Industry Consolidations Are Coming… and Not Going Away

✍🏻 From the Desk of Barbara Sprenger, Founder of Deskworks

We’ve hit that point in our more-than-fledgling coworking and flexspace industry where we’re seeing consolidations. And we’re going to see lots more of them – both on the operator side and on the services and software side.

But why was this inevitable and is there any good or bad fallout from it?

A Diverse Industry from the Start

The coworking industry started with lots of different models:

• Some were highly focused on a particular industry.
• Some were small, some large. 
• Some concentrated just on offices as they evolved from the executive suite business.
• Some offered mixes of space and space-time configurations (like our Satellite Workplaces do). 

And everyone felt their way was the only way to go.

As really good models survived the sieve, there was interest in reproducing them.  CANOPY, building really beautiful, exclusive, high-end spaces is an example. So is Venture X, with their franchise model for coworking-enhanced office spaces. And The Muse Rooms, making unstaffed, small spaces for creatives work in the Los Angeles area. Not to mention PodcastVideos.com, creating podcast and studio spaces and services in a coworking model. There are so many more!

Why Consolidation Happens

Sadly, a lot of interesting spaces just had to close their doors, as owners tired of the effort or didn’t survive the pandemic changes or just couldn’t make the nut in this high fixed-cost, low-variable cost industry. These spaces were ripe for consolidating into larger enterprises that had a replicable model and could profit from the economies of scale: combining management, operating systems, purchasing power, marketing, accounting, IT, and, in some cases, labor-sharing.

As in any industry, those are the reasons consolidations happen, whether in a franchise model or a single ownership structure. (Which we can talk about in another post!)

Why Uniqueness Still Matters

There’s still a place for uniqueness in coworking. I’ll never forget Pacific Workplaces’ Scott Chambers’ comments at a conference years ago: when you’re traveling, you want Starbucks; you want the repeatability, knowing what you’re getting. But when you’re home, you want your neighborhood coffee shop, the unique place, the place that knows you. That is ten times more true for your coworking space! 

We feel it’s vital to build uniqueness into each space of a group of spaces, so people feel that they’re home. And this needs to be done while gleaning the economies of group marketing and operations. Yes, I believe it’s possible to have the best of both worlds!

And as the industry grows up, it is demanding the same thing from us software vendors: Deskworks was at the forefront of automation – tracking members through wifi as they walk in the door, comparing their usage to whatever plan you sold them, right through to automated billing and payments. And making it easy for anyone to self-service reservations and memberships and day passes, so Community Managers can focus on building community, and you can run a center with one person.

What Software Consolidation Means for Operators

The coming consolidation in software will be a huge benefit for coworking operators. You want to run your center. You don’t want to have to navigate ten different software packages (that may or may not play nice with each other,) to say nothing of ten different bills. 

And as software companies consolidate, they reap the same economies of scale:

• In marketing: so they can more easily let you know what’s out there.
• In operations: so they can provide better support and service to you, wherever you’re located.
• In speedier development: so you can get the features you want more quickly.

Consolidations will be vertical as well. You will be able to have a standard product that includes tightly integrated member management, billing, digital mail, IT infrastructure, e-commerce, virtual front desk, service desk, CRM, marketing, mailing, and events. 

Protecting Coworking Operator Power and Flexibility

I don’t believe we’ll ever have a time, however, when everyone will want all the features of one vendor. Sophisticated operators will always have a favorite CRM or Member and Operations Management platform (like Deskworks!) or not be able to live without QuickBooks or Eventbrite, and the two will need to be able to operate seamlessly through great integrations. We shouldn’t be willing to give up that flexibility!

Wearing my operator hat for a minute, we should demand that whatever consolidations occur, operators still have marketplace power with our vendors. Just as our members want to retain power in the relationship with spaces, we need to be sure software vendors and hardware support vendors are answerable to operators: that we get the features we need, the support we need, and that we know the people building our software as real, live people. Not inanimate chatbots. 

Putting my software vendor hat back on, I know that our job is to serve our operator-clients. We have to make it as easy and pleasant to work with us, to meet your needs for how you want to run your business. 

Not the other way around.