There are approximately 22.4 million small businesses in the country. How does the government know this? By collecting information from businesses. Lots of information. Some is mandated and some is voluntary.

The federal government defines a small firm as any employer with fewer than 500 workers, but most -- 90 percent -- have less than 20 employees.

The Office of Management and Budget estimates it costs American businesses -- large and small -- $140 billion and 8 billion hours each year to answer government requests for information. Much of that information is gathered from forms that ask many questions -- sometimes the same questions in different formats.

For small businesses, responding to these repeated requests for information is an extremely costly burden -- and getting worse. The Impact of Regulatory Costs on Small Firms, a study conducted by W. Mark Crain and Thomas D. Hopkins in 2001, estimated total costs of federal regulations at $497 billion for businesses. For a small business, that regulatory burden works out to $6,975 per employee.

And it's not just a problem of cost. As the regulatory burden grows, so does noncompliance. As the number of paper forms continues to grow, businesses -- especially smaller ones -- are less willing to report information the federal government mandates, requires or requests.

Not surprisingly, the federal government wants to eliminate the worst of its forms-plagued bureaucracy affecting the business community. Driven in part by the Small Business Paperwork Relief Act of 2002, the Small Business Administration (SBA) studied what technology could do to change the situation. The answer, according to a draft report issued by SBA in April 2003, is to build something called the Business Compliance One Stop.

This solution would be a portal where small businesses could find all laws and regulations at all levels of government, understand how they work by using a digital assistant, and comply with the regulations by performing online transactions, such as business registration, and license and permit applications.

The net result, according to the SBA, would be at least a half-billion dollar savings, just to start.

And the technologies that will make it happen? The portal will rely heavily on standards and tools collectively known as Web services. In a pilot project with Georgia, SBA launched an online application for businesses to apply for and receive federal employer identification numbers (EIN). The service combines data from state and federal processes, eliminating many redundancies that drive small businesses crazy.

For government officials, the service automates exchange of applicant data between state and federal government, and between two entirely different computer systems. That benefit came about, in part, because Georgia uses open standards on its portal, Georgia.gov, such as XML and UDDI (universal description, discovery and integration), as well as the widely adopted programming language Java. As a result, the application, which also links with the IRS, can be reused by other state agencies that want to offer the same service. Illinois recently used the software components developed during the pilot project.

When this particular application is in full production nationwide, the SBA estimates 4 million businesses will use it, saving them $200 million a year.

Turn of the Screw

To understand Web services and their full impact on government, one must understand existing technology standards and how they may exist tomorrow. The best way to get your arms around the subject is to learn a little about the common screw.

More than 150 years ago, products used custom-made screws, nuts and bolts, all of which were incompatible with each other. This arrangement was fine for craftsmen because customers had to continue buying their products, unless they wanted to start from scratch and switch to something different.

But in 1864, Philadelphia engineer William Sellers proposed a "uniform system of screw threads," so builders could order bolts from Providence, R.I., for example, and use them to build a locomotive in Cincinnati or a boiler in Baltimore. Sellers fought long and hard for standardization, and once it was accepted, interchangeable parts and mass production took off.

Fast-forward to today's technology industry.

Once dominated by proprietary standards, computer hardware and software has slowly shifted toward more open, industrywide standards -- particularly for PCs and networks. Now standards are beginning to appear in customer-oriented services, such as integrated information and transactions, as illustrated by the SBA's intergovernmental identification service.

"Web services is like a secret key that opens the door to integration," said Lev Gonick, CIO at Case Western Reserve University. "There's not one key, but a whole bunch that have to fall into place." Gonick likens Web services to a house where the door locks are compatible with the keys. Make one lock incompatible, and you lose access to that part of the house.

Case Western students can check enrollment for classes, make sure classes don't conflict with their schedule and register for classes in a few clicks, thanks to Web services -- with which once-incompatible systems can now communicate and execute discrete actions, without the university having to construct a new system.

"That's what Web services is all about," Gonick added. "It's all about all those keys turning in sequence to allow a workflow logic to occur without humans performing certain aspects of the transaction."

Modular Interaction

The Internet is a perfect example of how standards unite to create a universal platform for computers, information and services. As it's currently constructed, however, the Internet requires humans to interact with Web browsers to work. That's fine if you're surfing the Internet, but the business of commerce and government is built on processes and transactions that work best when machine interacts with machine, according to industry experts and government officials.

That's where Web services come into the picture. Small, modular pieces of software are designed to interact with other units of software, so a discrete business function can take place. Because software units are based on standards, they can be passed from one computer system to another regardless of their platforms or operating systems -- like nuts and bolts designed to the same standard, but used and reused in a variety of ways, such as building boilers, locomotives and ships. In other words, same component, different uses.

Another analogy is language. "Web services has given us a standard language, say English, by which we can ask each other questions, no matter what language we think in to come up with the answer," said Tim Hoechst, senior vice president of technology for Oracle. "What we get from standards is a common language for asking each other questions even though we have never interacted with one another before."

The key standard is XML, which can create common formats or interfaces, so Web services from different government agencies can find and communicate with each other, describe the data they want to exchange, and act on it. Other standards include UDDI, an XML-based registry for businesses to help streamline online business transactions; WSDL (Web services description language), the programming language that makes UDDI happen; and SOAP (simple object access protocol), which enables a computer program running on one type of operating system to communicate with a program in the same or different kind of operating system.

Fixing the N2 Problem

The business world sat up and took notice of Web services for one reason -- current IT systems have become too complex and expensive to run. Some have referred to the situation as the "n-squared" problem: complexity grows exponentially the more systems you try to link together.

Throughout the 1990s, businesses (and government) paid for costly but incompatible systems, then tried to make them run together using software tools known as middleware. That approach became unsustainable when number-crunchers realized that for every dollar spent on IT, another $4 to $10 were spent making it all work, according to Fortune magazine.

Web services benefit governments in a number of ways, according to IT experts and government CIOs. First, they lower the cost of system development and deployment. "Government agencies can get lots of reuse out of their existing systems by wrapping Web service software around applications and exposing them as a service that can be combined and assembled into new applications," said Doug Wait, CTO for EzGov Inc.

By using existing systems to launch Web services, government agencies don't have to rework the entire infrastructure. "That lowers risk for implementing Web services," Wait added. The applications can evolve, starting small and grow. "You don't have to do it at once. The upgrades can be evolutionary."

Aside from working with the SBA to design its EIN service for states, EzGov helped the United Kingdom standardize its national e-government portal with XML formats, so the private sector can interact better with government departments. Another player in the public-sector Web services arena is webMethods Inc., a Virginia-based firm that has worked with a number of federal, state and local agencies, including GeorgiaNet, the Peach State's Internet authority.

The state's online DMV and child support services were significantly improved using EzGov's FlexFoundation platform. For both applications, Web services reduced delays in customer service while supporting numerous legacy applications, saving the agency significantly in development and implementation costs, according to Gina Tiedemann, director of GeorgiaNet.

EzGov and webMethods have been active in the public-sector market for Web services, but they aren't alone. Others include IBM and its WebSphere applications, Microsoft with .NET, HP with Netaction, Sun with its ONE environment, and BEA and its WebLogic architecture, to name a few.

And Web services have gone global. International governments that have exploited Web services include the Australian Bureau of Statistics and the Singapore government, for example. In the United States, the General Services Administration uses the Office of Citizen Services and Communications as a clearing-house for shared Web services programs. Massachusetts' Executive Office of Health and Human Services uses Web services to integrate data from 15 separate legacy systems, while Pennsylvania uses Web services for its one-stop business portal. Both use Microsoft's .NET tools.

Scores of colleges and universities are adopting the technology as well. Besides Case Western, they include California Institute of Technology, University of Cincinnati, Louisiana State University, DePaul University and the Massachusetts Institute of Technology, which is considered a leader in developing Web services for teaching, learning and research, according to the Higher Education Knowledge and Technology Exchange.

As impressive as this list of public-sector customers is, it just scratches the surface. "I wouldn't say adoption of Web services is broad," said Hoechst. "Customers are holding back because it's about a new paradigm. People need to look at their applications in a new way."

The other issue holding back adoption is that standards are still developing. "They need to be consistent and complete," Hoechst added. "Right now, the major vendors are focused on J2EE [Java Second Enterprise Edition], which is a framework for using Java to write Web services."

Until all the necessary standards are complete, customers can't be sure vendors are providing the infrastructure for Web services in a consistent way, Hoechst argued.

But some industry leaders think waiting for standards to evolve to a stage of symmetry and consistency will take too long. "The adoption rate of XML is huge, but if you become a purist -- insisting on waiting for the specification to be ready -- then the adoption rate will remain extremely low," said Chris Thomas, chief strategist of Intel Corp. "You have to realize that Web services standardization is going to take years, but the utilization of the standards that are already developed is extremely valuable."

Thomas describes his philosophy on Web services as practical, not pure. He also believes Web services must migrate away from their reliance on a protocol known as RPC (remote procedure call), which allows one computer program to request a service from another computer program.

In government, where stovepipe information systems still reign supreme, RPC requires Web service developers write too many interfaces for full-fledged enterprise applications to exist. Instead government needs to adopt XML routers and pointers, which can eliminate expensive and labor intensive computing methods.

Thomas called these Web service architectures "extremely promising" because they use existing resources more effectively, and reduce the potential processing load on legacy systems.

In lay terms, these developments could lead to what Thomas believes is a breakthrough in how the public sector interacts with citizens and businesses, and ultimately how it operates. It's called document-based Web services, and it addresses one of the most expensive and time consuming processes known to government: form filing.

Current uses of Web services and the Internet require customers to log on and fill out forms online, which means government agencies need large numbers of Web servers to service those ongoing requests. Intel looked at a possible e-grants application for the U.S. Department of Health and Human Services (HHS) and noticed some grant applications were more than 100 pages long.

Rather than expect someone to complete the application online in one sitting or set up a complicated security procedure, Intel proposed a document-based Web service where applicants could download the grant forms fill them in at their leisure, and then ship the XML-based form back to HHS, where it could be processed more efficiently via computer. This way people could take a break and go back online to pick up where they left off.

"Based on the work we did to bid the e-grants to HHS," Thomas said, Intel identified approximately $6 billion in annual savings to the federal government,

Deconstructing Documents

Run that same scenario through all government operations that involve forms of one kind or another and the cost savings could be huge, according to industry and government experts.

That's what Rick Rogers, CEO of Fenestra Technologies, hopes will happen. His firm worked with the Census Bureau to create a more efficient way to run the 2002 Economic Census -- a mammoth paper-based project involving 950 paper and electronic forms, each 10 pages long and sent to 3.5 million companies. The solution: document-based XML Web services.

The approach is more secure and the content is dynamic, making it easier to generate forms and surveys, and process the results. For its work on this ongoing project, Fenestra has been tapped to lead an e-forms pilot project by the federal CIO Council (see Seats at the Table in this issue).

Using standards invoked by Web services, the Census Bureau (through the work of Fenestra), broke down the process it uses to construct surveys to come up with a more efficient way to obtain the information it sought.

Richard Varn, former Iowa CIO and current president and CEO of RJV Consulting, said he believes the standards Web services bring to the public sector are forcing government officials to rethink their processes and eventually begin to deconstruct the layers of bureaucracy that have built up over decades.

Just as standards for the common screw created a new, more productive way for companies to build products, Web service standards also will create a new, more productive way to think about government processes. They force governments to document their business rules and describe how a transaction takes place, Varn pointed out.

"Web services requires us to deconstruct how we approach a process by finding the value within. Once we do that, we can break it down into its most important elements and then build it back up, so it can be reused again and again," he said.

That's the approach taken by SBA with its EIN service, a project Varn is consulting on, and one where the software modules fit together like nuts and bolts. William Sellers would be proud.

Tod Newcombe  |  Senior Editor

With more than 20 years of experience covering state and local government, Tod previously was the editor of Public CIO, e.Republic’s award-winning publication for information technology executives in the public sector. He is now a senior editor for Government Technology and a columnist at Governing magazine.