COVID-19 Update

The New Year’s Resolution I Won’t Keep

Editor-in-Chief Tom LeBlanc makes a tough decision for the year ahead.

Tom LeBlanc

I get negative feedback every day. It comes with the territory of editing a publication, and it’s actually a positive thing.

Thanks to Twitter, LinkedIn, the comments section on CommercialIntegrator.com, and our industry’s many conferences, I live in a 24/7/365 focus group.

Negative comments usually provide more value than positive ones. The trick to leveraging a negative comment is to figure out if it reflects a significant chunk of Commercial Integrator‘s 25,000 subscribers or if it comes from that person’s unique — and perhaps jilted — point of view.

On the final day of CI Summit, which took place Nov. 12 to 14 in Orlando, Fla., I was unwinding and chatting with a bunch of integrators about the event’s panel and roundtables discussions.

One guy told me, “If I have to sit through another panel discussion on recurring revenue I’m going to shoot myself in the [expletive] head.” We all laughed.

That comment resonated with me. On the plane ride home I was thinking about how frequently Commercial Integrator covers the industry-wide challenge of shifting from product margin- to service-based revenue.

We posted 10 articles tagged Recurring Revenue on CommercialIntegrator.com in 2014, including a couple of magazine features, and we usually explore that theme in our CI Profiles of integration firms.

Maybe I should cool it for a while on writing and assigning articles about recurring revenue and service contract topics, I thought. After all, as that CI Summit attendee added, “At this point, guys either get it or they’re not going to.”

Unfortunately, the data from the 2015 Business Outlook survey of 127 integrators conducted by CI and NSCA indicates that too many guys still don’t get it. Half of respondents say that recurring revenues represent 5 percent or less of their total revenue. Meanwhile, another 42.5 percent say RMR falls between 6 and 30 percent.

Read the 2014 State of the Industry report here to learn more.

Consider that a typical hardware margin is below 20 percent according to 74 percent of surveyed integrators, up from 68 percent a year ago, and it adds up to what remains a significant industry problem. I still think it’s important for the industry to learn from the minority of integration firms that are finding true success selling service contracts.

The majority of firms still benefit from ideas about when to bring up service contracts in the sales process, how to incent sales professionals selling service contracts, how to structure post-installation support and how to choose products that facilitate service that’s not labor-intensive.

Meanwhile, I don’t think it’s true that at this point integrators either get it or they never will. I’ve been told integration firms ought to strive for at least a third of their revenue being under contract. Only five of the 50 firms among our 2014 CI Industry Leaders meet that criterion. So, while integrators may get that they need to be selling service, most don’t get how to actually do it.

As much as I appreciate the candid feedback, Commercial Integrator will continue to cover the industry challenge of migrating toward service revenue. We have to. Otherwise, there might not be an industry to cover.