Around the turn of the century, a new business model emerged in the local government software market. Private equity firms and Wall Street types observed that local governments were reluctant to replace their aging software and were willing to pay ever-increasing maintenance fees in other to avoid an expensive and painful migration to new software. Armed with virtually unlimited capital, these companies began buying up hundreds of small software companies that had been providing great service and regular updates to their customers.
Under the new model, development and support staffs were slashed and updates were reduced to the absolute minimum necessary to keep the software running. At the same time, maintenance fees were increased steadily.
This approach has resulted in billions in profits for these companies and their investors while customers have had little choice except to pay more for outdated systems.
Just as companies like Xero and Toast have challenged the status quo in the private sector, the emergence of a new generation of easy to use, subscription-based software is on the horizon for the public sector. Companies like TownCloud already have new apps available and more are on the way. Under the new model, customers will be able to try before the buy and pay a small monthly subscription this avoiding a large capital expense. Customer data can be easily imported and the new systems will be up and running in a few days. Best of all, there’s no maintenance, hardware or software to buy so the total operating cost will be lower than the maintenance of existing systems. Updates will be continual and painless.
Municipalities who are frustrated with the functionality and cost of their existing software should take heart. A new group of subscription-based systems are coming more quickly than you can imagine. The balance of power is about to shift back to the customer.