhere, 24/7. Usually, the smaller communities don't have the big budgets to spend on technology, so you have to come up with creative ways of paying for the technology. You also need to treat the small guys like you would the big guys. Let them know that they're important to you."

These efforts often lead to spillover work. For example, Dallas-based integrator Affiliated Computer Services (ACS) sold Tulare County, Calif., on a project in which the county would use telecom financial-management software from Framingham, Mass.-based vendor AnchorPoint. The software allowed the county to save up to 20 percent on long-distance costs by centralizing database operations in its telephone-call accounting system. As a result of the cost savings, ACS and AnchorPoint are now working with the county on a study to redesign the network configuration as a VoIP network. The relationship is expected to continue to branch out, creating other cost-saving telecom projects.

"Tulare County, like all county governments in California, is faced with shrinking revenues and increasing pressures for high-quality services to its constituents," says George Bjarke, the ACS account executive overseeing the work. "The county will repay ACS through the savings it realizes in telecommunications costs. Budgets are getting worse. Because of California's fiscal crisis, less money is being made available to local governments, but program requirements are not being reduced. Counties are required to get the same work done with less money. We were able to help Tulare County 'find money' that can be used for ongoing programs."

Define Your Customer
And, often, word about a successful project at a larger municipality trickles down to local, smaller towns. It helps, however, when the reseller creates its own "good buzz" by getting its story out in trade shows and other networking opportunities.

Hamer Enterprises, a McAllen, Texas-based VAR, has made this kind of impact in selling IBM's browser-based technology, which reduces the need for hardware and software, such as a Web-based solution for dealing with business and personal property data. It was successful in larger California cities, such as San Diego and San Francisco, and those experiences are now influencing the smaller communities in the state to do business with Hamer.

"Hamer Enterprises [employs] user groups, trade shows, marketing materials, vendors and direct sales to get the word out about what we're doing, and to engage the customer in new and innovative thinking," says William Hamer, CEO of Hamer Enterprises. "Our business philosophy not only considers the needs of the particular department, but also looks beyond the local entity--to its citizens and taxpayers who are the true customers of the solutions."

For one VAR and integrator, Sacramento, Calif.-based Hansen Information Technologies, the local-government customer is its bread and butter. The VAR specializes in local-government IT.

Bryan Klann, vice president of strategic alliances and channels, is responsible for a customer base that covers more than 500 governments and 1.2 billion transactions a year. Like many reseller/integrator executives, Klann says that from an applications perspective, call center, or 311 technology, and Web services are at the forefront when it comes to the local government customers' current demands.

With more than 67,400 local-government entities throughout the United States, according to Klann, including cities, counties and special districts, "Governments desire to deliver information and serve citizens in a more effective manner and believe that call center/311 technology is the gateway to achieve that goal," he says. "From a technology perspective, Web services are the latest trend."

One of the misleading things about this number of local-government entities, however, is that it does not account for the multiple departments in each of them, such as the water department, the sewer department, the building department and the police department.

"If you include the number of departments--which averages at about eight departments per entity--then you can see that number quickly climb to more than 500,000 opportunities in the local-government market," Klann says. "Since so few companies focus solely on the local-government sector, it truly is a 'bear market' for those of us who do."

Are the local-government budgets getting any better these days?

"It's hard to say what a particular local government will spend on technology per year," Klann says. "We have some customers that have a population of 15,000 and spend over a million dollars on technology, and then others who may have a population of 75,000 and will only spend $250,000 for technology. This tells us that the local-government market is extremely difficult to segment. However, the thing that we have found, which affects the budget the most, is how progressive the CIO or city manager is."

Also, there are nuances to selling to a local-government customer, as opposed to the state or federal customer.

"There are fewer decision-makers involved in the process. And it's not as bureaucratic since the organizations are much smaller. So it's much easier to explain your positioning and your solution in a local-government situation than that of a state or federal government agency," Klann says. "It also helps that local governments are generally more closely connected with the citizens than state and federal governments, which are usually a couple of steps removed."

Also, understanding the effect new systems have on an agency's entire ecosystem is critical, especially for business-process reengineering and change-management services, according to Klann.

"These are the two categories of services that local government agencies most desperately need and resellers are able to provide," he says.

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