Falling in Gov

Clear and Present Opportunity

You may already be familiar with traditional, time-consuming government procurement processes. E-procurement, however, which is also known by the buzz-acronym B2G, involves governments using the Internet for notification, bidding and buying processes for goods and services. Jupiter Media Metrix forecasts public agencies will spend a whopping $286.1 billion by 2005, with 17 percent of total purchasing done online. E-government is looking to become a boom town.

Two distinct angles exist for entrepreneurs. One is providing the technology services to make e-procurement possible. The other is taking advantage of governments' new online offerings to expand the way you do business. Small suppliers are gaining unprecendented access to all types of government bidding and contract processes nationwide, and it will open up even more over the next few years.


$286.1 billion:
The estimated amount of public agency spending by 2005; 17 percent of that will be done online

Source: Jupiter Media Metrix

The city of Evanston, Illinois, just outside Chicago, has an annual budget of $180 million-$70 million to $90 million is spent each year on goods and services. That includes everything from medical services for inmates to vehicles and pencils. Chad Walton, the purchasing manager for Evanston, recently supervised the transition of the city's procurement process online using service from MunicipalNet Inc., a growing e-procurement business in Boston.

Walton echoes the sentiments of many municipalities when he discusses reasons for heading into e-government. "It lessens the cost of responding to solicitations from the city for businesses, which in turn should translate to lower costs for us as well," he explains. Both sides save time by cutting out much of the red tape from the process.

In addition to expanding potential markets for American entrepreneurs, e-procurement is a wide-open door for tech-minded start-ups. David Nute, 32, founder and CEO of MunicipalNet Inc., isn't planning on getting filthy rich, but he does expect his company to thrive while focusing on services to small states, local governments and the businesses that supply them. His company's revenue model is based on selling advanced options and extra services to suppliers. Basic access is free for businesses, an approach that sets them apart from most competitors.

The get-rich-quick glow of early e-government plays like GovWorks.com has faded, leaving entrepreneurs to forge ahead with sensible business models and back-to-basics marketing. "It's very grass-roots," says Nute. "There is no substitute for calling up a procurement director, going in, sitting down, looking at [him] face to face, earning [his] trust. It may be old-fashioned, but it works."

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This article was originally published in the March 2002 print edition of Entrepreneur with the headline: Falling in Gov.

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