The Pitfalls of Vendor Consolidation in Local Government Technology Solutions

We need to fight for the nimble, interoperable, open, and platform-agnostic govtech we deserve.

Vendor Consolidation and Local Government Innovation

CivStart Board Member and longtime advocate for civtech startups, Doug Matthews, recently received a cheerful invitation to participate in a vendor-hosted webinar that led to a rare (for him) public declaration on the state of the civic technology landscape. The subject? The “benefits” of technology vendor consolidation for local governments. After 20 years working to break free from the status quo of lumbering legacy technology solutions, he was seeing the script play out all over again.

Public sector innovators fought hard for data standards, open APIs, and procurement reforms in the past two decades to allow needed new solutions entry into the local government space. The amount of innovation, improvement in local government processes, and betterment of resident experience with their government has been visible for all to see.

We at CivStart see some of the same issues reemerging as market pressures lead to acquisitions and consolidation. Local governments can feel like they are in a cycle of purchasing innovative startup solutions, whose contracts get acquired along with the startups by big companies. This often weakens or retires the features that made the vendor attractive in the first place as the big companies integrate their acquisition into their existing technology infrastructure.

The Case for Smaller, More Focused Startups

Local government leaders seeking technology solutions to their challenges encounter a range of potential vendors, approaches, data–privacy standards, integrations, features, user-experience journeys and numerous other options to consider. At CivStart, we see all of these options falling on a spectrum between small focused startup on one end, and big consolidated vendor on the other. And there are serious risks to the latter.

Working with smaller companies requires a real bit of risk-taking on the part of the local government, we won’t hide that (and much of our work is focused on de-risking this kind of innovation), but the potential benefits to both the government and the wider ecosystem of solutions is tremendous. In addition to the obvious benefits of startup innovation, younger companies give governments the potential to co-develop solutions, which means they will be cutting edge and customized to the exact needs and problems the government is facing. This also usually means lower costs for pilot opportunities or more nimble startup contracts. It means better customer support and service, and often means easier onboarding and implementation, since it will be customized to your needs.

Taking a larger view, as smaller companies integrating into your existing technologies, startups will almost always utilize open-data and API standards for interoperability, which increases the possibilities of future changes or additions from other vendors to plug in to these solutions. It empowers every local government looking to solve their problems to, “have the power to plug-and-play solutions that were right for their communities using common data standards and API,” as Doug Matthews explained.

The bleak alternative was laid out in Doug’s post: “giant companies motivated by farming clients rather than thoughtful iteration and making things better for communities. . . a handful of companies built largely by acquiring local government customers via acquisition, with little or no strategy on how to be responsive to those customers and diminishing incentive to provide what we sought a decade ago — interoperable, open, platform-agnostic solutions that allowed the thoughtful local government to plug-and-play the right solutions at the right time.

What a Successful Startup Partnership Can Look Like

We’ve had the pleasure to work with dozens of local government leaders through our programs and help them build out their challenges through deep understandings of their real problems and needs, then connect those challenges to a public submission process oriented toward startup companies. Those often turn into pilot programs or even full contract opportunities meeting the local government needs in ways they hadn’t even considered as possibilities beforehand.

One example is how a small, but rapidly growing city like Manor, TX partnered with us to find ways to improve their downtown and particularly the ability of small businesses to get the resources and support they need from their local government. As a result, the city launched their Biz101 site as a one-stop-shop for local businesses. In another instance, we supported New York City’s Office of the Public Advocate to identify new ways to communicate with their residents.

More great examples can be found in the five open challenges currently on our website. All of the pilots we will launch with these local governments will aim to improve processes, reduce costs, and deliver better services to their residents.

How to Fight for the GovTech we Deserve

The first and most important thing local government leaders can do is build spaces where an appetite for risk and innovation can be rewarded. There are as many models of smart cities and innovation teams as there are cities across the US, but many of them have had marked success in supporting their colleagues in overcoming big challenges in new ways. We’ve been particularly impressed with the work being done by Smart Cities Philadelphia, Smart Cities Raleigh, Long Beach’s Smart Cities Program, and Kansas City, Missouri’s BizCare Office. But we’ve also worked with transportation department heads, sustainability managers, planning offices and more. Leaders from small cities might be wondering how they can innovate with limited resources and that’s another place CivStart and our network can come in. Innovation can come from anywhere, but it does require dedication and work to make it happen.

Building out pilot program opportunities, making procurement processes accessible to smaller startup vendors, insisting on open APIs, integrations, and data interoperability in technology contracts, and partnering with organizations like us to help identify or evaluate potential startups who might be great partners are all ways that local government leaders can support this better way forward. Next time you are facing a technology challenge, consider finding ways to work with the thriving govtech startup community to solve your problems. We think that work can pay off tremendously for your fellow public servants, for your residents, and for the larger ecosystem of innovation in government technology.

Thanks for reading, as we mentioned, CivStart is a nonprofit that exists to help lower these risks and promote public-sector innovation. If you have a challenge you are looking to solve, reach out to us at info@civstart.org