For most Americans today, life is good. In the waning months of this century, the economy is strong and optimism is high. "The New Economy," said a recent BusinessWeek article, "so far propelled mainly by information technology, may turn out to be only the initial stage of a much broader flowering of technological, business and financial creativity." Many business magazines have so far resisted the temptation to focus on the exceptions, such as the economic downturn in Asia, and have instead concluded that the current economic boom is the real thing -- that it has a sound foundation and will usher in a new era of prosperity built on innovation and information technology. As for the raw material of prosperity, a long string of inventions and patents -- from information technology to biotechnology -- is lined up in the technology pipeline.
President Clinton, who has called information technology "the engine of tomorrow's economy," even based many of his recent State of the Union initiatives on the continued existence of a budget surplus.
So what does this have to do with state and local governments? As Y2K activities wind down, new possibilities open up. Washington state CIO Steve Kolodney said in his January Government Technology editorial that many agencies have used the Y2K crisis as an opportunity to decommission old systems, rethink new ones and prepare to launch long pent-up systems and projects. When the Y2K war ends, its soldiers will be looking for work, and while the economy booms, they will find it in state and local government. Preeminent among those long pent-up demands is electronic commerce.
In December, more than 300 state information executives met in Phoenix for the Conference on Electronic Commerce in the States, to take on electronic commerce issues, discuss the implications and plan technology campaigns. Some initial reports showed why electronic commerce has attracted so much interest. "We have a state purchasing card in place to eliminate paper," said George Banks of the Florida Department of Purchasing. "Our transaction analysis showed 4.4 million transactions, 90 percent of which are under $1,000. That's only 3 percent of the dollars, but a tremendous burden. [We dropped from] $150 per transaction to $25 using EDI."
Behind the promise of a significant return on investment lurked a long list of challenges, already encountered by private-sector electronic commerce programs. "Electronic commerce is an immature marketplace," said Chuck Shih of the Gartner Group. "For every dollar for software, $10 is spent for systems integration, and $10 to $20 on the buildout. You put up a storefront, you don't want people to get an e-mail 24 hours later saying, 'Sorry, we don't have that in stock.' You need to integrate inventory with the storefront."
In addition, electronic commerce has some economic and social effects yet to be calculated. Some are predicting that widespread e-business will have a larger impact on American business and society than anything since the advent of railroads. Most pundits think that's good -- but all acknowledge that widespread social and economic disruptions will result, as in any technological revolution.
"The retail impact of electronic commerce will be to eliminate weak distributors and middle people," explained Shih. "In the auto industry, weak and low-volume dealers will disappear. They will be 'disintermediated.'" Many white-collar professionals, such as real estate agents, stockbrokers and programmers, could find themselves "disintermediated," or their security shaken, by online competition from around the world.
According to Business Week, E-Loan of Palo Alto, Calif., processed $70 million in home loans in July, bypassing mortgage agents who charge around $1,500 for the service. The trend, like E-Loan, is growing. Customers with money to spend and a specific product in mind search the net for best prices, kicking off price wars in everything from automobiles to books. Even book publishing is changing, with additional books printed to meet the