I’ve spent several decades around facilities, building technology, energy management and the companies that sell into this market. During that time, the technology has changed dramatically.
The basic customer problem hasn’t changed nearly as much.
Owners and operators still want buildings that cost less to operate, equipment that lasts longer, fewer emergency calls, lower energy consumption and fewer headaches for the people responsible for keeping everything running.
Yet somewhere along the way, our industry became very good at selling them software.
I understand why. SaaS created an attractive business model. Recurring revenue, strong margins, predictable contracts and the ability to add customers without adding people at the same rate. Investors understood it. Technology companies embraced it.
Customers went along because the software promised better information and better decisions.
But I think we’re approaching the limits of that proposition.
If you run a building technology company, here’s a question worth considering:
If your customer stopped logging into your software tomorrow, would they still receive the value they’re paying you for?
If the answer is no, you may have more exposure than you think.
I’ve watched building technology move through several generations. We connected equipment that wasn’t connected. Then we collected the data. Then we built dashboards to display it. Analytics told us what was wrong. Now we’re putting AI on top of those systems to help determine what the data means.
All useful advances.
But somebody still has to do something.
A fault detection system can tell a facility manager that a rooftop unit isn’t operating correctly. An energy platform can identify abnormal consumption. A CMMS can prioritize a work order. An AI engine can probably tell us why the problem is occurring.
None of those things, by themselves, fix the unit.
I’ve been around enough facility organizations to know what happens next. The information enters an operating environment where people are already busy. Someone determines whether the problem is important. Someone authorizes action. Maybe a technician gets dispatched. Maybe a contractor becomes involved. Maybe the issue gets deferred because there are 25 other priorities that day.
The technology company can correctly say its system worked.
The customer can correctly say the problem still exists.
That gap is where I believe the next generation of building technology companies will find opportunity.
Call it Outcome-as-a-Service, managed outcomes or something else. The name isn’t particularly important. The commercial idea is.
Instead of selling customers another tool that helps them produce a result, providers will increasingly sell more of the result itself.
Consider two companies competing for the same multi-site customer.
One tells a retailer with 1,000 locations, “Our platform identifies opportunities to reduce HVAC energy consumption.”
The other says, “We’ll reduce your HVAC energy consumption, maintain the performance and show you what we saved.”
Those are very different conversations.
I’ve sat through enough technology presentations over the years to know which one gets my attention.
It also changes who should be sitting across the table.
Features, integrations and dashboards tend to produce technology conversations. Operating costs, asset life, labor productivity, energy spend and return on invested capital produce business conversations.
That matters if you’re trying to move your company out of a facilities technology budget and into a larger executive discussion.
There is a catch, and I think some technology companies are going to underestimate it.
Selling outcomes is much harder than selling software.
With SaaS, you can provide the tool and allow the customer to carry much of the execution risk. When you begin selling outcomes, some of that risk moves back toward you.
Now you need to know whether the recommendation actually worked.
You need credible baselines and reliable data. You need to understand the equipment, not merely the data coming from it. You need to understand field operations and what happens after an alert is generated.
And you need to be very careful about promising results influenced by things you don’t control.
That’s why I wouldn’t advise a CEO to simply put “Outcome-as-a-Service” on the website and create a new pricing model. That’s marketing, not strategy.
The more interesting question is how much responsibility you’re willing and able to assume for the economic result your technology promises.
Maybe that’s shared savings. Maybe it’s a performance guarantee. Maybe it’s software combined with managed services. Maybe part of the fee is tied to uptime, avoided service calls, energy reduction or another measurable result.
I don’t believe there will be one model.
I do believe there will be a shift.
AI makes the shift more likely because it can begin eliminating something our industry has quietly depended upon for years: people sitting between information and action.
I’m far less interested in AI producing a better dashboard than I am in AI making the dashboard unnecessary.
If a system can identify an abnormal condition, determine whether it matters, recommend or initiate the appropriate response, verify that the correction worked and calculate the economic impact, how much time should a facility manager spend looking at the software?
Very little, ideally.
That should make some SaaS companies uncomfortable.
We’ve spent years measuring engagement. Logins. Users. Time in the application. Feature adoption.
What if the best measure of a building technology product eventually becomes how little the customer needs to interact with it?
I don’t think that’s far-fetched. It’s where automation should ultimately take us.
And there is another issue CEOs and investors should consider.
Building technology is crowded. There are an extraordinary number of companies selling platforms, analytics, optimization, intelligence and now AI. Many are competing for the same customers and increasingly telling variations of the same story.
Eventually, another dashboard isn’t differentiation.
Taking responsibility might be.
That doesn’t mean SaaS disappears. It won’t. Software remains fundamental to all of this.
But I think the companies with the strongest position will increasingly combine software, intelligence, operational expertise and some form of execution. Some will build those capabilities. Others will partner. We’ll likely see acquisitions in both directions as software companies need operating capabilities and service organizations need better technology.
The category lines will get messy.
Customers won’t care.
They’ll care about whether the problem went away.
If I were running a building technology company today, I’d spend less time debating what AI features belong on next year’s product roadmap and more time asking three questions:
What economic outcome does our customer really hire us to produce?
How much of that outcome can we credibly take responsibility for?
What would our company have to become to do that?
Those questions can lead somewhere uncomfortable. They can challenge your pricing model, margins, product strategy, partnerships, go-to-market approach and even how you define the company.
These aren’t decisions I would leave solely to the product team.
They affect what you sell, how you price it, who you sell it to, the capabilities you need, the partners you choose and ultimately what kind of company you’re building.
It’s also why founders and CEOs contact Efficio Advisors.
I’ve spent decades around both the technology and the operating environments expected to produce the results. That perspective becomes particularly important when a company is trying to determine whether an interesting technology can become a scalable, commercially successful business.
Sometimes the answer is positioning. Sometimes it’s product-market fit, the commercial model, sales strategy or a partnership that fills a capability the company shouldn’t build itself.
And sometimes the right advice is not to pursue an idea at all.
The objective isn’t to create more strategy. It’s to make better decisions before spending the time and capital required to discover the answer the hard way.
Because the greatest threat to building SaaS isn’t another SaaS company with better features.
It’s a competitor willing to tell the customer:
You don’t need another tool to manage this problem. We’ll take care of the problem.
That’s a much harder proposition to compete against.