# Tyler Technologies _The patience to sell to government._ --- ## The pivot In 1998, Tyler Corporation was a dying conglomerate. The company had spent decades as an industrial hodgepodge - iron pipes, retail operations, distribution businesses. By the mid-1990s, management had divested most of these assets, returning over $400 million to shareholders. What remained was a public company shell with a stock listing and not much else. John Yeaman saw opportunity. At 57, when most executives contemplate retirement, he left EDS to become president of the hollowed-out company. His bet: pivot entirely into software for local government. The timing was deliberate. Municipalities across America were running on ageing systems - some still paper-based, others on software written in COBOL decades earlier. These weren't glamorous customers. They moved slowly, bought through painful procurement processes, and had limited budgets. But they also couldn't function without technology, and once they chose a vendor, they rarely left. Tyler Corporation became Tyler Technologies in 1999. First-year revenue in the new direction: $23 million. Twenty-five years later, the company generates $2.3 billion annually and serves over 13,000 government locations. Yeaman's bet paid off because he understood something most technology companies miss: unglamorous markets can be the most defensible. The logic of [[Niches]] applied perfectly - a market that repels impatient competitors rewards patient ones. --- ## Why government is different Selling to local government requires a specific kind of patience. The procurement cycle runs twelve to twenty-four months. A city deciding to replace its financial system forms a committee, issues an RFP, evaluates vendors, negotiates contracts, and navigates political approval. The process is designed for fairness and transparency, not speed. Budget cycles add another constraint. Governments plan spending a year or more in advance. A deal that misses the budget window waits until the next fiscal year. Sales teams accustomed to quarterly pressure find this maddening. But the same friction that slows initial sales creates extraordinary retention. Once a government implements your software - training hundreds of employees, migrating decades of data, integrating with state and federal systems - switching becomes nearly unthinkable. [[The churn ceiling]] here is structural, not earned through product excellence alone. Tyler's retention rate hovers around 98%. About 200 government software contracts get bid annually across the industry. Half stay with their current provider without a competitive process. The installed base barely churns. This isn't lock-in through legal tricks. It's lock-in through operational reality. A failed software transition can disrupt tax collection, court operations, or public safety dispatch. No city manager wants to explain that to voters. --- ## The product strategy Tyler's approach to product mirrors its approach to customers: go deep, not wide. The company offers eight categories of software: financial management (ERP), courts and justice, public safety, property appraisal and tax, planning and regulatory, records management, data and insights, and school transportation. Each category addresses a specific government function. Together, they cover most of what a local government does. The strategy is deliberate. A city running Tyler's financial system discovers that Tyler also handles courts. Then public safety. Then property appraisal. Each additional product deepens the relationship and raises switching costs. Cross-sell isn't just a growth strategy - it's a retention strategy. A government using Tyler for one function might consider alternatives. A government running six Tyler systems has effectively outsourced its technology backbone. Leaving would mean replacing everything simultaneously. The products themselves reflect deep domain expertise. Government accounting follows different rules than corporate accounting - fund-based budgeting, grant tracking, regulatory reporting. Tyler's ERP systems handle these natively. Oracle and SAP can be configured for government, but they weren't designed for it. This specialisation creates a moat that scale alone can't overcome. Microsoft, Oracle, and SAP have vastly more resources than Tyler. But they spread those resources across every industry. Tyler concentrates everything on one customer type. It is classic [[Counter-positioning]] - the incumbents' horizontal ambitions prevent them from matching Tyler's vertical depth. --- ## Acquisitions with discipline Tyler has completed over 55 acquisitions since Yeaman joined, but with a specific discipline: every acquisition serves local government. The pattern is consistent. Identify a software category that governments need. Find the best vendor in that category. Acquire them. Integrate their product into Tyler's platform. Cross-sell to the existing customer base. New World Systems in 2015 brought public safety and computer-aided dispatch - $670 million. Socrata in 2018 added data analytics and open data portals - $150 million. MicroPact in 2019 contributed case management - $204 million. NIC in 2021 expanded into state government and payments - $2.3 billion, Tyler's largest deal. The NIC acquisition illustrates Tyler's strategic logic. The company had dominated local government but had limited presence at the state level. NIC operated digital government services for 31 states. The combination created a platform spanning municipal, county, and state - the full vertical of American government below the federal level. What Tyler hasn't done is equally telling. No expansion into federal government, despite the obvious adjacency. No diversification into commercial software. No international ambitions. They stay in the lane where they have genuine expertise. --- ## The cloud transition Like [[Jack Henry]], Tyler faces the challenge of modernising technology without disrupting customers who can't tolerate downtime. The company's solution is patient migration. Legacy on-premise systems continue running while Tyler rebuilds capabilities in the cloud. Customers can transition gradually - moving one function at a time rather than executing a risky wholesale replacement. An expanded partnership with AWS, announced in 2024, accelerates this strategy. Tyler's stated goal is completing the cloud transition by 2030 - a seven-year timeline that reflects government procurement reality. Customers who bought on-premise systems in 2023 won't be ready to migrate until their current contracts expire. The cloud transition changes Tyler's economics. Recurring revenue - subscriptions, maintenance, and transactions - now represents 86% of total revenue. This is more predictable than licence sales, smooths quarterly results, and increases customer lifetime value. CEO Lynn Moore frames the transition around customer benefit: business continuity, continuous updates, enhanced security. But the business benefit is equally significant. Cloud customers renew automatically. The relationship becomes subscription rather than project. --- ## The compound effect Tyler's growth compounds through a specific mechanism. Existing customers expand. A county running Tyler's financial system adds courts. Then public safety. Revenue per customer grows without new sales effort - [[Customer-funded growth]] through cross-sell rather than new logos. New customers arrive through replacement cycles. Eventually, even the most entrenched legacy system becomes unsupportable. When governments finally modernise, Tyler is the safe choice - proven, specialised, unlikely to disappear. Acquisitions add capabilities. Each deal brings new products to cross-sell into the existing base and new customers to cross-sell existing products. None of this is fast. Tyler grows at 10-15% organically - respectable for a company serving budget-constrained government customers. But the consistency is remarkable. Revenue has compounded for over two decades without dramatic pivots or bet-the-company acquisitions. The stock price tells the story: 22% compound annual growth over twenty years. Not by disrupting markets or chasing trends, but by serving the same unglamorous customer with increasing depth. --- ## What this teaches Tyler Technologies illustrates principles that apply beyond government software: **Unglamorous markets can be the most defensible.** The same friction that makes government sales painful - long cycles, complex procurement, slow decisions - creates extraordinary retention. Markets that repel impatient competitors reward patient ones. **Specialisation beats scale.** Oracle and SAP have more resources than Tyler will ever have. But Tyler's concentrated focus on one customer type creates expertise that generalists can't match. In vertical software, depth defeats breadth. **Acquisitions work when disciplined.** Fifty-five acquisitions over twenty-five years, all serving the same customer. No diversification into adjacent industries. No empire-building for its own sake. Every deal strengthens the core position. **Switching costs compound.** One product creates moderate switching costs. Six products create a technology backbone that's effectively permanent. The goal isn't just landing customers - it's becoming so embedded that leaving is inconceivable. **Patience is a strategy.** Twelve-to-twenty-four-month sales cycles. Seven-year cloud transition timelines. Customers who buy once per decade. Tyler's entire operation is built around time horizons that most technology companies can't stomach. The company isn't exciting. It doesn't announce revolutionary products or chase emerging technologies. It processes property taxes, manages court dockets, and dispatches emergency services for thousands of municipalities that most people have never heard of. That's exactly the point. The most defensible businesses are often the ones that do unglamorous work for unglamorous customers, consistently, for decades. --- **Connects to:** [[Verticals]] · [[Switching costs]]