Temenos
Niche lock-in through switching costs: $1B+ revenue from mid-sized banks in growth markets.
Temenos built a $1 billion+ banking software business by occupying a niche giants ignored: mid-sized banks in emerging markets. Founded 1993 in Geneva, the company serves 950+ core banking clients in 150+ countries—not JPMorgan or HSBC, but regional players in Indonesia, Brazil, Nigeria, Eastern Europe. This geographic diversification provides growth (2025 subscription revenue +24% year-over-year) that saturated Western markets can't match. Annual Recurring Revenue reached $804 million in 2024, representing 89% of product revenue. The business model exploits path dependence: once a bank runs on your core system (accounts, transactions, customer data, regulatory reporting), migration means operational risk that boards won't accept. Switching costs create lock-in that drives 20-25% operating margins. Temenos's shift to cloud-native SaaS accelerated during the pandemic, as mid-sized banks needed digital transformation without enterprise budgets. The company's market position (5% global market share but dominant in growth markets) proves a biological insight: specialists thriving in underserved niches often outperform generalists pursuing crowded enterprise segments. By 2028, Temenos targets ARR exceeding $1.3 billion, EBIT around $500 million, and free cash flow of $420 million—representing 13% ARR CAGR from 2024. The lesson: in enterprise software, owning the system of record for mid-sized customers in growth markets beats pursuing logo clients in mature economies. Temenos survives because it built irreplaceable mutualistic relationships with banks that can't afford custom solutions but can't operate without reliable core systems.