By Pamela Cargill, Principal at Chaolysti
An update to last year’s software usage article “Will Software Eat the Solar Industry?”
The primary functionality of many solar-specific software offerings has been to automate routine tasks required to develop customer proposals. This was coupled with innovative financial service offerings that drove the rapid rise in third-party ownership and expansion of nearly-national solar company operations. SolarCity, Vivint Solar, SunRun and Sungevity all drove massive growth based on this turn in the market.
However, that growth was not profitable. The aforementioned companies with near-national reach have struggled to reach cash-flow positive operations.
Combined forces of continued module cost decreases and changes to the capital markets have made direct ownership more compelling again. However, the operations of a near-national company with a complex financial services model differ significantly from the small, local contractor. So why should the philosophy that built software for one apply in both cases?
The Need Landscape Amongst Solar Companies is Diverse
According to research conducted by the Solar Foundation, the solar industry is populated by several thousand small installers—companies who employ 10 people or fewer. Most small contractors working in this industry, given less complex operations, do not need particularly advanced software solutions.
However, many software vendors have created products assuming they need to build in automations and features that cater to an ever-lowering common denominator of knowledge and skill of employees in order to spur growth and drive down costs—essentially the mindset that created the processes and tools in third-party-owned residential solar. This assumption creates lower barriers of entry to a lower-paid workforce but then assumes the “push to publish” salesforce will achieve the same level of trusted acceptance with the prospective consumer that a consultative, trust-building and listening-based sales process would. It doesn’t take into consideration the context of the small installer and that relationship with prospective customers.
Instead, a much simpler “minimum viable toolset” of estimating, CRM, business finance and analytics tools that can interface with each other could fit the bill in many cases.
With middle-market and regional contractors, operations are becoming complex enough that they should consider some type of simple enterprise resource planning (ERP) system in conjunction with the aforementioned minimum viable toolset to help manage more complex financial controls, including planning out purchase orders and cash flows.
But are the current solar-specific offerings fitting this need?
How Did We Get Here? A Brief History of Solar Software
Financial service compliance and booming solar company operations collided in a complex need set in 2008. The realities of exception-filled construction planning, ever-changing regulatory and incentive environments, and compliance in financial operations necessitated systems to track projects, customers and create additional transparency for investors and internal management.
Furthermore, in third-party ownership, developing trust and confidence with the consumer was about demonstrating it was a wise investment. Graphs, charts and cash flow analysis dominated. Proposals ballooned from 2 to 4 pages to upwards of 20.
Many second-wave solar software entrepreneurs (post 2011) spun off from these near-national solar companies (or related financier channels) to start their own software products based on experiences they had. Many also started with the assumption that the basics were covered and installers understood business finance controls, project level profitability analysis, etc., and instead skipped straight to working on software that focused on higher order needs like financial modeling, remote shade analysis and design optimization.
Unfortunately, the biggest oversight in most solar-specific software is that vendors are developing products based on installer feedback and not considering the end buyer—the consumer (or facility manager)—enough by looking in to what consumers will respond to or what would appeal to different or new consumer demographics. Instead, the assumptions of what worked to drive growth in third party ownership is assumed to work and drive growth in this new round of direct ownership.
Solar proposal software especially has two user classes—the contractor and the end customer. It needs to work correctly for both, solving the primary need for both parties in the transaction environment. For the contractor, to help them put together a quote quickly, easily and accurately. For the consumer, to promote confidence in the process, contractor, price, product and assuage whatever concerns they have brought to the process of buying solar. This is no easy task! Understanding what motivates consumers is hard work.
Iterations of solar software since OnGrid have essentially created more automated, cloud-based versions of investment-forecast and cash-flow-analysis set of graphs and charts, ignoring whether those items were driving adoption or whether the contractors’ demonstration of thoroughness or something completely different was driving customer adoption. This is partially why price-transparency-based marketplace services like PickMySolar and EnergySage are growing so quickly.
For the most part, the solar industry doesn’t understand what compels consumers to buy. Most companies are not organized around listening and learning more about their consumers, but more about being order takers. In this time of industry transition, order takers will not survive.
What Kind of Software Do Solar Contractors Need?
Solar contractors need software that fits into a process operated by trained, empowered and correctly incentivized employees. There is no substitution for process design and investing in training. No software available absolves the business owner from strategically planning their operations and creating the workplace dynamics and culture that encourage success, transparency and working toward a common goal.
Traditionally, the solar industry has been more focused on the technology fix. This industry was born from a love of technology and has been technology obsessed since the get-go. It’s just more fun to fuss over ways to optimize solar component integration and evaluate integrated racking systems than deal with HR issues or process problems. Engineering problems have logical, unemotional solutions; people and process problems generally do not.
Software tools do not alone solve people and process problems. Software tools must be integrated into a more complete solution for the contractor that involves process re-design, training and an implementation plan. Without these investments, the software implementation is much more likely to fail.
Suggestions Based on Lessons Learned
Software developers:
- Do you understand who the end user(s) actually is/are and how they use, interpret and integrate your product?
- Do you have a customer success or implementation strategy that takes in to account the realities of your customer base?
- Does your product/solution consider the shifting market—financial services, consumer preferences, rate reforms? Is it flexible enough to?
Contractors:
- Are you skipping to a software solution first without solving people and process problems? Go back to square one before adopting software or you will waste a lot of time and money.
- Are you targeting the right software solution? Without having a requirements list (what you need software to do, by what stakeholder and to what end result) you are more likely to choose the wrong software solution, waste time and money and be unhappy with the results.
- Do you have an implementation plan? People need to be retrained, processes need to change and you’ll need to carefully watch the transition.
Software can be a powerful part of an overall business operations strategy, but it must be integrated into an overall strategic planning framework that understands customer desire and how to meet it and how the holistic integration of people, process and tools work together to achieve customer delight.
Gregory L Smith says
I think you nailed it. Many customer installers want the highest efficiency possible from the US market place, and because over very inexpensive and sometimes cheaply designed modules, you get inferior long term satisfaction, often resulting in warranty issues long after the company that manufactured them died or was swallowed up by competition. The result is the installing company has greater exposure to correcting those shortfalls. US manufacturers are getting better. As a result they stay in business and find good returns for using higher quality components and reliable third party Remainder of system manufacturers of wire systems, boxes and inverters. Why shouldn’t contractors offer easy to install higher end modules if it support their state or local industry, works in their favor for long term quality, and makes the utility see them as an asset instead of a pain in the tailend? This all fits into the authors opinion that end users should help determine the software a company eventually adopts.