2014 CI: State of the Industry Report

Published: January 8, 2014

If you’re a glass-is-half-full type, you’re in luck. There’s lots of fodder for optimism within the data gathered for Commercial Integrator’s 2014 Business Outlook survey, conducted jointly by CI Research and NSCA.

Most importantly, 65 percent of firms report revenue growth of more than five percent during 2013, according to our survey of 72 integrators and specifying consultants. Compare that with the 46 percent of firms that experienced similar revenue growth in 2012.

Entering 2014, 56 percent say their project backlog is better than it was a year ago. Nearly 60 percent of companies say their projected pre-tax profit from 2013 projects is up compared with profit from 2012 projects. These are both significant signs of health for companies that in recent years have struggled with profitability.

In general, the commercial integration industry, which we described as “vulnerable” entering 2013, showed many signs of strength and resilience during a year of economic recovery and construction resurgence but also in the U.S. government-fueled unease related to the “sequester,” the “shutdown” and the Affordable Care Act rollout.

The glass-is-half-empty folks, however, can have their fun too with our research. A look beyond the numbers shows tide-turning challenges:

  • IT/AV convergence is reaching a boiling point and many traditional AV integrators are at risk of being burned.
  • What little product margins still exist are at risk, forcing companies to at least reevaluate the long-term viability of their pricing structures.
  • Many integration firms cling to outdated sales incentive approaches that prevent them from growing the all-important service segment of their businesses.
  • There’s an escalating need for integration firms to expand their customer relationships to the point where they’re viewed as business partners.

Integration firms that don’t consider evolving in these areas risk becoming extinct. Those most vulnerable (there’s that word again) are traditional AV integration firms that struggle to compete against IT-centric firms.

Related: Register for the Jan. 30 4th Annual Integration Business Outlook Webinar

“In my 30 years in the industry, this is the most challenging time I’ve seen,” says Bill Apter, senior systems consultant for Sterling, Va.-based Avitecture. “There have been lots of changes [in the industry over the years], but this one is so baseline disruptive. We’re all trying to figure out where we fit.”

Many firms echo that sentiment, acknowledges InfoComm International executive director David Labuskes. “2014 is a year, as many years have been, that you need to make changes if you’re in the commercial integration business.”

The good news, according to NSCA executive director Chuck Wilson, is that the industry has “a unique ability to figure things out.” Of watershed moments, he says, “We’ve seen some of these before. We couldn’t imagine going from analog test equipment to using a PC as a tool, and two years later we had that figured out.”

Indeed, even within these dramatic challenges are reasons for optimism. Apter knows that.

“You can’t fight it,” he says of areas in which traditional integrators need to evolve. “You have to figure out what part of the AV world demands your skills. But within that, there’s an opportunity to grow.”

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