GovTech: Insights on an Expanding SaaS Sector

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Tim Bechtold

Tim Bechtold

Vice President

August 13, 2018
Thought Leadership

The benefits of SaaS are clear, but when it comes to widespread adoption, markets move at different paces. While state and local governments have historically been slow to adopt SaaS solutions, market dynamics are quickly changing. Government technology (GovTech) has emerged as an exciting space for investors at the venture, growth, and buyout levels.

Our recently announced partnership with Orlando-based PowerDMS demonstrates our excitement about the trends in GovTech and more specifically, the public safety vertical. PowerDMS provides cloud-based document management, compliance, and training solutions for public safety agencies and related government organizations. Agencies are now seeking to deploy more efficient, affordable, and secure cloud technologies to improve public services, optimize operational processes, and increase employee productivity. PowerDMS’s solution enables its clients to operate more efficiently, run their organizations with best-in-class compliance practices, and communicate more effectively with their constituents.

In addition to adopting SaaS platforms to optimize internal processes, government organizations are seeking innovative solutions that enhance external aspects of their daily workflow. Rising expectations related to citizen experience and service are at the forefront of another key trend that addresses a critical government pain point.

Over the last several years, our online interactions within the private sector have trended towards seamless. Think about the last time you made a purchase on Amazon, checked your bank account, or paid a bill – easy, reliable, and predictable. Counter that with the last time you needed something from the DMV – frustrating, confusing, and inefficient.

State and local governments recognize that changes must be made to keep up with their private sector counterparts as it relates to constituent engagement. To accomplish this, they are turning to vertical-specific solutions that aim to unify interactions with transit authorities, parks and recreation departments, public safety, and…even the DMV.

Think about the multitude of consumer touchpoints that exist in government today: buying a subway pass, putting coins in the parking meter, complaining about a pothole, paying taxes, or registering a vehicle. These painful, daily tasks are now being streamlined through software solutions that connect citizens with their municipalities online.

The upgraded experience for citizens is impactful, but there is also significant value unlocked as technology solutions help agencies operate more efficiently and instill a government culture of service excellence and accountability. Instead of hiring full-time employees to collect coins from parking meters, cities can divert valuable resources elsewhere. Instead of a pothole complaint getting held-up in the shuffle, a request submitted via software is sent directly to key stakeholders within the Department of Transportation.

Government representatives have already begun to catch on. A quarter of the government workforce is older than 55. While the aging workforce may spell a cause for concern, we see it as a positive. Young, hungry representatives who replace their retiring predecessors are looking for a place to hang their hat and see these technology upgrades as low-hanging fruit that can enable their organizations to operate more effectively.

Eric Garcetti, the 47-year-old mayor of Los Angeles, is arguably the most tech-focused mayor in America. The Information Technology Agency of Los Angeles has access to a $90 million budget to focus on making L.A. a fully digital and connected city. Garcetti has led the city to consecutive recognitions as America’s #1 Digital City. Citizens can even “talk to L.A. City” on their Google Home devices.  

This is more than just a top-down culture shift. Government has historically carried a propensity for risk-aversion, making it difficult for SaaS providers to drive organizational change and scale quickly. While this dynamic still exists in some capacity, we’ve seen government agencies work to streamline procurement practices. Individual departments are moving to faster deployments and shorter sales cycles, likening them to SMB buyers. This generates opportunities for agency-specific solutions, like PowerDMS, to carve-out strong niches within government.

We believe GovTech is hitting a growth inflection point. An AGC Partners report notes that cloud vendors with municipal solutions are seeing double digit growth rates in SaaS subscriptions. And there’s plenty of room to grow – SaaS spend represents only ten percent of all software spending within state and local government today. As software budgets increase (six percent projected growth in 2018), money will continue to pour into government-focused SaaS solutions. We’re excited to be a part of this rapidly growing and dynamic software vertical and look forward to future partnerships with emerging leaders in GovTech.

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