Venture capitalist Marc Andreessen famously proclaimed in 2011 that software would eat the world. Since then, we have seen the rise of the platform economy, the gig economy, and the sharing economy, as well as multiple billion-dollar-plus valuations for software-based companies and business models.
According to a 2014 Goldman Sachs study, global software-as-a-service revenues are forecasted to reach $106 billion in 2016 and will only continue to grow.
Bernard Golden, vice president of strategy for ActiveState Software, wrote late last year that “every company in every industry has to figure out what it means to be a software company, whether it wants to use technology to improve its position or needs to use technology to protect it.”
I’ve pointed out how the top solar installers by market share have used software to maintain a competitive advantage and lower soft costs. Recently, I moderated a panel called “Tools and Techniques to Get and Stay Competitive in Solar Installation” during CalSEIA’s contractor day program at Intersolar. In a room filled with about 60 solar installers, over 50 percent polled admitted to using five or more different software tools to develop proposals and manage projects. This sample crowd indicated that it was driving them crazy, too.
The recent acquisitions and IPOs in the top 10 market share for residential solar continue to underscore the importance of IP -- hardware and software -- that streamlines the delivery of residential solar at volume.
Solar installers as equipment and software systems integrators
Information technology is a crucial and growing part of enterprise strategy across many industries, and residential solar is no different. IT is even more critical in this space, where market leaders are already boasting sale-to-installation complete timelines as low or lower than 30 days.
Solar is a more recent growth industry. It’s not like the current wave of high-tech startups founded with state-of-the-art tools and systems. As I’ve said before, the industry is a strange amalgamation of construction, finance, and high tech. Market leaders understand that velocity is key to customer satisfaction, as delays can compound and uncertainty puts pressure on operations teams to communicate more with customers and other stakeholders, using up precious human resources and causing ripple effects that can impact the progress of other projects.
Ideal software systems in the competitive residential solar marketplace must promote end-to-end customer, project, and company pipeline visibility. But not only do IT systems have to focus inward and enable efficiency, they also play an increasingly critical role in customer-facing tools as customer acquisition costs continue to remain troublesomely high for many installers.
IT systems are continually the key to unlocking scalability and project velocity among industry leaders. IT systems are also helping installers differentiate by using platforms and tools to enable the customer experience.
While many software tools exist to serve the construction industry, these tools are not directly applicable to the high-volume, high-velocity needs of small-scale residential solar. Those tools manage large, complex and time-intensive projects. Therefore, many of the IT solutions needed in residential solar have to be custom-developed, either in-house or by outside firms that wish to offer these services and solutions to the industry. Market leaders have a clear head start on this, but by no means do they have perfect tools and process.
Instead, relying on multiple cloud applications means that solar companies need solid network infrastructure and access, a robust information security framework, and an IT organization that behaves as a systems integrator. The ultimate goal in this landscape is the seamless integration of these many niche applications or an end-to-end platform that manages it all.
Solar companies are being expected to play not only systems integrator, but also scalability architect and predictor of future IT trends in the hopes that these tools can be swapped out for more mature second- and third-generation apps down the line. This is a difficult ask for the mid-market and especially long-tail installers in the industry, which operate with much leaner staffing models and profit margins.
Building software requires a much more capital-intensive business model than the solar industry can generally support, except at the scale at which a handful of national players operate. It’s also a completely different business than the design and installation of residential solar energy systems, which is what most installers got into the business to focus on -- not building and integrating IT systems.
The state of purpose-built solar software
Several software developers are offering end-to-end solar business platforms in different stages of maturity. For the purposes of this piece, let’s define a solar business platform as a cloud-based software tool that not only automates core sales activities, like proposal generation and system design, but also tracks and streamlines some combination of pre- and post-sales activities, such as lead generation and management, business administration or project management.
Most end-to-end platforms are focused first and foremost on quick proposal generation, automating a process that normally involved visits to multiple websites and the use of several spreadsheets. Currently, post-sale customer experience management and project logistics features are still very underdeveloped across most of these tools.
Recently, many of these platforms have announced integrations and interoperability with other niche tools. While it’s good news for the mid-market and smaller installers that don’t want to play systems integrator for anything other than solar equipment, we still have a long way to go.
In order to get the most out of these tools, installers must already understand the best practices and most streamlined and simple methods necessary to propose, sell, design, and manage a project through to completion. Installers must also be savvy enough to configure the software system to support a streamlined delivery process and customer experience.
This puts immense pressure on the software developers to scale up implementation and customer success teams like their counterparts in the wider development space. Without these roles, the systems integrator and implementation will continue to fall on the shoulders of installers that are already burdened with enough complicated responsibilities.
As an industry, we are still in the nascent stages of developing this layer of support services. We clearly need tools to support our businesses in order to compete effectively. But we need these tools to live in an ecosystem of process best practices.
That means thinking through what the most streamlined and effective way to deliver a solar project is. That means thinking way outside the bounds of incremental improvements and automations on the status quo. It means really challenging the whole approach and asking “why” -- from the way we position our companies and services, to the information we collect during the site visit, to the process we use to deliver our projects.
Pamela Cargill is the principal of Chaolysti, which specializes in scalability strategies that lower soft costs in the residential solar sector through operational effectiveness programs that streamline people, processes and tools.