The pros and cons can both be quite compelling here so it usually comes down to a question of budget and available manhours.
Pros
Targeted niche sites allow the client to be far more specific about exactly what it is that they do. This can make them far more competitive in that particular niche. As an example, one of our clients installs fake grass in commercial applications and outranks the largest national hardware chain here in Aus simply because he does one thing very well while the hardware chain sells thousands of products.
It also makes the site much easier to manage and browse from the user perspective while also being easier on the crawl budget as well.
Cons
Multiple websites means multiple SEO campaigns. You have to duplicate all of your effort for everything from page titles and meta descriptions to content and link profiles. If you have 10 micro-sites then your time investment will increase 10x!
Thinking of the user experience, you may miss out on same conversions and/or upselling if users only visit one of these niche sites and don't realise that you provide several other services that they're after as well. Sometimes, being able to get everything they need done by a single company can be a very strong selling point. Much like paying 1 renovation company to do your entire reno rather than orchestrating 20 different suppliers and service providers.
There are ways to manage this second point to some extent like including badges or a list of other services you provide, though I would warn against inter-linking between each of these sites.
So, if you have the time and resources to put into it, you're likely to see greater success from multiple small sites but for more businesses, this just isn't viable. In that case, a well structured site and navigation is going to be your best bet, as well as strong and relevant internal linking from blog posts and building backlinks directly to those category pages from their respective industries.