If your perception that the government is messed up is based purely on having spent too much time watching cable news programs, try being an integration firm that relies on revenue from that fickle market.
For the integrators that serve it, the state of the government market is, well, challenging. Construction spending is trickling down. It fell three percent in 2014 and appears to be falling another three percent in 2015, according to NSCA‘s most recent Electronic Systems Outlook.
What little is being spent seems to be targeted at renovations rather than new building construction. Meanwhile, government budgets for AV technology have declined over the past couple of years and appear to be continuing to do so, according to InfoComm‘s Acclaro Partners’ 2014 Source: AV Definition & Strategy Study – North America, which adds that many integration firms have reported reductions in revenue from federal and state government projects.
It’s a “tricky” market, said Ron Baylin of Net-AV, a 2015 CI Industry Leader in the government market. “Above all else you need to know how to play the game — how to navigate labyrinthine procurement and buying policies; how to strategically partner with larger companies or other small niche companies to create a strong joint venture or partnership for bidding and performance; how to leverage key differentiators to find and win opportunities; how to get and keep the ear of government end-users, buyers and prime contractors.”
The diminished budgets and slow construction have led to increased competition for government projects.
“We can’t let the competitive market move us from our approach,” said Mike Landrum of Technical Innovation, a 2015 CI Industry Leader in the government market. “It helps to have some level of confidence and a good healthy backlog.”
The story is a little different in Canada where Genesis Integration earned a spot as a 2015 CI Industry Leader. InfoComm points out that although government spending on AV technology also has declined in Canada, the cutbacks “have had a more severe impact on the U.S. market.”
One potential reason, which is also cited by InfoComm, is a reflection of expectations.
“Historically, the government market has been less strong in Canada. During the recession there was less stimulus funding than in the United States, and as a result, the Canadian pro AV market has become less reliant on government spending.”
The government market “has been a stable source of income” for Genesis, said the firm’s Kevin McKay in our August 2015 CI Industry leader analysis. “Governments tend to spend money even through recessions.”
There are some bright spots in NSCA’s and InfoComm’s research. It’s conflicting to call prison over-population and a rise in U.S.-based privately owned prisons a “bright spot,” but NSCA indicates that AV opportunities may spring from the fact that the private prison industry is growing at a rate of 30 percent per year.
InfoComm notes that military clients are dedicating AV budgets to developing classroom solutions and video conferencing. It adds that courthouses, like many clients across different markets, are focused on solving video content challenges; and that at the state level council chambers are upgrading technology, albeit often with a very price-conscious strategy.
So it’s a market that’s not for every integrator, and increasingly from an AV integration perspective the government is shrinking.
Key Takeaways:
- It’s a tricky market that requires mas-tery of unique buying and partnership policies.
- Government new construction spending is trickling down.
- Government AV technology budgets are reduced.
- Canadian government integration firms seem less affected than those serving U.S. government clients.
- Rising private prison industry appears to be creating a significant crop of AV customers.
- Military spending is focused on class-rooms and video conferencing.
- Courthouses are focused on innovative audio and video content solutions.
- State council chambers are investing in technology, but price is a big factor.
