The System Integration business faces unique challenges and is undergoing change and disruption. Some changes may seem subtle, while others are more obvious. As a business leader or professional involved in the industry, it’s important to keep your head down and continue to serve customers and meet their needs, but – it’s also wise to look up and keep abreast of change. That awareness allows everyone involved to navigate change proactively, rather than reacting to the prevailing winds.
The following trends are captured from various benchmark reports and industry conferences along with the sources of that information. We hope that this is a great resource to get a snapshot of the trends and to gather ideas about how to adapt and thrive in 2019.
1. Staffing Challenges and Labor Shortage to Support Demand and Growth
Currently, there is a shortage of labor in the system integration field. In fact, it was the number one concern of integrators in Security Sales & Integrations Gold 2019 book. Although the economy and unemployment rate vary in much of the United States, the talent gap for experienced technicians and designers is widening. “Finding and hiring sales talent is arguably the toughest business task as a system integration company owner or senior manager,” says Paul Boucherle of Matterhorn Consulting. To combat the talent gap problem, system integrators are turning to hiring firms that specialize in training veterans or are looking to groups like NSCA’s Ignite program that works with vocational schools, community colleges and universities to ensure that integrators can find the right people to grow the business. Utilizing these services can help integrators fill the needs for technicians, designers, and the sales team.
As organizations look to attract new talent and “digital natives”, it is important to show them that you’re embracing modern technology and have tools that they are excited to use. The additional benefit is that these tools help new employees ramp faster to productivity and elevate the professionalism of your company in the eyes of your customers.
2. Commoditization Drives Need for Services Revenue/MRR
Many integrators have reported that hardware product margins are thinning. This requires them to increase their value proposition with better services, installation and maintenance services as a means of attaining monthly recurring revenue (MRR). As Chuck Wilson stated at the NSCA Fall Pivot to Profit 2018 event, it is more important than ever to become a “trusted advisor” to customers and move up the value chain. Integrators can achieve this through consultative selling. By properly capturing customer requirements at the outset and understanding their pain points, sales can better position higher margin value added and turnkey services. This helps build that "trusted advisor" status with customers. According to the SS&I 2019 Gold Book, integrators reported that the top 3 ways that they leave money on the table are: 1) not selling maintenance and service contracts; 2) not charging enough; 3) focusing on products rather than solutions.
One opportunity is for system integrators to engage earlier and often in the project design process using interactive tools that help the customer visualize and customize their systems. Nexus Communications Technology, a Chicago-based system integrator and managed service provider (MSP) took it a step further using System Surveyor to capture a digital asset map for customers and to provide complete turnkey managed services. They create a digital, living “as-built” record for their customers and use it to provide high quality, profitable services. Case study.
Integrators can also grow services revenue or MRR through selling cloud services. Whether it be the customers data uploaded to the cloud or their video surveillance footage stored in the cloud, these services provide not only peace of mind for the customer, but recurring revenue for system integrators.
3. Convergence of IT and Electronic Systems Market
As virtually all devices and systems are now IP-based and networked, IT is inevitably going to be involved in more decisions. IoT creates a greater emphasis on system security and availability. System integrators are wise to develop on their relationships with IT and to become more versed in cybersecurity and IT priorities to ensure that they are engaged in customer decision making. The level of product knowledge is demanding for IT. Customers are looking for companies that display a higher level of professionalism and grasp of this knowledge.
Integrators can provide value by ensuring that IP-based systems that they propose and install for customers are implemented with considerations for IT and cybersecurity. Heed these best practices: avoid key traps of using common passwords, study device manufacturer defaults, provide regular firmware updates, and ensure the team is trained on best practices and IT terminology.
4. Defining Value to Customers to Ward Off Lower Price Alternatives
We’re back to the need to establish as a trusted advisor and expert for customers. As competition from new DIY entrants, Amazon, Google and other consumer alternatives for security and other systems enter the market, it could be tempting for smaller commercial customers to turn to the DIY route. While no one underestimates Amazon or Google; integrators continue to provide significant value for designing and maintaining a system. This is your core business, it certainly is not for a small to medium business or even a home-owner. While the new systems are intuitive, it is likely that people will underestimate the design, installation, and service needs for video surveillance and other system needs. There can be confusion when an integrator offers a 10 camera system with a proposal of $15,000. The customer looks on Amazon and finds 10 cheaper cameras for $200. It is important to educate and emphasize the quality of the product and complete life cycle of service that you as the integrator offers. Surveillance cameras are only valuable if they are operational. It may be important to ask key business questions about the risks if a camera were down and they missed an incident - often costing much more than the investment.
How can you show them the value? Do they really know what they want or need? What if you could make the process streamlined and simple? What if you could map out their needs and let them comment on a plan so they are 100% sure they are getting a great system and full life cycle management?
5. Industry Consolidation and Competition
Is the system integration industry undergoing consolidation? Some would say so. According to IHS Markit, “the largest 15 video surveillance hardware and software vendors account for around 58 percent of global revenues. Conversely, the largest 15 systems integrators only account for 16 percent of global revenues. One reasons for the difference is that systems integrators require a significant human presence within a region. As such, it is harder for systems integrators to grow organically outside their home market”.
We’ve spoken to integrator leaders who are eager to expand out of their regional area domestically and internationally due to customer demand for multi-site enterprises and regional offices. In the past, the reach has been limited to do the site surveys, installation and ongoing maintenance. New technology such as System Surveyor is extending the reach of integrators by enabling them to work effectively with subcontractors and partners by using mobile, visual and collaborative system planning and design. One example is an integrator who was based in the Atlanta region that was able to take on California-based business by subcontracting using the design tool that “makes it just like being on-site". It may be worth a look to grow your business before it gets snapped up.
Do you feel like you're better prepared for upcoming trends in 2019? Are there trends you feel like we might have missed? Let us know in the comments below.