Is the U.S. solar industry growing or retreating? For such a fundamental question, the answer is surprisingly difficult to pin down. The tone from public companies is decidedly gloomy, with many large developers pulling back or re-assessing their growth plans. Yet for many local and regional developers, it seems that the sky is the limit. To understand this “best of times, worst of times” duality, we must dig into the deeper forces driving growth at these companies. In the opening talk for the 2017 S3 Solar Software Summit, MJ Shiao of GTM Research and Paul Grana of Folsom Labs diagnosed how software tools can hold the key for helping the solar industry maintain its healthy growth.
Shiao opened by pointing out that while hardware costs have fallen by over 40% in just the past year, the soft costs have proven to be much trickier to squeeze—to the point where “customer acquisition costs are often twice the cost of the solar module.” At the same time, smaller installers are proliferating and taking market share from larger installers. These new companies tend to be highly specialized, and often partner with multiple other firms to complete the sale and installation. This additional coordination can make it challenging to systematically track and reduce soft costs.
While Shiao’s comments were based on GTM Research’s interviews and analysis, Paul Grana of Folsom Labs reached similar conclusions from a different set of data. Folsom Labs ran a survey of more than 500 solar developers to gather a quantitative understanding of the forces driving the solar industry.
We found that while media coverage focused on the reduced growth rates of the publicly-traded solar developers, for everyone else the focus was still on growth: four of the top five priorities of solar developers were growth-related priorities.
Referrals make up the bedrock of the sales funnel, providing a unique combination of high quality and low cost. Yet these cannot be scaled up simply by increasing the budget. This underscores the fact that local installers can achieve moderate growth rates very cost-effectively, while national installers find growth to be much more expensive.
Raw growth leads to significant demand for software solutions as well. Companies with the fastest growth rates also indicated the strongest needs for software solutions to help them hit their growth targets. A company planning to double their headcount knows that the existing systems will break down at the larger size.
Yet Microsoft products continue to dominate, with most users using Word and Excel for their proposals and CRMs, respectively. The difficulty in displacing Microsoft as the main software provider can be chalked up to the uniqueness of each company’s business process. In the Folsom Labs survey, the developers had well over 100 unique workflow combinations. That makes it hard to develop a software program that fits all those various needs.
The market needs for good software solutions remain, and dozens of software startups are working on cracking the code, as we’ll hear from in future installments from the S3 Solar Software Summit recap.
Interested in seeing this data in greater detail? We will also be holding another survey this year, and everyone who participates will get the full results of the survey. Send an email to email@example.com and we will make sure you’re notified when the survey is available.