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Tech Futures

B2G

The Basics: OK, so it's not sexy. But selling products and services to Uncle Sam online is something better than sexy--it's lucrative.

As local, state and federal agencies enter the ranks of online shoppers, a new crop of Internet companies is springing up to supply them with everything from staples to software.

Background Required: You need military or e-commerce experience, or a little of both. Of course, if you don't have either skill but hire people who do, Uncle Sam may still want you.

Who: Brad Allen, 44, co-founder, chair and CEO (co-founded with Keith Allen, 35, and Mark Dowd, 40)

What: eFederal Systems Inc. , Washington, DC

When It Started: the Fourth of July, 2000

What It Does: provides software applications and professional services for buyers and suppliers in the government market

Why It Rocks: The 20-person company has found a fail-safe market. As Brad points out, "Governments spend more than $500 billion annually and almost never go out of business."

"Business-to-government companies target fewer buyers that have enormous purchasing power and more dependable shopping lists," says Brad.


$6.2
billion: amount estimated to be spent on e-government (including hardware, software, and internal and external services) in 2005
SOURCE: Gartner

He should know. His eFederal Store, an online store designed specifically for government agencies, sells more than 100,000 different office supplies and computer products and lets agencies purchase those items using government-issued credit cards. His other company, eFederal B2G Workplace, allows government agencies to track purchase card usage, select from a variety of vendors, and analyze their own audit trails and strategic spending.

But it takes more than a few good men to tap this market-it takes experience. Brad and his co-founders had the right stuff: Brad had some e-commerce experience--he sold his first online company, a golf shop called Buygolf.com , in late 1999--and his brother Keith, now vice president of sales and marketing, had previously sold computer hardware to the government. Dowd, now vice president of operations, had military experience and had worked for Booz-Allen & Hamilton, a government consulting firm.

Before enlisting in this type of business, be aware of the downsides. For example, stringent bidding rules, technological limitations and cautious attitudes may discourage government buyers from using start-up e-tailers for their purchases. And analysts say the public sector has moved more slowly into online buying than businesses or consumers have--for several reasons, including Y2K-bug fixes that drained the technology budgets of government agencies for several years. Even now, just 35 percent of local agencies operate their own Web sites.

Moreover, the e-government sector may be out of reach for many start-ups, because it takes years to master the intricacies of the market and requires continuing investments just to understand the government's needs. And, as anyone who's contracted with the government knows, the long sales cycle in the public sector translates into a long wait before achieving a return on investment.

But if you're successful, rest assured that Uncle Sam probably won't be going out of business anytime soon.

Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines. You can reach her at mcampanelli@earthlink.net.

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This article was originally published in the June 2001 print edition of Entrepreneur with the headline: Tech Futures.

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