Uncle Sam Is the Man

Just as American farmers plow through mounds of dirt each year, they've become accustomed to plowing through piles of Internet sites to apply for government help.

Whether seeking subsidies or obtaining research on crop insurance, farmers must deal with scores of federal agencies, inputting information from scratch for each request.

But that should change within the next two years, as governmental departments proceed to evolve their underlying agencies into a single computer platform.

"Each time a farmer faces a different agency, he has to interact with that agency's program," says Greg Carnill, e-business executive with the U.S. Department of Agriculture, which has 18 underlying agencies within its umbrella organization. "Now when a customer deals with us online, we'll be able to share information on that customer back and forth between the agencies, instead of having a sneaker network."

For farmers, the $60 million budget the government has allocated for providing computer systems for government agencies should mean faster funding, quicker access to information and less frustration. For service providers and vendors, it will mean more business revenues from federal dollars over the next few years.

Analysts and consulting companies point to the federal government as a rare breed — a market sector that will experience growth in network buildouts and service offerings over the next two years.

Regardless of whether the rest of the country is in a recession, analysts predict 30% growth in government spending for data and long-distance services during that period. In 2000, businesses spent $43.2 billion on data and long distance, of which the government spent 8%, or $3.456 billion.

This bright bit of good news can be attributed in part to the fact that the government lags about two years behind private enterprise trends. So while the overall economy is experiencing a downturn and major cutbacks in spending within the corporate world, the government is partying like it's 1999.

"The government is like an elephant," says Susan Eustis, senior analyst at consulting firm WinterGreen. "It's slow to get them started, but once they start, they move pretty well." The corporate sector, on the other hand, will see about half that growth over the same time period, she says.

Centers Of Attention

The biggest chunk of the government's cash is going toward centralizing its computer systems — away from mainframes and toward a centralized network in one geographic location. Regional centers are being designed to store content for distribution to various branches, to facilitate high levels of security as well as increase network efficiency.

So great is the need for such systems that the market demand for federal vendor information systems and services will increase $10 billion over five years, from $30.2 billion last year to $40.3 billion in 2005, finds research firm Input in a recent report. The study points at federal IT as a marketplace that will log steady growth over the next few years.

And even though there is less tax revenue coming in this year, the government is spending money banked years ago because federal budgets are hammered into place far in advance.

So which vendors and service providers will profit the most from the outpouring of federal dollars? "Those in Washington, D.C. territory — especially Verizon," Eustis says.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.