2021 was a banner year for mergers and acquisitions in the government technology space, with more than 30 deals in the industry through last November. The dollar volume of these deals was nearly $10B through three quarters. The year started with blockbuster sized deals like Tyler Technologies acquiring NIC for more than two billion dollars before gradually moving to smaller, more frequent deals. This trend is expected to continue into the new year as the biggest companies continue to grow and others looked for missed opportunities further downstream in the market.
Part of the reason why the government space has been so active is because of the fact that it’s reliable revenue. When the larger economy is in trouble, vendors have little doubt that they’ll be paid when working for the government at any level, whether it be local or federal. This is particularly of interest during a pandemic and helps to offset any concern that working with the government moves too slowly or involves too much red tape. The government hasn’t always been viewed as an early adopter of technology, but this varies by location and also leaves plenty of room for software and services companies to sell products that will help modernize offices and workflows.
The pandemic also helped fuel expenditures in the space which may have made some of the acquisition targets look a bit more attractive. Many county governments used funds allocated from the CARES Act to invest in projects that allow their citizens to access services from home that they couldn’t before the pandemic. Additionally, remote work and convoluted processes for procurement have allowed governments to streamline the procedure through emergency orders that could lay a blueprint for how procurement should be done in the future.
Where will the next round of investment be? Cloud services is probably a good bet. As of now, only a quarter of counties have 30% of their applications and systems in the cloud. While complete adoption of cloud technology is unlikely to happen soon, three quarters of city and county technology leaders say that they have IT infrastructure that could be moved to the cloud.
This also means that government technology vendors will face stiffer competition than just Tyler Technologies as companies with strong software as a service and cloud offerings like Amazon and Google angle for market share.
Extract Systems is a smaller player in the government technology space, so we don’t anticipate conducting our own M&A, but we will continue to serve state and local governments with automation products that handle things like redaction and indexing. If you’d like to learn more about how we’ve done this, how we helped governments use CARES Act funds to get historical documents redacted, or you’d like to see a demonstration of our software, please reach out.
About the Author: Chris Mack
Chris is a Marketing Manager at Extract with experience in product development, data analysis, and both traditional and digital marketing. Chris received his bachelor’s degree in English from Bucknell University and has an MBA from the University of Notre Dame. A passionate marketer, Chris strives to make complex ideas more accessible to those around him in a compelling way.