Despite funding struggles and bureaucratic inertia, eGovernment will change the way authorities deal with citizens and businesses. According to a new Report from Forrester Research, Inc. (Nasdaq: FORR), federal, state, and local governments will collect 15% of fees and taxes online by 2006 — totaling $602 billion.

“An increasingly demanding and wired public is looking for speed and convenience from its government, said Jeremy Sharrard, associate analyst at Forrester. Even though constituents are concerned about privacy and paying convenience fees, users see the value of online government and want those services now.”

Most government services and regulatory requirements involve the filing of an application or report by businesses and constituents. Governments at all levels will receive 333 million online submissions by 2006. State governments will receive the most — 137 million in 2006 — fueled by online business reporting. By 2006, authorities will roll out almost 14,000 total online service applications nationwide. The majority of these services will come from the nation’s 35,000 cities and towns.

eGovernment adoption will evolve through three phases: experimentation, integration, and reinvention. Governments’ initial forays onto the Net over the next 24 months will continue to be marked by a smattering of low-risk, clearly bounded, constituent-focused services online. Applications will be simple, posing little privacy threat to users, requiring minimal identity authentication, and calling for a low level of system integration. Volume will be low also, due to the lack of technological sophistication that will keep 90% of cities and towns from offering eGovernment services until 2002.

Expectations for online government will rise quickly as citizens incorporate private sector eCommerce into their daily lives between 2002 and 2005. This will force governments to respond with business-focused services as well as more sophisticated, customer-centric offerings that require integration among multiple departments and address privacy concerns. But linking different departments’ legacy systems will slow deployment as authorities struggle to tie their systems to new payment and authorization services.

In 2005 and beyond, legislative mandates will drive the organizational reinvention necessary to synchronize governments’ processes and jurisdiction with their Net front ends. Once constituents and lawmakers see the structure of their government laid out before them on the Web, they will question why so many departments offer overlapping services. By consolidating applications and building easy-to-use sites, government will eventually become less visible and constituents will become more autonomous.

“By 2005, local governments will receive federal funding to bridge the digital divide controversy — making eGovernment services available to all constituents,” added Sharrard.

For the Report “Sizing US eGovernment,” Forrester interviewed CIOs and other heads of eGovernment efforts at federal, state, and local governments that have already begun eGovernment implementations, as well as five international governments.