What is your service plan?

Is it part of your strategic business or is it something you do out of necessity to keep customers happy?

If you are a commercial integrator and claim the former, this might be nothing new. But if you relate more with the latter, let’s discuss this often ignored, yet highly critical component of our business.

As the economy continues to change and technology evolves, it is becoming harder to make significant profit on a box sale. With Internet retailers willing to sell the same products we are at pennies over cost, and integrators (if we call them that) willing to give away the farm, making money the old fashioned way is becoming just that, old fashioned.

America is a service economy, and so are most of the other developed countries in the world.  Why are we so fervently fighting the expansion of our service offerings to drive in more highly profitable, and ideally recurring revenue dollars?

Industry pundits talk about the AV/IT evolution on a weekly basis. In case you are a believer in this “evolution,” are you watching how IT manufacturers and VARs are making their money?

It was just recently that a major provider of IT equipment informed me that making five percent margin is good. Five percent?

What they don’t understand is that unlike many of their traditional resellers, we don’t have 30-40-50+ percent of our revenue coming from service.

It is time for commercial integrators to switch to a service revenue model. Here are a few offerings integrators should consider to enhance their service revenue.

Repair/Warranty Repair: This is the oldest type of service and it is becoming less and less prevalent. But if you aren’t doing this for your customers, who is?

Service Contracts: These are probably the most common type of offering from integrators today. An effort to attach a service contract to every integrated system sale should be made. It is an opportunity to lock your company into every room for an additional year or more, while simultaneously bringing in profitable service revenue.

Prepaid Contracts: Another offering would be to consider offering flexible prepaid service that can be used for a variety of service throughout a school or corporate facility. This could be used for repair, on site service, or in some cases light install. This allows a customer to use service flexibly and, again, locks you into the relationship.

On-Site Managed Services: This has become more popular recently, primarily in the corporate space. Companies seek integrators to put full-time or part-time staff on site to handle large corporate facilities. This is essentially an employee on your company books.

Off-Site Managed Services: This can vary in terms of exactly what it means. In some cases, it is system troubleshooting, but more often now a days it is hosted video/telepresence or other types of conferencing services. This is a newer form of service revenue, but can be quite lucrative as it generates strong recurring revenue.

Often times in the case of bridging, this type of service has some significant upstart costs but can be quite profitable over time. Additionally, companies like Cisco and Lifesize are now offering integrators a pre-packaged, resalable hosted video conference service.

Whether we like it or not, the profit margin for box sales are going away. Our customers are being forced to be more price-conscious and are using the Internet to verify they are paying the best price. If, like most integrators, more than 50-70 percent of your revenues come from equipment sales, it is time to think about another way. My suggestion is to start thinking service.  After all, if not service, what is your plan?

About the author

Daniel L. Newman

Daniel L. Newman, currently serves as CEO of EOS, a new company focused on offering cloud based management solutions for IT and A/V integrators. Newman has spent his entire career in various integration industry roles. Most recently, he was CEO of United Visual where he led all day to day operations for the 60-plus-year-old integrator.

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