Sea change in the AV ecosystem Finding a new path forward

The January-February issue of Commercial Integrator (CI) magazine delivered its annual AV industry insider predictions with the title "Cautious Optimism". This is based on an excellent industry-wide survey on the state of the AV ecosystem. The survey left me frustrated, as from my lens, it was much the same thing, and/or worse than ever before. At best I would consider my view that of “Cautious Pessimism”. Although I felt that NSCA’s Tom LeBlanc analysis was spot on, reminding us that one needs “to Position your company to be what their customers want them to be”. How many years have we heard- integrators cannot find candidates, or- and of most importance,- integrators “lack insufficient budgets do not allow AV integrators to meet the demands of current and prospective candidates’ salary needs.”. The survey asks about overall ??revenue but does not drill down to profit margins or retained earnings. All of this fueled my thoughts for this ecosystem of possible interest.

?A Brief History Before Offering Advice

?I invested 38 years in the AV business founding Univisions Video Systems in 1977. The business was fun and delivered 25% margins increasing to 35% when we started building and bundling things through most of the 80's.

?Then (as I called it) the video wars hit Upstate New York as MPCS / Camera Mart/ Lake Systems & B&H photo stripped nearly every profit dollar out of the box sale in attempt to win New Yorks Thruway economy.

We only survived because of?integration and bundling along with skimming enough boxes mainly due to a great service center and at the time a great PSNI product catalog to loyal clients who cared about service.?

Still the days of 30-40% margins were gone and living in the teens meant running the business within those boundaries. A national Corporate contract with Verizon, IBM Global, Welch Allyn kept us sound enough before I sold controlling interest in the company to meet Verizon geography needs and acquired Crimison Tech for geographic mirror growth.

After Univisions, UnivisionsCrimison, and spinoff AXXESS Video Productions, my time was invested between consulting, EIR roles, and CRO with a boutique IT company in NYC before finally helping Menlo Park venture firms’ start-ups with all sorts of challenges.

?A New Path Forward for the AV Ecosystem

What follows is based on the very real FACT that this ecosystem struggles to gain more than a single digit retained earnings after working hard to be in the teens (on average) net profit margins.?I have seen it, I have listened to other CEO’s and as above, I lived it.

AV integrators struggle to be competitive, to acquire new talent, (per CI survey said 76% find it most challenging going into 2025). Nearly 70% of AV integrators said, “they do not have the readiness to tackle IT”. Perhaps of equal concern is a failure to build any (Annual Recurring Revenue) ARR upon which their company valuation is a major component. Yes, there are less than a handful of integrators that have achieved at least 40%+ ?managed services and a solid ARR. Again, according to the CI’s report only 20% claimed a mere 5-10% MRR with 22% of CI survey claiming 11- 29% of overall revenue being recurring. My guess if you subtract AV service contracts, and whatever cousin you want to call AVaaS, that number sinks back to low teens or single digits. So, I ask what have you done that's new (don't say AVaaS) to give your business a healthy mix, to prepare your company for today and the future?

From my lens consistent low margins equal a failing grade and assure that the AV sector will remain a niche low margin cottage industry. Yes, a few have branded their monitoring services, and/or specialize in one sector or another (say HealthCare) while a few acquire (not mirror organizations) true net new skill sets and intellectual capital. This is the correct strategy in my view but there is so much more that can be done. My recommendations are fewer for them but for the other 98% of the businesses that find themselves stuck. Before I leave those?who choose the need to acquire capital for growth via Private Equity or a rare Venture investment, your challenges are steep in other ways, but that itself is another article.?

?A New Approach: An 'AVITA' Strategy

Let's get out of the box here, start with a fresh 'Tabula Rosa', and open mind and a dose of courage. It takes accepting that the financial results are not good enough.?Certainly, one detour to a better future is suggested here.

?Audio Visual Information Technology Access ......

...(as I prefer to brand it) is what the ecosystem needs to offer. Your company can be a portal to your NEWCO or spin-off sister company

An 'AVITA' strategy offers an open path forward with new skill sets and gravitas excitement that can be built organically or via acquisition. With this you would be free to be able to offer any set of SaaS, BaaS, DRaaS, and available IT managed service providers. ?In this world IT drives the bus and AV services get boiled down to just an overlay that gets bundled with core IT services and platforms. That alone is a shift most AV integrators find it hard to get in a new seat on the bus.?

This NEWCO structure invites ACCESS to software platforms that are selected after much study and reflect on core client business needs:

Examples include:?

·???? AI driven help desk for the IT depts ( Managed Service) MS (Example- MoveWorks)

·???? AI For the sales & marketing teams (MS) ( Example-ThoughtSpot/Seismic)

·???? Offer the proper storage and protection of all data as step one Cyber protection action (MS & integration) (Example Rubrik)

·???? Offer communication protection platform via SASE (MS) (Example – CATO/Netskope)

·???? Offer a total Managed Service (as a reseller) from leading SOC network prevention & protection?providers. (MS) ( Example Arctic Wolf)

·???? Offer a comprehensive IT monitoring service as a reseller from a leading IT firm with special video IOT detection?

·???? Consider platforms into the RPA, Robotics, Business Intelligence, Offensive Cyber Discovery, to name a few.

?Winners will be expert in finding bundles with the classical Audio-Visual solutions that include existing UCC, VoIP and Microsoft services, and display. This fundamentally is a new business , a pivot, a change in process, in short a sea change. Fix it while in flight and do NOT forget the business basics to optimize productivity - link below for that and other tips of possible interest.

?https://www.dhirubhai.net/posts/bobromano1111_just-to-be-sure-you-have-considered-all-these-activity-7295517340497063937-vFV2?utm_source=share&utm_medium=member_desktop&rcm=ACoAAADhXsoBqMt0jiyWpjevDltzxtGdPmPtA0o

All this takes a strategy*, a lot of study to select which ACCESS paths you would deliver inside a new product plan. That along with the new intellectual capital is step one, perhaps even the need to build a spin-off company with its own brand. How great it would be if the entire ecosystem sought to establish such a new category. Marketing matters as you begin transitioning and your new direction becomes crystallized. Then cross pollinate to keep core service afloat while you build a new sister company coupled with a solid sales enablement training program.

These platforms and ideas are building awareness and in field application to current IT centric firms also needing to stay competitive. Bottom line, no one is sitting still, except most AV integrators I believe.

Another story of possible interest in thinking about strategy:?

https://www.dhirubhai.net/pulse/seeking-new-strategic-directions-bob-romano/?trackingId=mMB%2FqB5mSNGvs73hDFuTJQ%3D%3D

?About the Author

This article was written by Bob Romano and contains solely his own personal opinions. Romano has extensive experience (including two startups to successful exit) providing C level leadership, sales process expertise, market branding and SaaS technology adoption from Business Intelligence? and Cyber Security. Bob has been working with Venture firms from Menlo Park, NYC and Boston where he resides.

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