Strategizing For Today’s Competitive Landscape
Not long ago, there was a growing tendency among large corporate organizations to house their own internal systems integration divisions, presenting systems contractors with a source of competition that was difficult to combat. In light of today’s economy, however, the concern that these in-house departments pose a serious threat to the systems contracting community is decreasing.
“On a scalable level, we are seeing more downsizing in corporate America, and the people that were in AV, IT, and integration support are the first people that are being downsized, because it’s pure overhead,” said Chuck Wilson, executive director of the National Systems Contractors Association (NSCA). This decrease in internal resources, Wilson said, presents more opportunity for contractors. “Today, our members are reporting that they are getting calls from big hospitals, school districts, and corporations saying, ‘We had to let our in-house team go. Can you come in and start doing our changes?’”
Competition within the contracting community is fierce because economic conditions are seeing more companies going after a smaller pool of projects. an increase in the number of companies that show up for a bid project, up to four or five times more than it used to be,” he said. “To some extent, it’s a symptom of the economy, and to some extent it’s some competitors’ inability to build a strong sales force and a good marketing plan that avoids bidding whenever possible.”
At the customer level, decreased funding has led to more aggressive bargaining tactics when it comes to agreeing on price. “There seems to be some pressure in certain circles to get more prices, based on the assumption that the more prices they get, the better price they will find,” Bradley observed. Clients that wouldn’t have put their projects out to bid in the past may decide to do so now, in an effort to ensure that they’re getting the best possible rate. “That doesn’t mean that we would lose that project, but it means that there is going to be some price pressure put on us.”
Jeanne Stiernberg, principal consultant at Stiernberg Consulting in Sherman Oaks, CA, noted that offering flexibility is one strategy that can help to sell to customers that are paying more attention to the bottom line. This translates into proposals that account for phased-in projects, rather than one large integration effort all at once. “They can go back to their existing customers or to prospective customers that may be sitting on the fence and say, ‘We know that these are uncertain times. How about if we scale back on what we were going to do? How about if we do it in steps?’” she illustrated. “They can work with the customers, and work with their budget.”
Over the last several years, the IT industry has demonstrated a growing presence in the integration market, particularly in the security sector. The current climate is driving more IT resellers to explore new revenue streams, driving them to offer peripheral product lines that systems contractors already provide. “In the security and life safety sector, there is very much a push from the IT industry to start adding security products and camera systems to their product mix,” Wilson said. “The large IT distributors are starting to add a lot of AV devices to their product mix also.”
Bradley, however, downplayed this trend. “I don’t call it a threat. I think it’s just an encroachment into our market, and we’ve seen that coming for years,” he said. “The good news is that they’re not well equipped to do it, from an integration perspective, but they’d like to say they can.” He likens this to the concerns that surfaced a number of years ago, when the electrical contracting sector started to examine opportunities in the low-voltage market. “They were not at all equipped to handle that, and most of them pulled back out and went away. It never materialized, on a global basis, as a major threat to our industry.” Where contractors hold the upper hand is they are equipped with the specialized skills required for the integration and programming of complex systems. “Whether it’s control systems, video analytics or integration of video to access control, or the automation and integration of audio/video systems, this is the value proposition of the integrator,” Bradley underlined. “That is the area that the typical IT integrator has no expertise in.”
Wilson emphasized that in helping customers understand the total cost of ownership of their systems, contractors make a better case for the value that they provide during, and in the months and years following, an installation project. “In a down economy, the additional value-add is going to help sell the total cost of ownership by proving to the clients that the lifecycle of that product can be extended through the expertise and service that you provide,” he said. This also makes the sale of bundled services, such as maintenance, ongoing support, and diagnostics, a little easier. “Contractors can position themselves not only as a solutions provider or a complete integrator, and they can also demonstrate that if something isn’t working, they will be over right away to help solve the problem.”
