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The Swedish market for financial systems in municipalities has long been dominated by a few established vendors, but now clear signs of change are visible. New players, partner-driven delivery models and increased demands for AI, automation and flexibility create conditions for increased competition. The question is not if the market will change, but which municipality chooses to lead and drive the development.
The municipal market for financial systems has long been characterised by stability. Or perhaps rather stagnation, depending on who you ask. For municipalities facing a system change, the options are relatively well known. The market is still dominated by a few established vendors who have, over many years, built both functionality, reference customers, and knowledge of the public sector. CGI with Raindance, Unit4 with Unit4 ERP, and Visma Affärslösningar have virtually all of Sweden's municipalities and regions as their customers.
At the same time, we are now seeing signs of change.
Over the past year, new vendors have attempted to enter the Swedish market. Xledger already has a handful of municipalities as customers and actively participates in municipal procurements. It is becoming increasingly common for several Microsoft Dynamics-based solutions to be discussed as future alternatives driven through various partner and implementation networks. The market is still concentrated, but it is no longer as static as it was just a few years ago. What is required is someone who dares to take the step into a somewhat more unknown world.
The market for financial systems to Swedish municipalities is mature. The functionality of the established systems is good and the differences in procurements often concern less about basic functionality and more about issues such as user experience, integration capabilities, cloud strategy, AI support and future product development.
At the same time, the thresholds are high for new vendors. Municipalities like to see references from municipalities before choosing a new system, while vendors need references to win their first deals. Municipalities also set high functional demands mainly in areas such as reporting/follow-up and invoicing/accounts receivable where working methods have been developed within municipalities that new vendors can solve if given the opportunity.
The result is a market where the same actors reappear in procurement after procurement. This also means that innovation and competition risk developing more slowly than many municipalities actually demand now that technology is making great strides in a short time.
To be honest, it is not the vendors who determine whether the market changes. It is the municipalities.
Every established vendor was once a challenger. Unit4 entered the Swedish market about 30 years ago precisely because the Swedish state dared to invest in an unestablished player. Going from an interesting alternative to an established vendor requires relevant experience, municipal knowledge and one or more brave customers who are willing to lead the way.
For the market to continue developing, cooperation between vendors, implementation partners, consultants and municipalities is required. Above all, it will require that some municipality chooses to invest in something new. Not to take risks for the sake of it, but to contribute to a market with more alternatives, stronger competition and faster innovation.
It is only when someone leads that the rest can follow. If we want to see real change, it will require a municipality that is willing to drive the change. A municipality that has the competence, drive and strength to give the next municipality a better starting point.
The most interesting thing right now may not be which systems are sold, but how they are sold. Historically, many municipalities have purchased software, implementation, support, and further development from the same vendor. The new alternatives, however, often enter the market through partner-driven ecosystems where the system vendor is complemented by implementation partners who provide industry expertise. The model is common today in the private sector, but within the public sector we still see a few larger actors offering the whole package.
Xledger is an example where the partner level plays an important role in establishing itself in the public sector. Microsoft uses only partners and the number is large. Unit4 has also announced its strategy to become a more focused SaaS company where implementation and delivery are increasingly to be done by or together with a partner network.
For municipalities, this creates future opportunities where the municipality can combine a product together with a consulting partner with specific expertise or own configuration to optimise their own processes. However, this will mean higher demands on governance and division of responsibilities where the municipality needs to take a clear and more active role.
One question that increasingly arises in our procurements is exactly how contracts should be viewed when software is delivered by one party while implementation projects are delivered by another.
We therefore see that this dialogue is becoming increasingly central before the procurement to understand what type of contract management the municipality desires in a future situation. A cohesive delivery often provides a clearer distribution of responsibilities and simplicity. The municipality gets a clear counterparty to hold responsible for both functionality, project execution, and results. At the same time, such an arrangement can limit the market and innovation.
In a future with more partner deliveries, it becomes even more important to understand which partner suits us and why. The possibility in the future is that there are partners who have specialised in municipalities and municipal groups but also have complementary products to create a good overall delivery for the entire financial area. We are not there yet, but it is entirely possible that the market will develop in that direction. The future may require more contracts and more procurements to achieve the desired future situation.
We believe that the municipal market faces an interesting development in the coming years. The pace of development will need to increase to meet the demands for AI solutions, automation, data-driven management and simpler integrations. The desire exists both from vendors and municipalities but the question is when the real investments will be made. Increased competition in the market may lead to faster development among both existing and new players.
The question is not whether the market will change. The question is which municipality will drive the change.
