{Paul Lachance:} Hi everyone, Paul Lachance here with a preview of our State of Government Software Sector report. This is a high-level overview touching on key themes from the full report, including the current state of the sector, emerging technologies, and major trends in M&A and market dynamics. Today, we’ll focus on the key highlights, beginning with an overview of the current state of government software.
{Paul Lachance:} There are major macroeconomic drivers, both challenges and opportunities, impacting the sector. Governments face significant hurdles, including budget constraints, which are especially evident in today’s news cycle. They’re also dealing with workforce shortages and cybersecurity risks, which are arguably on par with physical security threats. Add to that an aging infrastructure and a complex environment for doing business.
At the same time, there are tremendous opportunities for innovation, particularly through SaaS and cloud-based solutions, especially those enhanced by AI and automation to make them even smarter and more adaptable. One key trend is data-driven governance: the idea of harnessing the vast amounts of data collected through modern technology and using analytics to enable smarter decision-making, improve workforce development, and support public-private partnerships. We’ll spotlight a few specific examples.
Download our State of Government Software Report to learn more.
{Paul Lachance:} The aging workforce is one of the most evident challenges, and while it spans all sectors, it has a particularly serious impact on government agencies. Many experienced professionals, men and women who have done an incredible job for decades, are retiring. The baby boomer generation is rapidly exiting the workforce, and with them, we are losing deep expertise and institutional knowledge. Replacing them is difficult. There are not enough people to get the work done, and hiring replacements is becoming more expensive. This has led to a growing reliance on contractors, which only adds to the cost.
We need to find ways to retain talent in the public sector. With increased competition from the private sector, many workers are lured away by higher-paying jobs. This talent drain directly affects the ability of government agencies to deliver essential services to their communities.
Technology can play a critical role here. When there are not enough people or hours in the day to meet demands, automation and modern tools can help bridge the gap. Workforce development programs, along with more competitive recruitment and retention strategies, are essential. Technology, especially when powered by SaaS, AI, and the Internet of Things, can make a real difference. In the report, we highlight several examples of how these solutions are being applied.
We are also seeing demographic and social changes across the country. We have already touched on the aging population, but there is also rising diversity, an affordable housing crisis, and longstanding mental health challenges that are finally receiving the attention they deserve. Income inequality is another key issue. Government agencies need to adapt and respond to these shifts.
This means making policy adjustments, forming public-private partnerships, and launching targeted economic programs. It also involves investing in technology that can both address these challenges and unlock new opportunities. These solutions are embedded in the software and technology that is increasingly accessible to government agencies.
{Paul Lachance:} The technology in this sector is incredible. I have been involved in the government space for decades, and what I have seen in the last five to seven years has truly blown me away. SaaS software is at the center of this transformation. It reduces costs by eliminating the need for large, expensive, upfront on-premise installations that were common in the past. It also allows for scalability, making it easier for agencies to expand or contract as needed with cloud-based SaaS solutions.
This technology can be deployed faster and at a lower cost than traditional, especially on-premise, systems. It brings automation and efficiency, reducing manual work, streamlining approvals, and improving collaboration. These improvements are critical because there simply are not enough people, particularly with the right skills, to get everything done.
The data these tools generate, especially when supported by AI, enables smarter, real-time decision-making. And it is not just software. Physical world technologies like IoT sensors are also playing a major role. They monitor infrastructure and fleets, delivering data that informs smart decisions and alerts agencies when maintenance is needed.
Modern automation and emerging technologies such as blockchain, robotics, drones, augmented reality, and virtual reality are being embedded into these solutions. They are making a real difference, enabling smarter software and smarter technology that can help government agencies operate more effectively.
{Paul Lachance:} Let’s take a look at the government sector. First, it is massive and multifaceted. In our report, we break it down into federal, state, and local levels, as well as public safety. If you look at the chart referenced here, you will notice there are many departments. They do not always fit neatly into a single category, and many of them intersect. In some cases, all levels of government are involved in a given function. It is a vast and complex sector, not just in structure but also in scale.
Some of the data we include in the report highlights this: 50 states, 16 territories, hundreds of agencies, and a population of over 346 million people and growing. The financial scope of the sector is also enormous. While growth may have slowed recently, the underlying needs remain consistent. Our report breaks all of this down with detailed data.
The government sector is also a very unique environment in which to do business. It presents distinct challenges compared to other markets. Long sales cycles, numerous decision-makers, and slow-moving procurement processes make technology adoption more difficult. Budget constraints, which are widely discussed in today’s headlines, are likely to persist for the foreseeable future. Procurement and compliance rules are often complex and vary significantly between agencies.
Historically, the sector leaned toward capital expenditures, requiring large, upfront investments in technology. Today, with the rise of SaaS, there is a shift toward operating expenses. This transition is being supported by a new generation of government leaders who are more familiar with cloud-based software. As a result, adoption is becoming easier and more affordable.
Government agencies also tend to be risk-averse and prioritize stability. We often see a ripple effect when a software company proves successful in one municipal district; it becomes easier to gain traction in neighboring districts. Strong vendor relationships and long-term partnerships are essential in this space.
{Paul Lachance:} The report also includes a series of spotlights on the government SaaS sector. There are more than a dozen featured in the full report, but we are highlighting just a few in this video. It all begins with digital transformation. Digital transformation means looking at the sector’s challenges and opportunities through a fresh lens and leveraging today’s technology to address workforce shortages and improve outcomes. We do not have enough people to meet demand, and technology can provide vital support.
Digital transformation enhances citizen services. It helps improve access, speed, and transparency. It also increases efficiency by automating processes, which reduces costs and delays. Beyond improving day-to-day operations, it supports long-term strategic planning, especially when powered by the valuable data now available. At the end of the day, saving money and staying within budget is essential, and this technology can make that possible.
A key aspect of digital transformation in government is taking a holistic approach. This is true across all sectors. It is not just the mayor of a town making decisions. Leadership, staff, citizens, constituents, and stakeholders must all work together to drive better outcomes. At the foundation of this effort is technology. SaaS, cloud computing, artificial intelligence, and the Internet of Things are all key enablers. They streamline operations, support smarter decision-making, and drive the kind of digital transformation that is urgently needed across the sector.
{Paul Lachance:} One of the really exciting topics we cover in the report is the intersection of the digital and physical world. You often hear terms like “smart cities” or “smart towns,” but in reality, this applies to any area of government where physical infrastructure is connected with digital technology. The report includes many examples, but I will share just one to illustrate the concept: waste management.
Traditionally, a dump truck would drive around the city on a fixed route, stopping at every municipal garbage can. Sometimes the can would be full, but other times it might not need emptying at all. Now, imagine placing an IoT sensor in each can that alerts the waste management team when it actually needs to be emptied. The truck’s route can then be optimized based on real-time data.
This approach reduces unnecessary driving, lowers emissions, saves time for staff, and helps address workforce shortages. It is a great example of how the digital and physical worlds can come together to create smarter, more efficient, and technology-driven solutions. And this is just one of many examples highlighted in the report.
{Paul Lachance:} Workflow, communication, and collaboration are central to smart, modern SaaS solutions. The days of rigid software systems that forced agencies to conform to inflexible processes are behind us. In today’s SaaS environment, software is designed to adapt to strong internal processes. Of course, if your processes are flawed, those need to be addressed first. But once you have effective workflows in place, the software can support and enhance them.
Modern SaaS tools automate repetitive tasks, reduce paperwork, accelerate approval timelines, and improve both internal and cross-agency collaboration. This is especially important in the complex operating environment of government agencies. These tools also strengthen communication, both internally and with the public, through various channels. Most importantly, they support both real-time and long-term decision-making, thanks to their flexibility and their focus on workflow, communication, and collaboration.
{Paul Lachance:} We spotlight a wide range of software types in the report, diving into detailed examples across areas such as permitting, case management, and maintenance operations, among others. For this video, I am focusing on just one example, and it is one I find especially compelling.
Let’s take the Infrastructure Investment and Jobs Act. It received extensive media coverage and involved a massive investment of federal dollars. For most constituents, the next visible step is seeing traffic cones and construction crews working on roads and bridges. But what happens in between, the process that takes place from legislation to project execution, is complex and often overlooked. I like to call it “how the sausage is made.” Historically, this process was incredibly manual and cumbersome.
Today, modern SaaS software is helping to streamline that entire journey. From the distribution of funds and project planning, to identifying vendors, managing construction projects, and notifying the public, software plays a central role. Whether it involves environmental initiatives, operations, transportation, housing, or construction, SaaS tools are making the process more efficient, more transparent, and far less expensive. Ultimately, this technology is helping to save taxpayer dollars.
The report contains many more examples like this, covering different types of software and their specific use cases across the government sector.
{Paul Lachance:} The final aspect of the report focuses on mergers and acquisitions and the broader market landscape. Whether you are an investor or a software creator in the government sector, this information is highly valuable. It gives you a sense of the current pulse and overall momentum in the space.
In the report, we organize the sector by federal, state, and local levels, and then by public safety. Within each of these levels, there are many different types of software categories. What you are seeing here is just a small snapshot of the variety we cover. From there, we build out our market map. The market maps are very detailed, and while it may be difficult to read everything on the screen during this video, you can find the full version in the report or visit the website to explore it in more depth. Online, you can drill down into each company, sort and filter based on your interests, and explore the vast number of organizations active in the space. View the Government Software Market Map here.
This is a massive market, with innovative companies of all sizes, from small startups to well-established players, all working to transform how government operates. Having spent many years in this industry, I can say the progress over the last five to seven years has been incredible. These technology companies are reaching all aspects of government and driving real improvements.
From a mergers and acquisitions standpoint, it is a strong time to be involved in government SaaS. The report includes detailed commentary on recent deals, active buyers, transaction trends, and overall market sentiment. This is a growing sector, and investor interest is high. Anywhere digital transformation can occur in a sector that truly needs it, there is opportunity, and that is exactly what these SaaS companies are delivering.
We also highlight notable transactions, including what I refer to as platform plays. These are larger companies building out comprehensive technology ecosystems. Tyler Technologies is a great example of this approach and how they have scaled their platform to serve a broad range of government needs.
In conclusion, this is a great sector to be in. We cover much more detail in the full report, which you can download. I encourage you to take some time to go through it. And as always, if you have any questions, please feel free to reach out. We are always happy to talk about it. Thank you.
