There’s No Stopping Commoditization: So What Will You Do?

Published: October 15, 2015

As the end of the year approaches there is no shortage of AV integration firms projecting ambitious growth in 2016. If you focus only on that enthusiasm the industry appears to have no problems.

If you look in the shadows, however, you find a reality in which most integration firms continue to struggle with shrinking product margins and a general commoditization of solutions threatening customers’ perceived need for custom AV solutions.

CI’s and NSCA’s 2015 Business Outlook Survey shows that over 22 percent of integrators see between 1 and 10 percent margin on hardware and 52 percent see between 11 and 20 percent, leading NSCA executive director Chuck Wilson to speculate that those in the 22 percent earning virtually no margin will not be in business to take our 2016 survey (which is underway).

Customers increasingly want what they have heard of — Microsoft Surface Hub for collaboration, Skype for video conferencing — and don’t want to hear about how a more customized solution for their specific needs will improve their system utilization, productivity and return on investment.

So, as a custom AV integration firm, what do you do?

That is the topic of a keynote presentation, Combating Commoditization of the Industry, at NSCA’s Integration Business Survival Conference & Technology Showcase, on October 22 in Annapolis, Md.

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I have the privilege of moderating a panel that includes Dave Ferlino of Whitlock; Bruce Kaufmann of Human Circuit; Jay Paul formerly of AVI-SPL and currently of Biamp; and Brad Dempsey of Solutions 360.

“It’s about challenging the model and the assumptions of clients and even manufacturers,” says Kaufmann. “The status quo isn’t going to differentiate any of us or any of the manufacturers.”

Integrators need to take stock of who their customers really are these days, says Paul. “More often than not they’re CIOs, CTOs or IT departments. More and more they’re driving the commodity business. We’re selling devices that have network capability. They see [the products] as appliances and want to buy them as appliances in many cases.”

With product margins dwindling, integrators should focus on building relationships and long-term partnerships with their clients, adds Ferlino.

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Posted in: Insights, News

Tagged with: NSCA

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