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Most AV Integrators Won’t Cross This ‘Double Line’ in 2018 (And Neither Will IT-Centric Ones)

AV integrators aren’t ‘mission critical’ in this author’s opinion, and therefore would have a hard time acquiring series IT-centric firms.

Bob Romano Leave a Comment
Most AV Integrators Won’t Cross This ‘Double Line’ in 2018 (And Neither Will IT-Centric Ones)

The recent CI article on Mega-Integrators drew me back to an earlier blog I enjoyed: the 2017 ‘State of the Industry’. These articles are a very good barometer around the realities of AV integrators nowadays and serve as good reflection points on some of today’s mega acquisition trends.

Previously writing about AV 2021 last year revealed my thoughts about who will be in the “center lane” in the future. The ‘mega’ issue offered strategic insight to outside investors (or just observers), an opportunity to see what remains true to the prior views and predictions.

With that said, (as a C level veteran) the ‘Mega moves’ that offer a hosted, managed service, or those that might be referenced as out of the box — ‘good asymmetric strategic partnerships’ — stand the best chance to succeed from my lens.

Personally, I already feel that more than 35% of today’s ‘Classical AV integrators’ will be out of business by 2020 as margins continue to decline, especially for those ‘bid-only responders’.

Today’s system cookie cutters do not exactly lower the barrier to entry for new competition, even from furniture resellers and others. It’s not rocket science.

It is commonly understood that AV needs to be more IT and find a way to begin a recurring revenue business.

Most start with reselling a hosted video conferencing model, some venture to be that Host. Both make sense as a starter for several reasons, not the least of which is sales can stay ‘close to the nest’.

It should force management to rethink basic compensation plans for monthly revenue, as well as an annuity compensation model for sales. There is so much more to do: the survival paths are NOT easy, but I suggest you dust off “The Lean Start Up” book on your shelf and get that entrepreneurial Mo-joe going again.

Big Mergers for AV Integrators Brings Difficulty to IT-Centric Firms

The challenges of IT/AV remain; even an IT-centric organization (i.e. take care of the network, offer IT hosted services VOIP, Video Conferencing, BaaS, DRaaS, DaaS, IaaS) or Managed Services (such as Security, Patch Management or Network Monitoring) find the merger of some AV integrators difficult.

I still believe that an IT-centric shop can develop an excellent AV overlay practice, but will find conflicts with personnel ‘certifications appreciation,’ best practices, or plain poor understanding of the AV construction process.

Acquisitions take up huge intellectual capital and will delay focus on company differentiation, recurring revenue attention, and the creation of increased margins.

Certainly, many core practices are similar in cable convention and fabrication (practice may differ), but studying the differences is critical.

Changes are required, the ‘cheese always keeps moving’.

It’s a good thing.

I would like to share an extended view as to what some AV integrators have considered: acquiring a large IT-centric company, and why it is NOT likely to happen.

Putting Distance Between AV and IT

The big AV firms are going to continue to acquire the smaller firms, but only the ones that have rock-solid Design/Build practices and who exercise a best practice process. Yes, the 35% of my ‘to-fail integrators’ will fight the good fight, but most will find the ‘off ramp.’

Although I can appreciate (from experienced having done so) an offensive approach to acquire “mirror symmetric organizations,” this type of bigger is not always better. Acquisitions take up huge intellectual capital and will delay focus on company differentiation, recurring revenue attention, and the creation of increased margins.

The original story stated that “nearly two-thirds of those surveyed say their corporate revenue was up in 2016 and with slightly more expecting it to grow in 2017.” But what is more important is that the pie charts showed that nearly 50% (48.5%) noted that profits were the same or less.

It’s not about revenue, it is about margins and bottom line. Further 40% of those surveyed say only 5% of their revenue is via a contracted monthly service. From reports I have, nothing has changed here.

Another past quote worth reflection: “The industry narrative is that the IT department is assuming more decision-making power and putting integrators unaccustomed to speaking IT at a disadvantage” …. but only 1/3 of AV integrators said that IT was a factor.

The story goes on to conclude “one might question that narrative”. If that reality has not slapped the side of AV’s face yet, start salting your skin…the wind up is deep into its back swing.

The ‘Double Line’ AV Integrators Won’t Cross

AV integrators might question it, but they should look over the hill and feel a bit insecure ‘in their lane’ with what NSCA’s Wilson goes on to say about IT… Again, I quote: “They may not be the decision maker, but they have the power to shut everything down!”

Come on, readers…that is the statement that matters.

The story accurately notes that AV integrators must demonstrate credibility through documentation and wherewithal in the IT Space. That is the reality of the future of AV decision making and as stated many times prior, it is the area in which AV integrators do not have the gravitas!

The story accurately notes that AV integrators must demonstrate credibility through documentation and wherewithal in the IT Space. That is the reality of the future of AV decision making and as stated many times prior, it is the area in which AV integrators do not have the gravitas!

So now to the headline and my current feelings on “crossing a double line in 2018.”

It seems to make profound sense that an AV integrator would acquire an IT centric organization. On the surface it seems asymmetric, but many believe it is quickly becoming the strategic symmetric move.

I believe that it is still not likely to occur, and therefore I see the AV integrators not crossing over the IT double lines on their highway.

It is not just acquiring a critical IT expertise — but it requires a change in thinking to the point of handing off the steering wheel while driving from bucket seats over a stick shift.

The basis of this is not a 5-man IT shop but a company that works inside the space primarily selling voice/data/video/infrastructure as a managed or hosted service with, say, over 70-120 employees of specific architect expertise.

The story accurately notes that AV integrators must demonstrate credibility through documentation and wherewithal in the IT Space. That is the reality of the future of AV decision making and as stated many times prior, it is the area in which AV integrators do not have the gravitas!

That type organization fights hard for IT intellectual capital and those professionals require a challenging ecosystem. That is not loading 0-365 on laptops but helping solve serious IT security concerns, cloud expertise and beyond cloud. The IT ecosystem will dominate future navigation, but big AV integrators will have a death grip on the wheel.

The makeup of the psyche and culture is not easily migrated into any AV-centric integrator for many reasons.

AV still does not get the respect deserved or desired as a specialist. AV remains an easier add-on overlay compared to the more complex value proposition that IT brings. After all, it remains that keeping a business alive, protected, secure and unified with all its communication tools is IT’s heavy lifting, not AV’s.

You can have your AV room go down, but not your voice, your e-mail, or your data lost — those remain mission critical.

Think for a moment why an e-Plus-Dimension Data, Presidio, Rackspace, and many others are not chasing AV integrators for acquisition.

It is because the AV margins are so low and the labor investment going into the construction business (as AV integrators are) — is not worth the return.

Nonetheless, some boutique firms might find a marriage and make it work but blended margins must be 32-40%, which is the world IT should and does live in.

The best I see is progressive – very skilled management teams (mainly in the AV space) driving in the lane with the double lines — a solid line and the dotted line (on one side or the other) as they evaluate when and if it is safe to venture into the IT passing lane.

Clearly, you need enough time to consider all other oncoming ‘culture traffic’ so as not to crash. Either the courageous disruptors or the foolish will cross the solid line without the proper preparation.

The accelerators are the product plan and basic essential decisions about what products and services differentiate you. What business are you in? Why should a client select your company over your competitors?

I just invested the past 6 months in Menlo Park with IT ‘start ups;’ those discovery’s can be the new secret sauce if selected and bundled correctly into the AV ecosystem. We all need to address today’s security concerns that our nation faces which includes the IoT of 95% of all AV devices.

Know the answers and have a safe 2018 Journey.