Why System Integrators Are Pivoting to Services and More Recurring Revenue
System integrators are finding better prospects for an improved bottom line by selling services work.
For system integrators, the landscape for 2023 appears ripe for opportunity. Merged technological ecosystems are rising across industries and economies globally. This trend is pushing many commercial integrators to pivot to a services-based business model where they’re finding better prospects for an improved bottom line. Others are seeking new markets where demand is increasing for tech systems that are more integrated and connected.
System integrators that build computer systems combining hardware, software and AV products from multiple vendors are entering a favorable time for both demand and the opportunity to pursue a service model as IT professionals continue to embrace as-a-service purchasing.
Selling Services Grows
According to the Commercial Integrators 2022 State of the Industry Report, 22.8 percent of survey takers in the AV industry indicated that they make between 11 percent and 30 percent of their revenues from services. Another 7.4 percent of integrator respondents affirmed that they make more than 50 percent of their revenues from services.
And that growth is expected to continue. Forecasts predict 8.4 percent annual growth rate in managed services from 2021 to 2026, which is faster than the overall AV industry growth rate of 7.2 percent. A ramp up in the percentage of business centered on services is expected, the report shows, with some companies doubling services and recurring monthly revenue. Roughly half the industry has made a shift to becoming as-a-service or managed-services type companies.
Integrators also are becoming more accustomed to working with IT professionals on service contracts and installations. That increased readiness and experience is propelling forward services models. Integrators understand the need to instill confidence in customers and are bringing their teams up to speed on IT requirements and IT knowledge, creating savvier business managers.
Steps for Successful MSPs
A National Systems Contractors Association (NSCA) and PSA focus group survey outlined the anatomy of successful manage service providers (MSPs), identifying steps and indictors of success. The survey showed that creating a strategic plan for adding service revenue or optimizing managed services or as-a-service business models proved most successful for MSPs.
Other steps for successful MSPs growing service lines included having a global customer base, including in the U.S., Latin America, Asia-Pacific, Europe and the Middle East and contracting managed services in the AV, life safety, IT or security fields.
The survey showed 67 percent of respondents had a projected revenue up to $50 million and 33 percent projected $50 million to $100+ million in revenue. Another 61 percent say the fiscal impact of recurring revenue from managed service or as-a-service offerings significantly improved their financial bottom line.
The survey also indicated that training along with culture change contributed to success in selling services. A large financial investment often is not needed, but a strategic plan based on training, processes and systems was the best preparation for the best results.
Popular Market Targets
Rising demand for cloud-computing software from public and private organizations will drive the global system integration market size, according to analyst reports.
The banking, financial services and insurance sector handles high volumes of financial data and, with a greater number of devices added to the cloud network each day, the vulnerability of sensitive information is more heightened.
Companies in these sectors are looking for data management and protection systems to make their services seamless, easily accessible and efficiently secured. System integration software offers solutions for these issues, reports show.
Corporate, retail and hospitality markets are driving increased opportunity for the AV industry. Other potential growth hubs include education, government and healthcare, according to the Commercial Integrator 2022 State of the Industry Report. Percentages of survey takers forecasting 7 percent or more installation growth in those markets were 34 percent, 29.7 percent and 28 percent, respectively.
Meanwhile, retaining top talent will continue to be a challenge in 2023. According to Commercial Integrator’s survey data, 64.6 percent of respondents identified a lack of qualified candidates as the biggest challenge to filling open positions.
Commercial integrators need a support partner to help them navigate growing their service lines. Software platforms like Canopy are that resource for system integrators looking to scale nimbly while adding services. Canopy is platform agnostic and can keep multiple, disparate systems connected and running smoothly so your business can grow.