Understanding Field Service Management (FSM) Software and Its Growing Adoption

Defining Field Service Management (FSM) Software

Field Service Management (FSM) Software is a technological tool designed to enhance the management of operations carried out by field agent workers. It enables organisations to monitor activities in the field, coordinate resources, and provide precise instructions for tasks to be performed on-site. Modern FSM software has evolved to support various aspects of job management, including scheduling, asset management, permit handling, and cost tracking. This comprehensive approach ensures that the right people are deployed to the right places with the necessary tools and information to execute their tasks efficiently.

The Rise in Adoption of Field Service Management Software

The surge in FSM software adoption can be attributed to several factors. Traditionally, field operations were managed using paper or disparate spreadsheets, leading to inconsistencies and inefficiencies. FSM software introduces standardised processes and consistent workflows, reducing the need for manual intervention and minimising errors. This transition brings about significant efficiencies, simplifying management tasks and improving overall operational effectiveness.

Also, FSM software ensures robust record-keeping, which can be helpful in any client complaints and legal compliance. The integration capabilities with other systems via APIs streamline processes such as invoicing and contractor coordination, driving further efficiency and making life easier for field operatives. These advantages collectively contribute to the growing preference for FSM solutions across various industries.

From a deal perspective we are seeing a continued rise in consolidation in the sector. 

Who are those buyer groups?

At MHA we have transacted with 3 broad groups focused on the sector, including:

• Trade Buyers: Larger players in the sector are actively seeking opportunities to consolidate the market. They may look to acquire businesses offering specialised sector-specific solutions, allowing for cross-selling and expanded customer base access. This strategy not only strengthens their market position but also leverages the expertise of acquired companies to enhance their overall service offerings.
• Private Equity (PE): FSM software’s subscription-based model is particularly attractive to private equity investors. Typically, there are initial implementation costs followed by recurring revenue from subscriptions which ensures a steady and consistent recurring revenue. The ability to grow the numbers of users, upsell additional modules or services to existing customers as well as the potential of a platform play through acquiring bolt-on businesses makes FSM software a lucrative investment. PE firms value the stickiness of the customer base, driven by the integral nature of FSM solutions to business operations.
• Software Consolidators: Software consolidators, often operating in sectors like B2B business-critical tech, see significant potential in FSM software. They focus on growing Annual Recurring Revenue (ARR) by acquiring and integrating complementary software solutions. 

Key Performance Indicators (KPIs) for Different Buyer Groups

The focus on KPIs varies between buyer groups:

• Consolidators and PE Investors: They prioritise metrics including revenue from new customers, upsell rates of products and modules, and customer retention. They also scrutinise the efficiency of marketing efforts by tracking conversion rates and cost ratios from marketing leads to actual sales. Operational metrics, such as development and administrative costs, are also critical.
• Sector Resilience and Customer Distribution: Understanding the resilience of the sectors served by FSM software and the concentration of customers helps assess risk. FSM’s non-plug-and-play nature means it often caters to specialised needs, resulting often in a lower volume of customers but higher value deals.
• Cloud vs. On-Premise Solutions: Cloud-based solutions are favoured for their ease of updates and scalability, which can significantly impact the attractiveness of an FSM provider.

Value Drivers in the FSM Sector

On the deals we have concluded, there are several factors we see drive value in the FSM sector, with the below being a selection:

• Sector Resilience: Software targeting robust sectors like infrastructure or healthcare tends to be more valuable.
• Technology Stack: Modern, cloud-based technologies are preferred over older, on-premise solutions.
• Growth Rates and Low Customer Churn: Steady growth and high customer retention are strong indicators of a valuable FSM provider.
• Code Base: A unified code base simplifies maintenance and upgrades, enhancing the software’s long-term viability.

Trends in Deal Structuring for FSM Businesses

Deal structures in the FSM sector vary based on shareholder goals and market conditions:

• Fundraising and Exits: Founders with technical expertise often need to build out a strong management team to appeal to buyers. The willingness of founders and management to stay in role post-acquisition can significantly influence deal terms and valuations, in particular in a PE ‘platform’ deal where PE are buying into the founder/management team to drive the growth plan.