AV Integration Firms, Your Competitors Are Getting Bigger

AV integration firms consolidation has led to AVI-SPL and Diversified approaching $1B revenue and fewer (but larger) competitors. How does this affect go-to-market strategy?

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AV Integration Firms, Your Competitors Are Getting Bigger

As large integration firms get larger, the AV integration industry is developing a David and Goliath vibe.

I kicked off CI Summit 2017 by suggesting that AV integration firms in the audience need to rethink their go-to-market strategies. An inundation of consolidation has changed the market. AVI-SPL and Diversified, the industry’s largest firms, are each approaching $1 billion in annual revenue.

Fewer AV integration firms are left standing, but those that remain are larger and presumably have more resources.

Competitors are stronger. This changes everything, right?

Wrong, says just about every integrator that I asked at CI Summit 2017, which is part of Total Tech Summit in Orlando, Fla., Nov. 1-3.

AV Integration Industry Is Changing

Three years ago the typical integration firm that was a member of NSCA had 28 employees. In 2017 that average number of employees ballooned to 45, according to NSCA executive director Chuck Wilson.

So it’s not just AVI-SPL, the AV integration industry’s largest firm which was on pace for $720 million in 2017 revenue before it acquired Calgary, Alberta-based Sharp’s Audio Visual which was on track for $53 million in revenue.

And it’s not just Diversified, which is projected to reach the $650 million revenue plateau by the end of this year after its acquisition of Ashburn, Va.-based MCW.

I’m not suggesting that the sky is falling. When I say integration firms need to adjust to the new reality that can mean leveraging new opportunities.

Nor is it just Whitlock, the industry’s third largest firm at nearly $300 million annual revenue which says, wryly, that it intends to grow through acquisition … of AVI-SPL’s customers.

Slowly but surely, consolidation has led to a new reality in which the typical integration firm is larger than it was a few years ago.

My feeling is that AV integration firms need to adjust to the new reality. Your typical competitor is bigger, that probably means they have more buying power; that probably means they can compete on price better.

I’m not suggesting that the sky is falling. When I say integration firms need to adjust to the new reality, that can mean leveraging new opportunities.

The good news is that competing on price has never been a good long-term strategy for integration firms. It’s always been better to be really good at competing on value and articulating that value really well.

Bigger Doesn’t Always Mean Better

More good news is, as your competitors get bigger, that might help your own company’s value proposition. Pearl River, N.Y.-based USIS AudioVisual Systems expects to stack up favorably against its behemoth competitors, says VP of operations Joseph Legato. “You can’t outsource quality,” he says.

USIS, Legato says, is focused on expanding by serving its sprawling customers, but it does so by making sure core individuals within its organization are working closely with customers even on remote projects. He suspects that larger AV integration firms aren’t able to maintain that level of oversight.

“If we can stress that our quality isn’t sacrificed, we can compete with larger firms,” Legato says.

“If we can stress that our quality isn’t sacrificed, we can compete with larger AV integration firms,” says Joseph Legato, USIS AudioVisual Systems.

Normal, Ill.-based Zdi, meanwhile, isn’t worried about much larger competitors and CIO Jay McArdle makes a good argument that it’s the larger competitors that should be worried. “We already shifted our strategy,” he says.

Indeed, Zdi launched a division called Room Ready which offers integrated room solutions certified as “Cisco compatible,” allowing it to offer conferencing solutions on a much larger scale than previously possible for an integration firm its size. Zdi even earned a U.S. patent for its communication path for all Room Ready rooms.

It was Cisco that essentially challenged Zdi to earn the patent on Room Ready. Under the patent, the codec communicates with a controller in a Room Ready room, which splinters to several types of end points, from displays to amps to cable TV to digital signage to lights to the HVAC system.

It takes about two minutes using Zdi’s patented approach to get all the technology in the room working together and the call connected as compared to about 15 minutes without it, according to McArdle.

When Zdi earned the Room Ready patent in late 2016, McArdle, who espouses Cisco as the heart of Zdi’s solutions, said the company is “fundamentally changing the way the conference room is being done” and that “we believe it can be pretty industry-changing.”

So savvy AV integration firms are indeed changing, but they’re not doing so in reaction to their competitors getting larger. At least, few were willing to admit that to me.

The reality, though, is that a smaller industry with fewer integration firms does require rethinking. For instance, says Jeffrey Wolf, executive VP of distributor Herman, which includes Herman Integration Services, it “becomes important to develop better and more strategic relationships with partners.”

Makes sense. In a small market packed with Goliath-sized competitors like AVI-SPL and Diversified, it would help to have some close allies.