2016 Commercial Integrator State of the Industry Report

Commercial Integrator's State of the Industry Reports gives valuable insight into the AV Integration industry that technology decision makers should know.

January 4, 2016 Tom LeBlanc Leave a Comment

CI Research and NSCA surveyed 140 integrators and consultants for the 2016 State of the Industry report.

While respondents aren’t wildly optimistic, they’re feeling positive and perhaps more realistic than last year. Only 8 percent said there’s room for improvement in 2015 while 35 percent feel that way about 2016. NSCA’s Chuck Wilson “feels good” about these numbers.

Anything from “little changed” on up is good news, says NSCA’s Chuck Wilson. That’s at least about 5 percent growth and that’s where the construction industry is looking in terms of growth, too. In the construction world, that’s a big number. “There is nothing wrong with slow, steady growth,” he says.

By now, it should surprise nobody that an IT director or professional is the most common decision maker within clients’ organizations, according to one-third of survey respondents, far outpacing all traditional point persons. In fact, as the role of IT increases, those other parties’ purchasing influence is going down dramatically, NSCA’s Chuck Wilson says.

All markets are looking relatively positive this year.

Corporate — by far the industry’s largest vertical — is looking the most positive.

This question tends to generate a lot of optimism. This year it’s more measured than in the past, but a whopping 68 percent expect to grow more than 5 percent in 2016.

It’s no surprise that video-related projects are highly anticipated. AVI-SPL saw two consecutive record-breaking months in the second half of 2015. The driver of the growth, according to VP of marketing Kelly Bousman, was AVI-SPL’s ability to win a cluster of very big and very video-centric projects.

The vast majority of the industry remains stuck in the mud when it comes to generating managed services revenue. Only one in five surveyed integrators earn more than 10 percent of their revenue through service contracts and 27 percent earn zero. It’s noteworthy that some firms find that as a result of service contracts customers end up being happier with their systems and noticing full utilization in their investments.

“It inspires more use of the system, so they build more systems,” Verrex’s Bill Chamberlin says. “So you see the percentages kind of level out.”

This is perhaps the most accurate indicator of how 2016 will begin and the good news is that respondents are slightly more optimistic than they were in 2015.

The highest percentage of companies are pretty flat while a good chunk is seeing growth year-over-year — another example of the industry’s slow and steady incline.

A snapshot of how surveyed integrators anticipated their billings and orders will look like end of year.

It remains a troubling stat that only 29 percent of surveyed integrators say more than 20 points on a project is typical in terms of hardware margin, while a staggering 21 percent say they typically get less than 10 points.

No surprises here with AV-centric integration firms making up the majority of the responding group.

We’re still seeing AV hold its place as the most prevalent category, with automation and control coming in second.

It’s easy to point out that most integrators are dramatically under-charging their clients, but it’s much harder to overcome the challenge since firms are often dealing with competitors that may be on an equal plane when it comes to qualifications and certifications “but they’re just not valuing their services high enough,” says Human Circuit’s Bruce Kaufmann.

This article was first featured on TechDecisions’ sister site Commercial Integrator. While the article and the state of the industry report is intended for AV integrators, it’s important for technology decision makers to understand the state of the industry that they are employing to install technology.

When it comes to the state of the AV integration industry as we enter 2016, well, it really depends how deep you want to go.

There’s the on-the-surface, Bill Parcells’ “you are what you are” interpretation, and what you are is an extremely resilient industry that has avoided whiplash from ups and downs since the pre-recession renaissance.

An impressive 41 percent of surveyed integrators say their 2015 revenue is up between 6 and 20 percent while nearly 10 percent are seeing upwards of 20 percent growth; about one-third say revenue is flat in 2015; and only 16 percent are down more than 5 percent.

That’s according to the 2016 State of the Industry survey of 140 integrators and consultants conducted annually by CI Research and NSCA.

When asked about projections for the upcoming year’s revenue — a question that typically reveals much optimism — the respondents’ answers are pretty much the same as last year’s with slightly more expecting to be up and slightly fewer expecting to be down. These are positive trends for sure but not consistent with the dramatic growth and optimism of previous post-recession years.

CI Research and NSCA surveyed 140 integrators and consultants for the 2016 State of the Industry report.

That’s the good part, says NSCA executive director Chuck Wilson. “There’s nothing wrong with slow, steady growth,” he says. “Running a company is like making good bar-b-que, it’s low and slow. That’s how you make the best decisions — slow and steady growth instead of these wild swings up and down.”

InfoComm, in its AV Market Definition & Strategy Study that it produces with Acclaro Growth Partners, reports seeing similarly modest growth. Globally, the study projects 11 percent growth in 2016, but growth in Asia “will be significantly higher” than in other markets, says InfoComm executive director David Labuskes.

In North America, growth will fall more in the 3 to 5 percent range. That’s a function of the maturity of those markets in terms of technology, he says, adding that InfoComm’s economic snapshot was “very optimistic” for the last quarter of 2015.

One company that’s extremely optimistic, belying the slow-and-steady trend, is AVI-SPL. The industry’s largest integration firm grew at a 10 percent clip year-over-year to $577 million in projected 2015 revenue. AVI-SPL saw two consecutive record-breaking months in the second half of 2015. The driver of the growth, according to VP of marketing Kelly Bousman, was AVI-SPL’s ability to win a cluster of very big and very video-centric projects.

“I think the roller coaster ride may be over, but what we’re seeing is a very dynamic marketplace,” Bousman says. “We’re heading into 2016 with fantastic momentum.”

AVI-SPL’s success speaks to the notion that while the reality may be slow-and-steady for the vast majority of integration firms, well-positioned firms can rise above competitors.

“Get big, get niche, or get out,” is a mantra used to describe the state of the AV integration industry by Julian Phillips, executive VP of Whitlock, another behemoth integration firm at $235 million in 2014 revenue. He says in a market in which he anticipates rapid consolidation it’s become extremely important for integration firms to either scale their offerings or to leverage their niche expertise.

“There are thousands of integrators out there right now. I do not believe for a minute that a lot of them are going to have to go out of business, but I think they need to make improvements to survive.”

Being just an AV integrator isn’t good enough anymore, Phillips says. “You have to be a UC and IT integrator as well. It’s not an option anymore to say I live on an AV island.”

Whitlock, he adds, made a commitment to provide a full range of services, “wide and deep.” If a firm can do that, “there’s huge upside potential for you, because there are very few that can do that.”

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Tom LeBlanc

Tom has been covering B2B technology since 2010. He’s editorial director for MyTechDecisions and its sister brand Commercial Integrator. Before that, he covered the residential technology market for CE Pro and wrote for sports department of the Boston Herald.