Hosting today, Brian Miller, the CFO of Tyler Technologies. I'm Matt VanVliet at the Applications Software Investor. I'll kick it off with a few questions, but would love to have some audience participation. If you have any questions, feel free to raise your hand, and we'll have Brian answer as well. I guess maybe we'll start off with kind of a high level of software is not much in favor these days, especially in the application layer with investors. I guess if we take a step back in terms of what you're actually hearing from your customers, how much demand are your customers asking for on AI? What's maybe the impediment to adopting more quickl y?
Maybe for those who are less familiar, Tyler primarily sells to the public sectors, government, your local governments, school systems, things of that nature. Maybe not the fastest adopters in some technology, but what is the high-changing discussion you're hearing with your cu stomers?
Yeah, you're right. We work exclusively in the public sector. That's really different than the private sector enterprise market in a lot of ways, but especially around how they want our technology, what priorities they do that, how they operate. Rarely are governments looking to be the first to deploy new technology. We've seen that with a very long transition to the cloud. They're reluctant to embrace the cloud for a long time. They're risk-averse. They have competitions and RFP programs and they don't want to implement new technology. They don't like change. They typically wait until they see things really proven elsewhere and see other governments use something successfully. It seems to be the same around AI.
We have a lot of conversations with our clients. It was a big topic last year at our user conference. I'm sure it will be at our user conference this year. In terms of new business like RFPs or new business conversations, again, it's really not a topic much there. They're curious about AI every two minutes or so. They're curious. They kinda wanna understand more, but they're not asking for it right now or, you know, saying it's gonna be new purchasing decisions. They're not allocating a lot of budget to AI, but it's not the kind of thing that they'll do themselves. Tyler is investing in AI around our products, looking for things that really solve practical real-world problems that our customers have.
A lot of this stems from staffing shortages. Their governments, for the most part, don't have enough workers, and often that's because their processes are really inefficient because they have old technology, paper-based, don't have online access for citizens, self-service, that sort of stuff. AI can help solve some of those problems. As far as why we think we have the right to win and the opportunity to bring AI to our customers around our solutions, it's really kind of three main things. One is the domain expertise. We have deep domain expertise in these very complex workflows and processes around things like public safety, criminal justice systems, courts and justice, to licensing, permitting, property taxes. Very specific but very complex operations. We built the system of record.
We have years or decades of experience around those really deep expertise in our people and in our products. The second is the trust and the relationships. We often have decades-long relationships with these customers and clients, and they trust us, and they look to us to bring them new technologies and show them how to use that. We're really around these systems that they help operate, actually critical essential functions of government. They typically, I think, don't trust new entrants. They are not taking a chance very often. That trust is important. The third thing is around data. That we have data from thousands of customers. We've got about 45,000 installations of our products across 15,000 different jurisdictions.
Millions of transactions are flowing through our systems that we have the data to be able to build models and operate in that data effectively. We have some products today that already have some of those capabilities. Those products are live, solving problems extremely widely as a product, a courts area that does document automation. That automates data entry, which is a pretty simple process, but solves a problem in courts. Yeah. Taking data out of a document that comes into the court system and creating a case file electronically or digitally rather than manually do that. We sold that to a large county in Florida in Q3. Just adding another revenue there.
This first county is $750,000 a year maintenance for their whole court system and pays $950,000 a year for the document automation. The AI add-on but saving $2 million a year in workforce application reviews on that product there. AI add-on that we are currently piloting broader licensing and permitting systems. We're the largest provider of those kinds of systems for governments, prosecutors, and things of that nature. Six months backlog to get a public work order because there aren't enough clerks to do the work. Using AI to automate that process can do something in a few minutes that might take clerks days to do.
Those kind of applications. We're even finding that customers are taking this, the funds for these out of labor budgets rather than IT budgets, because they do see it as a replacement for people that they otherwise are struggling to find. I guess the other area really is around agents and citizen engagement. We've deployed resident engagement portals now in six states. Again, building on the relationships we have with the state governments and the deep understanding that we have with how a state government works and the complexities there. Building resident engagement portals that can answer questions and help citizens find information. We just signed in Q4 our first county customer for resident engagement. We were on a pilot and it performs really well.
Those are kind of some of the things we're investing. Some things, as you said, some things are already out there, some that are in a pilot, that'll roll out more broadly this year. The timing for these things I think often can be probably slower than you would think, but consistent with what we've seen in the past in the public sector.
Very cool. Maybe, as you think about 2024, 2026, even into 2027, how are budgets for primary customers looking from a discretionary versus visibility from a budget perspective? Have you built that into your current forecast plan for Q4?
Yeah. Generally the budget backdrop for governments, we're about 70-75% local governments, so cities, counties, school districts, local agencies. 20-25% state and less than 5% federal. Generally at the state and local level, especially the local level, budgets are pretty solid. We've said for the last several quarters that the level of activity we're seeing in the market has been stable at elevated levels. Pretty solid number of RFPs. New sales have been up. The win processes are moving. Pipelines are strong. Win rates are consistently very strong. We're doing really well through those sectors where we have core products. You know, a lot of the demand, the core demand is driven by aging systems that have to be replaced.
When you have a system that's 20, 25, sometimes 30 or 40 years old, it is at end of life, and so replacing those is a very non-discretionary decision. That creates a stable, not explosive, but very stable level of business. On top of that, I think we're seeing some improvement in demand that's being driven by this increased focus on government efficiency. You know, obviously it was a big topic a year or so ago. Even before that, governments were starting to look. We always had a number of states that had efficiency commissions or something like that. Governments are really starting to really look at how they use technology differently and see technology as really the way they get more efficient. We've always had a need to do more with less.
They never have enough money or enough budget, even when times are great. They're starting at some level to say, "Yeah, I can use this system for another 10 years, but if I replace it now, I'll get these benefits." Actually, you know, looking at it almost from a ROI basis, that's not how they've typically looked at acquiring new technology. I think that's providing some improvement on level of activity. Yeah, our market's good. I think we're starting to see solid bookings growth this year. Our SaaS group overall growth of 20%. The SaaS group north of 20% growth year to date. Our SaaS lines growing at 20% plus for four years.
Even if that's something that we're kind of in the middle of, probably the middle innings now of this cloud migration, to rearchitect all your products on new infrastructure. We can talk about on the demand side what that's combined, moving to the cloud. You talked about the shortage of qualified staff making it much more difficult to do partner refreshes. What is that doing to the demand side even on your end? When it comes to like moving some bags or changing the economics of your product moving to the cloud as well as you transition?
Yeah. Yeah, we're in the, I guess, latter stages of a cloud transition that's gone on for several years actually. Not because we haven't been wanting it, but more because our market has moved slowly. I think going back to 2019, we moved from selling a hybrid cloud offering either on-prem or cloud to offering just cloud in a new business market. The migration of our decades worth of on-prem customers to the cloud has continued to move kind of gradually, but it's accelerated really in the last 4-5 years. If you look at our overall customer base today, nearly 90% of our new business is cloud. But our customer base overall in terms of total revenue is like 53% cloud and 47% still on-prem.
We previously hosted our cloud customers in proprietary data centers. AWS. We continue to migrate our current customers to the cloud. We said that by 2030, we expect that say 80% or 85% of our customer base that was on-prem in 2023 will have moved to the cloud. We're on track for that. Last quarter was the highest number and dollar value in flips or on-prem migrations that we've had to date. We said the peak of the flips still would be kind of in the 2027, 2028, 2029 timeframe because we had a spell where we were kind of tugging on the brakes over those three years.
Our on-prem base is still definitely weighted towards larger customers, some statewide court systems, large places like New York City's primary tech system, that move more slowly. It's really, I think, fortunately all of our customers now. It's not a question of are they going to move to the cloud. We're trying to convince them why they should. Our customers all understand the benefits that they get. It's good for Tyler, but it's good for them. It's a better end experience. We'll go ahead. As we move those customers on-premises, we're typically getting a like-for-like basis in 1.7-1.8x of revenue moving from these revenues to SaaS.
We're also seeing growing opportunities to upsell or cross-sell more products to them as they move to the cloud. We may be moving an entire court system to the cloud, but they don't have our jail system or our prosecutor system solutions. They have those on-prem. In some cases, they have payments processing as well. It gives us the chance to have discussions about other things that they can get from Tyler. From a margin standpoint, a significant part of the margin expansion we've talked about for 2030 is coming from the cloud transition. There's kind of three main drivers. One is first consolidation.
On-prem, we historically had a lot of products, but we had supported multiple versions of many products, which has been expensive from both a support standpoint and a development standpoint. Ultimately, we will have one version of each product in the cloud that everyone's on, and we're going to improve it at the same time. Like a true SaaS environment. As we move towards that, we've been sunsetting older versions, consolidating down to network. We've made a lot of progress with that, and most of our major products, almost all of our customers will be moving to those sorts of versions. That makes more customers transition over to the cloud. Product or cloud optimization of products.
We've been continually working on optimizing the architecture of our products to take advantage of the features of the cloud and specifically AWS. That lowers our hosting costs. There are margins there. We've been phasing a lot of those cloud-optimized products and continuing to make progress there. That'll help drive some margin expansion we expect through 2030. Partner costs just scale. The more capacity we use within AWS, the lower the unit cost is. Right now we still have some what we refer to as double costs associated with the transition from our data centers to AWS. Those will roll off after this year. We've talked about a 30% plus operating profit margin by 2030.
We're actually a bit ahead of trend right now. All that's coming from the cloud transition.
Very helpful. You talked about the ability to upsell in the cloud. Obviously, putting together multiple products is a little easier when it's all kind of on one similar architecture. I guess from the product development side, you have this Connected Communities idea out there. You made acquisitions and paid into acquisitions and some line-of-business solutions that sit on top of core systems. As you think about that, what has been the biggest challenge in getting, say, a core community to buy into the Tyler platform? Understanding that, you know, each of those departments, they're all independent. There's no CEO necessarily to base from the top or CEO. What’s sort of the challenge in the market? Then what benefits does it give you from a competitor standpoint with a product that's consistent across departments?
Yeah. It's a big opportunity for Tyler. We've talked about cross-sell and upsell is a very important growth pillar. We have by far the broadest product offering of anybody serving the public sector market. Most of our competitors, it is a really fragmented market, historically been served by a lot of point solutions, which were, you know, companies that were not narrowly focused from a product perspective, but also narrowly focused from a geographical perspective. So we have the biggest customer base, and we've got the broadest product offering. But we still have a relatively modest penetration with, you know, most local government and state government software. We've probably got, you know, maybe 15%-20% of the market share, some products or certain pieces of that.
That just shows you how fragmented it still is. Our average customer has two or three products from us. If you think of that suite of products, if you had a county that might need our court system and our ERP system, Odyssey, our public safety system, our licensing and permitting system, our property tax system. The average customer could have 8-10 products from us, and there's still a really significant opportunity just within the customer base. We've been really buzzed about the Connected Communities, the NIC acquisition. Our systems integrate well. We're transferring our property taxes and we're processing our payments for us to begin full service on telephone.
There are, I guess the biggest limiting factor is just the way that government-wide software is that we historically kind of wait until that next system hits the end of life, and we think we should have a really good read on when we have a significant advantage with that next system. Some of these are very closely integrated like property taxes and courts. I mean, that's sort of the whole process. You think about it from a 911 call to a police officer being dispatched. There's got to be a dispatch system. There's a records management system. They take them to jail, so there's a jail system. Prosecutor files charges, there's a prosecutor system, there's the trials, there's a case management system, there's a jury system, a probation system.
If you think about that whole process, a lot of places that might be eight different systems from eight different vendors. We go or homegrown. Some of them are integrated, some of them aren't. They start off with data entry all the way. We're the only company that can provide all of those systems. They rarely would buy all of those at once, but as each of those needs to be replaced, we have a big advantage there because we have a fully integrated system. You know, the data already flows to those, the interfaces the same. It's a fully integrated suite of products.
Others, like many property taxes and courts aren't fully integrated, but we have common foundational elements like security and sign on that works through those payment engines and case courts and things that create more value for having more of those systems from Tyler. You know, we do think we'll be cloud-based. That's a cloud transition that gives some great results as we grow our sales. I guess one other thing that we're currently investing in significantly and has really been continuing to improve the client experience and provide a more uniform client experience across different products.
Because Tyler is the product of a lot of acquisitions, and as we've evolved and as we get more customers that have multiple products from us, it creates some seams in the client relationships that they may have $300 they call for support for different products, and have different customer service teams with different products that have different processes and different back end systems. We have, you know, we created a new position about a year ago, Chief Client Officer, who is really tasked with creating that unified experience through standardizing systems, standardizing processes, making it easier for someone to do business with Tyler as they add more products.
That's a very active process right now that I think we've made a lot of progress with, and I think our customers are seeing that.
Historically, these acquisitions into adjacencies or verticals, a lot of times those were still sold by a kind of dedicated product team. You know, over the last couple of years, we're really playing on this cross-sell approach to make it more possible to train better with the sales rep as well as maybe help read that opp and sort of escape the client relationship and create networks there to sell more products. How does that answer kind of grow both the top and the bottom line?
Yeah, I think as we have more products, the ability to cross-sell more products, we had to rethink kind of how we go to market and how we do that. We do have some teams that are very much product focused and they're experts in that and the relationships in that, but how we tie those together is gonna be, you know, I think we're going to change compensation programs so that we make sure everybody's hitting the notes above and saying, "We've got more." We've granted kind of different market strategies about, for example, Larry, you know, as one of those newer products. We need a utility billing system or we're seeing a need for a billing system, or we have an existing customer that uses that and we want to add payments or that sort of thing.
That whole process is really much enhanced. We have a utility billing software sales team. We also have as part of our public benefit group, but we also have a team that's focused on payments. All those work together. Kind of takes the lead on that, does the implementation, and all of that is then standardized and sort of optimizes the time to make sure we're taking advantage of those opportunities. In some areas like state governments where we have these very deep relationships with community states from the NIC acquisition, that gave us more of these statewide enterprise contracts where we provide a wide range of solutions, whether a transaction-based product system by convenience fees. There's going to be budget, there's going to be appropriate funds.
We have these deep relationships with CIOs and state governments. We have many Tyler products that we can sell into state governments through those relationships, that's sort of bridging that gap and making sure we're taking advantage of them. There was a need there. Last year we created a new state-focused sales organization with sales leaders for each state that bridge all these Tyler products and these deep relationships we already have in the state level. There's one sort of point of contact and one way to manage that. We're seeing success with that. You know. Yeah, how our business is sort of organized breaks up by revenue.
About somewhere around 30% is what public admin, so that would be ERP systems, accounting, human resources, payroll. There's a wide range of applications within there, things like parks and recreation, and even down to cemetery management. They're very specific things for government that really differentiates ourselves from horizontal ERP player like Workday, which doesn't have a utility billing system or a parks and recreation system, those sorts of things. We've got property tax where we have, you know, property tax systems and mass appraisal systems, billing and collection systems. Those are somewhere around 10% of our business. Public safety around the same level. Public safety, we do, there's two major parts to it. Case management, like when you want your records management. There's some other ancillary applications there.
Courts and justice is between 10% and 15% of our business. That's by far our most dominant product. We have about a 55% market share of courts in the U.S. that use our case management system. We also have jails, prosecutor, probation, and jury, a multitude of suite products there. Licensing, permitting, and community development is less than 5%. In schools, in addition to ERP for schools, we have school bus transportation solutions. We're the leader in that space. We have an end-to-end platform, what we call platform solutions, but it's basically our payment solutions and our state enterprise as a product. It's around 3rd of our business.
Any other questions on there?
Yes. Going back to the point you talked about security, obviously building something over the weekend with cloud computing and, you know, getting a product out there is maybe more capable, but what people, I think, sort of gloss over is the governance, the cybersecurity requirements and all that stuff. How important is that to differentiating your product? Because those security incidents are extremely important whether it's a cloud migration or a net new product.
Certainly. You have both governments, just like private sector enterprises face a lot of cybersecurity concerns. I think in general, governments, and especially local governments, are probably often less sophisticated, and less comfortable with their ability to be protected, and especially where they're using technology that may be decades old, you know, mainframe systems that may have a lot of vulnerabilities. We've seen an awful lot of ransomware attacks and cybersecurity incidents, in our customer base in the government space. That is a major factor in both customers considering replacing systems and maybe replacing systems even if they might have some life left in them. Another concern they have, as well as customers looking to the cloud.
We often see customers who are planning to move to the cloud, in the very near future and are ransomware attacked and move immediately once we're in their recovery. We also then see typically their neighbors and peers and counties around them see what happens, and that's very interesting. For example, up here we have Fulton County, Georgia, which is one of our big customers of ours. Their large court case court system, our, you know, property tax system, our largest jail customer, some of our systems were targeted during quite a ransomware attack that could have brought down all of their, you know, critical systems.
They were able to actually bring them up in the cloud in a matter of days on the sort of a light version of it because they were planning to move to the cloud in the near future. Similarly, all of those systems that they were using, which in the jail system, I said we can do everything we want there, that's a problem. We've got a public safety system. We have these, you know, mission-critical systems. That is a big driver of customers having a greater interest in moving to the cloud. That coupled with the other challenges for just governments, especially in IT, they have a lot of aging workforces. There's this gray tsunami.
They call it people that are just retiring, and they're in the middle of it facing more loss of employees during COVID. A lot of them, of course, that they're now getting back. Because that's in IT, they struggle with hiring, replacing people who retire. They have a lot of, you know, a lot of gaps in harder skills. They have to compete for degrees. A lot of those skilled people are just generally attracted to work in the private sector. Even if they want to keep running these systems, you know, on a mainframe or operating system in-house, they don't have the skills to keep doing that. Our attention needs to be refactoring customers that are replacing aging systems, moving them to the cloud at the same time.
All right. We're out of time. Thank you everyone for joining us. Brian, thank you for joining us and coming up to Cambridge for this conference. Thank you.
Thank you.