I recently read an article by Tom LeBlanc and enjoyed the 2017 State of the Industry story. The article was a very good barometer for today’s realities around the AV integration business.
Previously writing about AV 2021 for Commercial Integrator in a 2016 publication last year, I revealed my thoughts about who will be in the “center lane” in the future.
The issue titled Pick a Lane is an even a better springboard for viewing the AV road ahead.
With that said, as a near 38-year C-level veteran and a very engaged IT/AV integrator at BBH Solutions, I continue to work inside both the IT and AV lanes full speed ahead.
I would like to share an extended view as to what some AV integrators have considered: acquiring an IT centric company and why it is NOT likely to happen with the larger companies.
First, I would like to carve out of the story several comments and add a few thoughts from my lens and executive experience.
Bigger Is Not Always Better
The AV big firms are going to continue to acquire the smaller firms, but only the ones that have rock solid design/build practices, and most of those who exercise a best practices process plus ideally those that have the largest managed service practices.
Yes, the 181 integrators mentioned will fight the good fight but the “karma” inside that statement is that they will lose (even if they are optimistic) and in fact, most will find the “off ramp” a reality. Based on my own AV acquisition experience, bigger, symmetrically, is not always better.
The story notes 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.” What is more important, however, is that the pie charts showed that nearly 50 percent (48.5 percent) noted that profits were the same or less.
It’s not about revenue, it is about margins and bottom line. To this, I hope readers agree. Furthermore, 40 percent of those surveyed say only 5 percent of their revenue is via a contracted monthly service.
Clearly, the champions here are Yorktel and Whitlock at 50 percent. That is terrific! Congratulations on their business models.
Another finding worth calling out is the following:
“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 one third of AV integrators said that IT was a factor. The story goes on to conclude “one might question that narrative.”
Well, they 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:
“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 the AV integrator 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!
Now to the headline and my current feelings on “crossing a double line” in the AV integrators business model highway specifically as it pertains to acquisition targets.
It seems to make great sense that an AV integrator would acquire an IT centric organization. On the surface, it remains asymmetric, but as many believe it is quickly becoming the strategic symmetric move.
I believe now that it is not likely to occur and this is why 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 sea change in thinking, to the point of handing off the steering wheel while driving from bucket seats over a stick shift.
AV Is Not as Mission Critical as IT
The basis of this is not a five-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.
That type of organization that fights hard for IT intellectual capital and those professionals require a challenging ecosystem. That is not loading 0365 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.
It is not just acquiring a critical IT expertise – but it requires a sea change in thinking, to the point of handing off the steering wheel while driving from bucket seats over a stick shift.
The makeup of the psyche and culture is not easily migrated into any AV centric integrator for many reasons.
First, AV still does not get the respect deserved/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 of 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, Data-Pipe, Presidio 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.
Bottomline – AV is not as mission critical. Nonetheless some boutique firms might find a marriage and make it work but blended margins must be 32-40 percent which is the world IT should and does live in.
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The best I see is progressive – very skilled management teams (in mainly 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? Know the answers and safe journey.
This article was originally posted on LinkedIn.
