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WORLDBEAT - Post-boom, gov't makes good e-commerce partner

WORLDBEAT - Post-boom, gov't makes good e-commerce partner

You walk into Govolution's glassy, shiny offices in northwest Washington, D.C., and at first glance, it feels like you've stepped back into the dot-com bubble of 1999. But the comparisons to a dot-com circa '99 pretty much end there

You walk into Govolution's glassy, shiny offices in northwest Washington, D.C., and at first glance, it feels like you've stepped back into the dot-com bubble of 1999. There's the hardwood floors, the spacious meeting rooms, the crowded cube farms and the retro art in the halls, but the comparisons to a dot-com circa '99 pretty much end there.

The art advertises U.S. government bonds, the people running the show are in their 30s and 40s, not 20s, and the pool and foosball tables are noticeably absent. The leaders at Govolution, which provides credit-card processing services for government Web sites, say they are doing something most dot-coms could only dream of -- making money.

Sure, Govolution Marketing Director Peter Moore jokes about getting rid of his stubbly beard growth before talking to a reporter, and President/Chief Executive Officer Christopher Flaesch sports a trendy-looking shaved head, but the general look at the Govolution office near George Washington University is more business-casual than the casual-casual of Silicon Valley during the boom. And Moore, a 41-year-old veteran of technology and consulting companies, also worries about finding the right balance between modern and not-too-cutting-edge for the new look at the company's Web site; after all, bankers and government accountants don't go for things looking too exotic.

"We are handling people's money," notes Moore, in explaining a somewhat conservative approach to the new site.

They're handling a lot of people's money. The company has processed more than $1 billion in credit card payments for about 70 U.S. government offices since it was founded in 1998 as a side project of Web development shop Bixler Inc. Govolution's contract isn't directly with the U.S. government -- instead it's with two Washington-area banks -- but through the banks, it serves the U.S. Treasury, U.S. Department of Transportation and other federal agencies. Govolution also serves about 10 other clients, mostly local governments, and expects to run $2 billion through its platform this year, Moore says. Govolution, a private company, didn't release its revenue numbers.

It's often said that Washington is a company town, and that company is the U.S. government. Spurred by its federal government clients, Govolution has had a positive cash flow for over a year and is self-funding, Flaesch says, and actually added a handful of employees to its 25-person staff in the last year. Flaesch expects to grow that staff by another third this year, and Govolution will soon move from its cramped 2,500-square-foot offices to a 6,500-square-foot space in the same building.

Think of Govolution as providing the payment back-end of Amazon.com, only targeted at government agencies. The look and feel of the "comprehensive suite of secure transaction processing and financial management tools" mimics the look and feel of a government Web site. Govolution also hosts the service, and allows transactions through Web-enabled ATMs and kiosks.

Business is good with the federal government, but the company is trying to diversify its client base so that if anything does happen to the federal government contracts, the company can survive. The company hopes to expand more into the state and local government sectors, Flaesch said, but also into industry by offering a private-branded service that banks or OEMs (original equipment manufacturers) in turn sell to their customers.

As he contemplates the growth of his business, it's easy for Flaesch to take a shot at the dot-coms of old. "You have to run this like a business because if you don't you're going to be gone," he adds. "At the end of the day, you have to sell your stuff at a cost that's more than it takes to deliver."

Still, it seems like some lessons have been learned. Company Chief Financial Officer Christian Duffus, a 30-year-old veteran of The Goldman Sachs Group, talks about conservative budgeting, "knowing what I have in the bank." He talks about delivering a product to customers who actually had a great need.

"It makes a lot of sense for governments to have Web-enabled services ... relative to a lot of the e-commerce applications that popped up during the dot-com boom," he says.-- IDG News Service

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