Harnessing the Internet Economy

In the Internet economy, dot-com schemes have been a dime a dozen, and until recently, venture capital plentiful. Of course, not all of those ideas have succeeded in practice: Many dot-com start-ups have crashed and burned, disappearing in a cloud of stock options.

For the most part, government information technology executives and policy-makers dwell in a separate universe. Yes, the Internet is creating new opportunities for how the government can operate, but no, a wellspring of money is not available to act on every good idea. And for the ideas that are tried, failure is generally not as easily tolerated in the government as it is in the private sector.

This doesn't mean that government should or even could stay on the sidelines.

It is inevitable that the service economy will be transformed by the Internet -- and not just on a technological level. The government must be a cautious but vigorous participant in that transformation. So the question is, what benefits can the government tap from the Internet economy without exposing itself to too much risk?

One of the biggest opportunities -- and one that provides an easily measurable return on investment -- is procurement applications. In the private sector, it is the hottest segment for Internet-based ventures. In the public sector, it is known as business-to-government, or B2G.

The government is already testing two of the more compelling online buying models: aggregate buying and reverse auctions, in which suppliers bid the selling prices down, not up. In the absence of government rulings otherwise, those models are acceptable under current procurement policy.

Of course, there are other significant innovations in the Internet economy that can improve government operations. In the private sector, companies are reaching out to customers via the Internet, providing them with useful information and convenient services that save both buyers and sellers time and money. Certainly, those are goals that the government shares. But as with procurement, the government has a more complex set of aims and obligations than the private sector, such as ensuring citizen privacy and providing a high degree of information security.

The government will never be able to move as fast as or take the big risks of an Internet start-up. But it can benefit by using the same kinds of ideas and technology that are redefining how people and organizations interact in the mainstream economy. It's an opportunity that is too good to pass up.

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