Now is the time to invest in field service software

By David F. Giannetto, CEO of WorkWave

When it comes to technology investment opportunities, service-based technology is not always a priority for investors, but once they understand the profitability, growth and stability of this industry, you can reconsider this decision. Field service technology is essential to the growth and operation of industries that are essential to keeping homes and commercial facilities well maintained, safe and operational – industries such as pest control, lawn maintenance, cleaning, security, HVAC and more. These companies rely heavily on their technology partners to not only run their business, but also to drive their growth and profitability, and this relationship is only going to get stronger.

The success of the technology is based on the industries it serves

Investor interest in field service technology has increased over the past few years, primarily because COVID has made it clear that this technology supports critical industries that are “recession-resistant.” At the same time, these industries are going through a period of consolidation, where one service provider buys another to grow inorganically. These large companies need to operate at scale, fueling the need for software solutions and giving field service technology companies efficient access to greater revenue. This momentum, combined with a large and growing target market, makes them ripe targets for the investment community.

In service verticals, inorganic growth is traditionally the result of one service provider acquiring another. But now, for the first time, private equity is getting in the game and aggressively acquiring service providers to build even bigger companies within their portfolios. As a result, service businesses that were once seen as primarily small local businesses are now professionalized global businesses with access to greater capital – capital that can be used to increase investment in technology. For example, world leader in pest control Anticimex belongs to the Swedish company EQT, CenterOak Partners recently acquired Palmetto exterminatorsand ExperiGreen is now part of Huron Capital Group. And it’s not just private equity firms that are looking to the service sector, but big banks as well. Morgan Stanley recently invested in Fairway Lawns, a provider of residential lawn care services. These groups are focused on building significant scale and growing their platform and business portfolio to over $100 million in annual revenue.

This renewed focus on the field service verticals has drawn attention to a group of industries that have gone unnoticed in the past. Investors are most interested in field service companies because they:

  • are essential – Whether residential or commercial, small or large, service businesses like pest control, lawn care, landscaping, HVAC or cleaning are essential and these services cannot simply be interrupted to reduce costs.
  • Are rooted in recurring revenue – recurring revenue creates predictability and consistent, guaranteed growth – significantly more attractive than revenue generated from one-time purchases or offers.
  • Have the ability to grow beyond their core services – most service companies, whatever their vertical, share the same business processes. This creates opportunities for horizontal growth when professional management teams take over, which these industries have yet to take full advantage of.

Software is critical to the growth and success of field service businesses

Field service software solutions are central to the growth of all field service verticals. According IBISWorld, the field service management software industry will reach more than $3.0 billion by 2026. And this growth will be largely contained within the existing landscape of solution providers, as the unique needs of these industries create barriers to entry for future new field services. software providers; something that existing field service software owners understand and use their investment power to both protect and enhance. These unique needs of field service providers include:

  • In-depth CRM functionality to manage complex customer information and interactions
  • Field oriented highly mobile solutions integrated back office to create greater efficiency
  • Complex routing and scheduling to balance optimal routing density with customer requirements, often able to increase efficiency by more than 30%
  • Customer communication capabilities that deliver the modern customer experience customers demand
  • The ability to generate recurring revenue models that are the new primary growth engine for service providers – often exceeding 90% of their revenue
  • The security and capabilities to manage and transfer customer money through the banking system, all in one easy-to-use solution

However, what really makes field service technology unique are the custom features and functionality that are unique to these industries, such as custom forms, proof of service, state and local regulatory compliance reporting when from the use of specific chemicals, marketing features that combine physical and large-scale digital marketing for local geographies and mobile-oriented customer portals, among others. These features seem common to any working solution, but actually require deep industry knowledge to create.

As service providers grow in size and professionalize, the demand for using software to achieve even higher levels of efficiency and growth creates the need for higher level functionality – deeper operational reporting , business intelligence, seamless integration via robust APIs and reliable performance. At scale. This next-level functionality provides a greater ability to capture these large organizations as customers, and the greater revenue they bring, but also requires greater resources to create these more complex solutions – opening the door for investors to to intervene.

This dynamic – where businesses are growing rapidly, often fueled by inorganic growth – creates the need for more complex and scalable solutions. This requires larger investments in order to generate and capture these growing revenues and is often the most critical feature that fuels the sudden and rapid injection of capital by investors. The field service software industry was already in the early stages of this momentum at the start of 2020. The pandemic, which has crippled many industries, has made it clear that the service industries these solutions serve are among the least risky. The combination has further fueled investor activity within these industries and the software industries that support them.

The result is a perfect storm of opportunity from the onset of a recession that will again show that service industries are among the most stable and reliable industries in our economy. And what investor isn’t looking for that safe haven right now?

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Veronica J. Snell