Internet Trading Communities

State and local governments need to start looking at the Internet as a gateway to virtual marketplaces.

by / August 31, 1996
Electronic commerce is creating a fundamental paradigm shift in both the private and public sectors. Private corporations, states and localities, and even the federal government, are coming to the realization that the Internet creates the largest possible electronic audience, and that is driving tremendous change.

Today, issues such as security and privacy, electronic certification, authenticity and accessibility are improving. In fact, new firms are developing based entirely on Internet commerce. Businesses are preparing for the advent of credit-card commerce over the Net and e-cash alternatives [Government Technology, June 1996]. The result is mind-boggling: organizations are preparing for a new operating model in which small, local firms and even state and local governments can compete in a global economy.

What begins to emerge are distinct "trading communities," which traditionally include the organizations and people with whom business is conducted. For government, this includes consumers/citizens, suppliers, other governments/educational organizations, taxpaying corporations, etc.

The focus of many public-sector organizations has been on improving the public's access to government information, and the Internet has been an affordable "interim" step. The result has been an emphasis on customer service improvement, self-service solutions and 24-hour government.

These public-access programs were considered cost-affordable, interim steps to an eventual network of public kiosks. However, today many organizations are questioning the need to develop a network of kiosks and are interested in pursuing additional Internet strategies.

While state and local governments have been focused on meeting public-access requirements, they have also found "commercial" access potentially more rewarding for revenue generation. In the past few years, commercial entities have demonstrated their willingness to pay for "electronic government," such as electronic access to DMV records or property-related data, electronic tax filing and electronic court case filing. Such arrangements, often between local governments and their respective business communities, have signaled the beginnings of electronic commerce in government.

Most of the solutions in place today focus on providing information to a focused community. The next wave is to expand the trading communities.

The sheer number of Internet users, along with its affordability, demonstrates the unparalleled opportunity to change operational or business models. Whether in support of electronic democracy and a return to town hall meetings or for recruiting additional businesses to a jurisdiction, the Internet is a powerful tool that immediately puts small governments/businesses on a par with larger counterparts and local businesses.

Government is developing a role as both a regulator and promoter of the new electronic marketplace. For instance, the stated goal of the U.S. Postal Service (U.S.P.S.) is to expand trading communities through the Internet, an objective which cannot be attained without the electronic certification of messages and transactions. This will both develop business-to-business and consumer opportunities in Internet commerce and help U.S.P.S. carve out a role for itself in electronic communications.

In addition to its interest in electronic certification, U.S.P.S. is trying to take the electronic mall concept to both private and public sectors, creating a "local delivery market that doesn't exist today." Developed with assistance from Microsoft Corp., the Electronic Post Office service will allow customers to buy stamps, order special delivery mail pickups, look up ZIP codes, and make change-of-address notifications using cable television connections.

Recently, Canada Post Corp. partnered with IBM Canada Ltd. for joint evaluation, development and pursuit of opportunities in electronic commerce.

The emerging "electronic mall" concept in this new model brings together compatible buyers and sellers
in a focused, virtual marketplace like "Open Market" for manufacturing or "FedCenter" for federal information technology purchases. Such virtual marketplaces can actually expand the number of trading partners conducting mutually beneficial business transactions.

Partial or total cost of the new virtual marketplace may be borne by the suppliers or sellers. In the future, governments might consider how to adapt the virtual marketplace or electronic mall concept to the provision of revenue-generating government services.

What are the necessary steps to ensure that an electronic commerce solution improves access for the greatest potential number of trading partners? There are a number of pre-planning steps if an agency is pursuing an electronic commerce initiative. Based upon the experience of state and local government electronic commerce "early adopters," a successful pre-planning process includes the following steps:

Identification of the trading communities potentially affected (whether upstream or downstream) by the proposed solution. Think long term -- electronic commerce means enterprisewide changes.
Focus groups, surveys, feedback from external parties. Do all of this in the pre-planning stage before system requirements are developed. Early adopters learned from their mistakes: interest and consensus must build from the beginning.
Build internal consensus. Business will be significantly impacted; relationships will change, business process will change. Be prepared for changes in internal and inter-agency communication.
Based upon feedback from state and local government innovators, G2 has developed electronic commerce solution and strategy benchmarking recommendations which should be incorporated in the planning process:

Internal assessment including internal skills, applications, existing and anticipated data storage requirements, IT and telecommunications infrastructure.
System goals/objectives statement, which includes system evolution, cost, return on investment and performance metrics identification.
Benchmark targets and objectives, learned from both user experience and vendor insight. Focus on design, implementation, and operations through interviews with leaders both within and outside the industry.
Analysis and recommendations.
Continue -- this is an evergreen process.
For more information, contact Michele Walsh-Grisham at G2 Research, 415/964-2400.