Spotlight on InfoComm 2019


There’s a ‘Disappointing’ Lack of Managed Services Contracts in AV Industry, According to These Findings

Managed services contracts are still considerably low in the AV industry. This is surprising for a space that’s filled with acquisitions.

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“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.”

AV industry, Managed Services Contracts

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.”

About the Author

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Tom has been covering electronics integration since 2003. Prior to being named editorial director of CI, he was senior writer and managing editor of CE Pro. Before that, he wrote for the sports department of the Boston Herald. Migrating to magazines, he was a staff editor for a golf publication and an outdoor sports publication.

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Comments

  • BH says:

    Here is my opinion of the whole service contract thing. Customers don’t care, don’t have the budgets and view them as a money grab. Let’s face it. With LED lights and laser projectors pretty much eliminated the lamp resale and replacement calls. Dedicated control systems will be a thing of the past within a decade. Disruptive companies are using disruptive products. The more IT we are, the less money we will make doing PM and service calls. We can’t have our cake and eat it too.

  • Lionel Felix says:

    Absolutely spot on with this. We have done the same introspection and are about to launch the managed services practice. The gap here seems to be going through what we went through, what does that kind of service offering look like? What are the prices, what are they based on, how are they tiered, what is included, what isnt, who writes the contract, is it legally “correct”. The very basics of the model seem obvious but when you get into the mechanics of “what does a managed services practice look like” It does not look like an AV company that does project-based installs. It looks like an MSP. Fortunately for us, I worked in IT for 20 years before AV so I do know what that looks like. Even with that experience, most AV companies suffer from they don’t know what they don’t know and they don’t want to experiment on their customers with offerings they dont know how to shape or execute on fearing they will undercharge, underservice, not meet needs and ultimately sour a relationship. AV is moving towards IT like the Titanic moved towards an iceberg, faster than we think and unprepared. IT people get this model and look at us like “how does this even work without MRR?”. We dont have good answers yet. Not without service contracts. There will be no contracts until we figure out how to create them. Fortunately for us, we have the offerings part down, now we have to go sell it 🙂

  • Bob Romano says:

    Lionel… Good honest reply .. agree.. AV integretors have little to no experience in MRR.
    Also intergrators compensation programs wrong, the sales mentally untrained, no incentives and of course the worse condition, no real value added products to sell that has value. !
    Certainly the opportunity is there , but NOT the patience to succeed to get there. Also how do you celebrate a $200-300.00 a month sale for 36 months when there is more commission in a 100k + project sale. Well you can offer annunity comp programs on top of new Solutions to drive MRR. Celebration is part of culture, not going into that one now.

    There are many ideas, here is one lay up, bundle into your Service Contract monitoring services and require, require, require them if their SLA on response time is in 24 hours for Level 3 service to buy it. If they will not, change SLA.
    Find new Solutions to offer… Soooo many !
    Good luck.

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