Zach HolmA dive into the shift in offerings from all-in-one platforms to specialized point solutions.
Specialized tools outpace the 'All-In-One' offerings on the market
Having worked in SaaS aligned with the residential HVAC industry for almost 8 years, I've been provided an interesting view into how software has started to entwine itself into a very mechanical, hands-on industry.
Specifically, I've watched the big players and enterprise software providers bend to the will of smaller outfits focused on building single-point solutions that solve problems effectively and immediately.
tl;dr: Point solutions in HVAC SaaS are born as a way to circumvent industry all-in-one solution leaders, leverage better technologies, and pull in venture capital money that's looking for quick wins.
Who Opened the Gates for Point Solutions?
While we worked on all-in-one solutions for our users in the HVAC industry, what we didn't expect is the boom of entrants offering single-point solutions. Who would? Seems more cumbersome than signing up for a one-stop shop.
But a trend emerged. We started seeing more requests for being an integrator than a provider. We also shifted our mindset from a 'we must build these things' to a 'let's leverage the work of others'.
There are a few topics we think shifted the market and eroded barriers to entry.
1. On-Prem to Cloud Solutions
Back in 2018, we noticed a lot of our competition stemmed from on-premise (where the user is hosting the software on their machines—think old school Microsoft Office disks / installers) solutions. These solutions required higher up-front costs and longer times to implement.
Once cloud solutions became the norm, you saw more offerings hit the market given the reduced overhead in creating a solution and deploying it to a user. It also became easier for a company to further create updates and enhancements to their offering, meaning they can grow with their users and address concerns / requests on the fly.
Eventually on-prem offerings transitioned to cloud-based services, or were bought out by other providers in the space (mainly for their customer lists), or left altogether.
The Gap Begins
As costs began to drop when it came to building and deploying solutions across the HVAC space, it opened the floor for smaller outfits to begin building specific solutions against individual use cases.
While the early entrants to the all-in-one space did a great job at evangelizing why software was important in this space, it also highlighted gaps where a startup could come in and offer specialized solutions that all-in-one would be slow to build themselves (pricebook managers, sales tools, marketing platforms, etc).
2. The Smartphone Era and 4G
Around 2009 and 2010, major US networks also began upgrading to 4G networks which became the standard offering by 2013. Not only were we seeing software deployment and offerings receive a major overhaul, but the rise of 4G led to a changing of how companies operated in the field and in front of homeowners.
No longer did businesses need to rely on manual processes of paper passing between homeowner to technician to the office, but mobile-first platforms sprouted and enabled communication between what was happening in the field and operations across the company, including invoicing and mobile time tracking, without a complete overhaul of a contractor's tech stack.
3. Venture Capital Backs Wedges
Investors took notice in these innovations. VC firms recognize that point solutions have faster paths from development to adoption, culminating in quicker exit opportunities.
Instead of taking on the giants in the industry, these lighter solutions carve their way through the market and provide a more direct approach to investor payoff.
Flattening of Broader Solutions
On the other side of this story, all-in-one platforms are experiencing little additional competition in regards to full-scope software.
The big players in the space by now have acquired large swathes of the HVAC market and hold their positioning for the most part through brand loyalty and the high amount of overhead required to transition from one software to another (the thought of this alone staves off quite a bit of attrition within these companies).
This is coupled with the idea that the juice isn't worth the squeeze for anyone thinking about developing a full Field Service Management service.
Looking Forward
It's doubtful the full FSM tools will go anywhere anytime soon. HVAC contractors are hyper-reliant on this software to run their business and store their data.
My prediction is that you'll see two things happen in this market as point solutions continue to innovate and exit at a faster clip than their big brothers:
- Full FSMs will be pressured now more than ever to offer a marketplace solution where integration and data passing is key. Enabling their users to leverage other tools alongside their fuller, all-in-one platform
- A middleware approach will emerge, handling the headache of managing multiple solutions across a full stack of SaaS.
Consumers will require greater integration and communication between their platforms as they find solutions that work best for them- this will open a market of tech (and yes, AI).
While point solutions continue to improve processes, and FSMs hold market share, middleware will be deployed as the glue in the future HVAC contractors’ curated suite of solutions.
Author's Note
I kept this study within the bounds of the HVAC industry, but it's worth noting that plenty of other verticals (mechanical or otherwise) are experiencing a very similar trend.
The pace of innovation is faster than ever and creating solutions overnight around concerns / features incumbents previously ignored.
If you've seen something similar in your line of work, shoot me a note- I'd love to hear about it