March 6, 2006
Small-town romance | Virtual Town Hall found a niche building low-cost municipal websites, but faces a crowding market
By Nancy Rosenbaum
When Greg Balukonis was elected town administrator of North Reading, Mass., in August 2005, he quickly discovered problems with the town's lackluster website. Balukonis couldn't find much useful information on the site, and most of the content that did exist was seriously out of date. In small municipalities like North Reading, he says, this situation is hardly unusual. "In small towns, there's no in-house expertise," says Balukonis.
"Developing the town website finds its way to the bottom of the priority pile."
Balukonis realized he needed help, and so in September 2005 he turned to a small Portland-based Web services company called Virtual Town Hall to equip North Reading with a website replete with online payment and interactive posting capabilities. Now, with a few clicks of a mouse, residents can research property values online, send the Department of Public Works an e-mail about a pothole, or pay tax and utility bills. Balukonis, who paid Virtual Town Hall $3,000 to build the town's site and will spend an additional $3,000 with VTH to maintain a yearly service contract, says he couldn't be happier with the results.
While it may seem quaint that small towns like North Reading have lagged behind the digital revolution, this trend has actually helped VTH carve out its market niche, says company president Randy Perry. Since its inception in 1998, VTH has specialized in building and hosting no-frills websites for municipalities whose populations range from 500 to 85,000 residents ˆ typically the ones that haven't had the staff or the money to develop their own sites. VTH now counts 180 towns representing 13 states in its roster ˆ including recent additions Salem, Ill., in December and Sheffield, Mass., whose site went online in January ˆ and plans to add 36 new clients by year-end. Using a blend of custom and existing software, VTH has developed a system that enables towns to manage their own websites using fill-in-the-blank templates and e-mail. VTH then hosts these sites on its own servers so towns don't need to concern themselves with server maintenance and backup protocols.
Although Perry acknowledges that the field is thick with providers selling online content management tools, what sets VTH apart, he says, is the system's ease of use. VTH clients can publish new information to their websites simply by sending an e-mail to a VTH server that instantaneously converts the content of the message into a respectable looking Web page. "Nobody else can do that," says Perry.
Why have small towns arrived so late to the online party? One reason is that many municipalities placed their digital plans on hold due to the recession that started in 2000, says Paul Taylor, chief strategy officer for the Center for Digital Government, a California-based research firm that analyzes government's use of digital technologies. "Now we're seeing an uptick and a pent-up demand," says Taylor. "[Municipal] coffers are not as empty as they used to be."
The Center for Digital Government estimates that state and local governments spend roughly $83.3 billion dollars annually on technology-related investments. But that figure includes a variety of big-ticket items, such as mainframe computers and network servers, and CDG estimates that the Web development and hosting niche occupied by Virtual Town Hall represents less than one percent of this multi-billion dollar total.
Still, Virtual Town Hall competes for contracts within that niche with a range of firms, including the current leader of the small-town Web developer space, GovOffice, a Minnesota-based company that has more 700 clients, including 47 towns in Maine. Another competitor, Muniweb, based in Birmingham, Mich., targets municipalities in the Midwest and South. Increasingly, Web hosting, online transaction and other low-cost service providers have started vying for a piece of the small-town market. "It's a tough market space, but it has a lot of potential," says Taylor. "There aren't a lot of big deals, though. There are a lot of small deals and a lot of handholding."
Providing online architecture
Virtual Town Hall's roots date back to the Internet boom years in the late 90s, but it counts itself a proud survivor of the dot-com fallout. In 1997, Perry was working at a Portland company called Infotech, providing what Perry describes as "basic Internet stuff" such as e-mail and Web services to clients ranging from small businesses to larger commercial entities.
That year, Perry received an invitation to attend a Maine Municipal Association conference in Augusta, and he decided to investigate who would be attending to see if it was worth making the hour-long trip. Practically all of the towns on the invitation list had websites, he says, but the vast majority were sorely outdated. Perry's instincts told him he might have found a market opportunity. "Throughout my entire career I have always worked on niche markets ˆ find a market that has a need and develop products and services to meet that need," says Perry.
The company evolved as a specialty initiative within Infotech until the turn of the millennium, when VTH hit a surprising growth spurt. In the aftermath of Y2K, Perry says, towns were free to reallocate funds that had been saved to avert the technology disaster that never happened, and it didn't take long for demand for VTH's services to surge. The company grew from 12 to 78 customers in 2000 alone, and as the year drew to a close Perry decided to spin off VTH with the support of angel investments totaling less than a million dollars (Perry declines to name the investors).
From the outset, VTH developed its business model around the assumption that small municipalities need affordable, user-friendly ways to post and manage information online. The company's paste and click posting, for example, replaced earlier efforts that built town websites in HTML, the Web development language that requires users to know special codes and information tags. Changes to a VTH website now can be carried out via e-mail by any of the dozens of people in a municipal office so that the in-house IT person ˆ if the town even has one ˆ is released from the often onerous task of collecting content from multiple sources.
Depending on the town's population and the number of users who are designated to post information, VTH will charge between $995 and $10,000 to build a site, and between $1,200 and $5,000 a year to maintain it. Perry compares VTH to an architect who draws up a plan and also oversees the construction of a building. By contrast, Perry says many of VTH's competitors offer licensed software toolkits ˆ some of which are less expensive than VTH's services ˆ for towns to build their own websites, making them like the local lumberyard: They can sell you the wood but they can't build you the house.
Michael Donovan, IT manager for new VTH client Saugus, Mass., describes VTH as a time saver that allows towns to easily expand their websites. "It frees up a guy like myself from having to spend 20 hours a week [on the website] and breaks it down into five minutes," says Donovan.
The DIY challenge
Not everyone wants to hire an architect, however. Take the town of Cumberland, which recently pulled the plug on its $2,500 annual service contract with VTH. Town Manager Bill Shane realized that the town's 21 year-old communications coordinator, Alyssa Daniels, could manage the town's site more autonomously. "We have the staff [with the capabilities] so why not use the money elsewhere?" says Shane. "These days, every aspect of the budget is looked at under a microscope."
In researching alternatives for the town website, Daniels settled on New Hampshire-based Savvy Software, which revamped Cumberland's website for $1,500. The town now pays Savvy roughly $350 a year for Web hosting, and Daniels continues to manage all of the online content, just as she did before. Now, though, she feels she has more control over the site's look and feel than was allowed in VTH's e-mail updating and template format.
The emerging technological sophistication of Virtual Town Hall's customer base may represent just one business challenge on the horizon. But to head off more defections, the company is creating new services such as online transaction and registration capabilities ˆ as well as other undisclosed services still under development. With such services in the pipeline, Perry plans to keep customers updated on new features that could address a town's emerging needs or concerns.
Perry also plans to address another challenge: He estimates that 75% of municipalities in VTH's target market already have websites. That doesn't mean, however, that the market for VTH services is shrinking in Perry's estimation. Instead, VTH is now focused on trying to upsell existing clients on ancillary services ˆ including an assessment tool that allows users to track and compare property values online ˆ as citizens increasingly demand a wider variety of online services from their municipalities. "A website is never a static issue because while the technology changes, so does the navigation habits of the user," says Perry. "More of our customers are looking at how they can evolve their websites to provide better service [to their constituents]."
But Virtual Town Hall is discovering that the field of competitors for these niche services is also expanding. Taylor from CDG compares companies like Virtual Town Hall to "evangelists in the hinterlands," who do the hard work of creating markets where none existed before. The problem with being a successful evangelist, however, is that they inevitably attract competition. Now, companies such as online transaction providers who might have ignored small towns see that municipalities have money to spend.
For now, VTH intends to maintain growth by reaching out to new states ˆ with a target of adding three to four new customers a month ˆ and pitching ancillary services to existing customers. Ultimately, though, the evolving needs for small-town websites and factors like cost, customization, control and even politics will determine which service providers will thrive in the long-term. But the fact is that some companies will find a market, as even the smallest of towns continue to look to the Internet to communicate with their citizens. "Web services have become part of the furniture," says Taylor. "You wouldn't think about shutting down a website any more than you would locking the doors of City Hall."
"Developing the town website finds its way to the bottom of the priority pile."
Balukonis realized he needed help, and so in September 2005 he turned to a small Portland-based Web services company called Virtual Town Hall to equip North Reading with a website replete with online payment and interactive posting capabilities. Now, with a few clicks of a mouse, residents can research property values online, send the Department of Public Works an e-mail about a pothole, or pay tax and utility bills. Balukonis, who paid Virtual Town Hall $3,000 to build the town's site and will spend an additional $3,000 with VTH to maintain a yearly service contract, says he couldn't be happier with the results.
While it may seem quaint that small towns like North Reading have lagged behind the digital revolution, this trend has actually helped VTH carve out its market niche, says company president Randy Perry. Since its inception in 1998, VTH has specialized in building and hosting no-frills websites for municipalities whose populations range from 500 to 85,000 residents ˆ typically the ones that haven't had the staff or the money to develop their own sites. VTH now counts 180 towns representing 13 states in its roster ˆ including recent additions Salem, Ill., in December and Sheffield, Mass., whose site went online in January ˆ and plans to add 36 new clients by year-end. Using a blend of custom and existing software, VTH has developed a system that enables towns to manage their own websites using fill-in-the-blank templates and e-mail. VTH then hosts these sites on its own servers so towns don't need to concern themselves with server maintenance and backup protocols.
Although Perry acknowledges that the field is thick with providers selling online content management tools, what sets VTH apart, he says, is the system's ease of use. VTH clients can publish new information to their websites simply by sending an e-mail to a VTH server that instantaneously converts the content of the message into a respectable looking Web page. "Nobody else can do that," says Perry.
Why have small towns arrived so late to the online party? One reason is that many municipalities placed their digital plans on hold due to the recession that started in 2000, says Paul Taylor, chief strategy officer for the Center for Digital Government, a California-based research firm that analyzes government's use of digital technologies. "Now we're seeing an uptick and a pent-up demand," says Taylor. "[Municipal] coffers are not as empty as they used to be."
The Center for Digital Government estimates that state and local governments spend roughly $83.3 billion dollars annually on technology-related investments. But that figure includes a variety of big-ticket items, such as mainframe computers and network servers, and CDG estimates that the Web development and hosting niche occupied by Virtual Town Hall represents less than one percent of this multi-billion dollar total.
Still, Virtual Town Hall competes for contracts within that niche with a range of firms, including the current leader of the small-town Web developer space, GovOffice, a Minnesota-based company that has more 700 clients, including 47 towns in Maine. Another competitor, Muniweb, based in Birmingham, Mich., targets municipalities in the Midwest and South. Increasingly, Web hosting, online transaction and other low-cost service providers have started vying for a piece of the small-town market. "It's a tough market space, but it has a lot of potential," says Taylor. "There aren't a lot of big deals, though. There are a lot of small deals and a lot of handholding."
Providing online architecture
Virtual Town Hall's roots date back to the Internet boom years in the late 90s, but it counts itself a proud survivor of the dot-com fallout. In 1997, Perry was working at a Portland company called Infotech, providing what Perry describes as "basic Internet stuff" such as e-mail and Web services to clients ranging from small businesses to larger commercial entities.
That year, Perry received an invitation to attend a Maine Municipal Association conference in Augusta, and he decided to investigate who would be attending to see if it was worth making the hour-long trip. Practically all of the towns on the invitation list had websites, he says, but the vast majority were sorely outdated. Perry's instincts told him he might have found a market opportunity. "Throughout my entire career I have always worked on niche markets ˆ find a market that has a need and develop products and services to meet that need," says Perry.
The company evolved as a specialty initiative within Infotech until the turn of the millennium, when VTH hit a surprising growth spurt. In the aftermath of Y2K, Perry says, towns were free to reallocate funds that had been saved to avert the technology disaster that never happened, and it didn't take long for demand for VTH's services to surge. The company grew from 12 to 78 customers in 2000 alone, and as the year drew to a close Perry decided to spin off VTH with the support of angel investments totaling less than a million dollars (Perry declines to name the investors).
From the outset, VTH developed its business model around the assumption that small municipalities need affordable, user-friendly ways to post and manage information online. The company's paste and click posting, for example, replaced earlier efforts that built town websites in HTML, the Web development language that requires users to know special codes and information tags. Changes to a VTH website now can be carried out via e-mail by any of the dozens of people in a municipal office so that the in-house IT person ˆ if the town even has one ˆ is released from the often onerous task of collecting content from multiple sources.
Depending on the town's population and the number of users who are designated to post information, VTH will charge between $995 and $10,000 to build a site, and between $1,200 and $5,000 a year to maintain it. Perry compares VTH to an architect who draws up a plan and also oversees the construction of a building. By contrast, Perry says many of VTH's competitors offer licensed software toolkits ˆ some of which are less expensive than VTH's services ˆ for towns to build their own websites, making them like the local lumberyard: They can sell you the wood but they can't build you the house.
Michael Donovan, IT manager for new VTH client Saugus, Mass., describes VTH as a time saver that allows towns to easily expand their websites. "It frees up a guy like myself from having to spend 20 hours a week [on the website] and breaks it down into five minutes," says Donovan.
The DIY challenge
Not everyone wants to hire an architect, however. Take the town of Cumberland, which recently pulled the plug on its $2,500 annual service contract with VTH. Town Manager Bill Shane realized that the town's 21 year-old communications coordinator, Alyssa Daniels, could manage the town's site more autonomously. "We have the staff [with the capabilities] so why not use the money elsewhere?" says Shane. "These days, every aspect of the budget is looked at under a microscope."
In researching alternatives for the town website, Daniels settled on New Hampshire-based Savvy Software, which revamped Cumberland's website for $1,500. The town now pays Savvy roughly $350 a year for Web hosting, and Daniels continues to manage all of the online content, just as she did before. Now, though, she feels she has more control over the site's look and feel than was allowed in VTH's e-mail updating and template format.
The emerging technological sophistication of Virtual Town Hall's customer base may represent just one business challenge on the horizon. But to head off more defections, the company is creating new services such as online transaction and registration capabilities ˆ as well as other undisclosed services still under development. With such services in the pipeline, Perry plans to keep customers updated on new features that could address a town's emerging needs or concerns.
Perry also plans to address another challenge: He estimates that 75% of municipalities in VTH's target market already have websites. That doesn't mean, however, that the market for VTH services is shrinking in Perry's estimation. Instead, VTH is now focused on trying to upsell existing clients on ancillary services ˆ including an assessment tool that allows users to track and compare property values online ˆ as citizens increasingly demand a wider variety of online services from their municipalities. "A website is never a static issue because while the technology changes, so does the navigation habits of the user," says Perry. "More of our customers are looking at how they can evolve their websites to provide better service [to their constituents]."
But Virtual Town Hall is discovering that the field of competitors for these niche services is also expanding. Taylor from CDG compares companies like Virtual Town Hall to "evangelists in the hinterlands," who do the hard work of creating markets where none existed before. The problem with being a successful evangelist, however, is that they inevitably attract competition. Now, companies such as online transaction providers who might have ignored small towns see that municipalities have money to spend.
For now, VTH intends to maintain growth by reaching out to new states ˆ with a target of adding three to four new customers a month ˆ and pitching ancillary services to existing customers. Ultimately, though, the evolving needs for small-town websites and factors like cost, customization, control and even politics will determine which service providers will thrive in the long-term. But the fact is that some companies will find a market, as even the smallest of towns continue to look to the Internet to communicate with their citizens. "Web services have become part of the furniture," says Taylor. "You wouldn't think about shutting down a website any more than you would locking the doors of City Hall."
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