“If there was one disappointment” in the otherwise glowingly optimistic results of Commercial Integrator’s and NSCA’s annual Integration Business Outlook Survey, it was that the AV industry transition from project- to service-based revenue isn’t going gangbusters.
An inexcusable 20 percent report that they earn zero via managed services contracts. Nearly a third, 30 percent, earn only 1-5 percent of their revenue via service contract.
“We’re stuck,” says NSCA executive director Chuck Wilson.
“It sure seems like people are aware of the need to transform into a managed services company but they still struggle with it. They are struggling with figuring out who is going to be responsible for the transition within their firm. How do you do it?”
However, the results don’t come as a surprise to Wilson.
“One of the first questions members ask me is, ‘How do you make this transition?’ Some are having great success, but there are still companies at the end of the day just don’t have the right people on board to make it happen for their companies.”
There are some bright spots with 41 percent reporting that they have indeed sold and executed managed services contracts in the past year.
While things are moving in the right direction, it doesn’t seem like most firms appreciate how important it is to show that revenue is under contract and not “one off.”
Asked, in terms of a goal, what percentage of their revenue they hoped will be under managed services contracts by 2020, only 22 percent are making it a priority to have more than one-third of their revenue recurring within the next couple of years.
Read more 2018 predictions with CI State of the Industry 2018: The Incredible Shrinking AV Industry
It’s surprising that the AV industry, which is so focused on mergers and acquisitions, doesn’t also feverishly pursue managed services contracts. One would think company owners would make it a priority to increase their companies’ value by locking up service.
Wilson anticipates that 2018 will be much of the same. “It’s going to be another year of us helping our members understand the value.”