Commercial Integrator + Security Sales Jan/Feb 2024 - 18

CI
STATE OF THE INDUSTRY
LeBlanc, citing NSCA's biannual
" It's hard to imagine how [companies at
Electronic Systems Outlook report, which
monitors construction starts, affirms
those results, saying they mostly mirror
our own research data. He adds, however,
that one vertical market not among
our answer choices - manufacturing -
registered especially robust potential for
growth in the Electronic Systems Outlook.
" One of the reasons for that, " LeBlanc
explains, " is the focus on reshoring manufacturing. "
So, even though factories
and manufacturing facilities might not
make up a huge slice of the pie for integration
businesses, they're an area where
opportunities are particularly robust.
Hardware Margins
Although NSCA, by its nature, cannot
get too deep into conversations about
margin, the association compellingly
encourages integrators to recognize the
value that they bring - and to price their
offerings accordingly. One area where
concern about value manifests itself is
hardware margins. Looking at our survey
data, the plurality response (margins of
21% to 30%) is relatively healthy - and
it's certainly positive to see a combined
16% of survey takers say their hardware
margins exceed 30%. However, it's somewhat
troubling that 36% of respondents
report margins of 20% or below - including
a combined 11% who report margins
of 10% or less.
41% to 50%
2%
31% to 40%
14%
Less than 5%
2%
5% to 10%
9%
the very lowest end of margin reporting]
are going to continue to be profitable in
such a challenging market as we enter
2024 and beyond, " LeBlanc says candidly.
His advice for integrators is clear: " Think
more about the great value that you
hopefully deliver to your customers and
reflect that [in your pricing.] " Operating at
extremely slim margins is very tenuous;
integrators that do so might soon lose the
ability to deliver the excellent outcomes
that their customers depend on.
Editor's Note: For another view of profit
margins, leveraging data from nearly 1,000
commercial, residential and security integrators
who use D-Tools Cloud Software-as-aService
(SaaS) end-to-end business management
solution, check out the accompanying
sidebar: " D-Tools Data Analyzes Profit
Margins: How Do Yours Compare? "
Escalating Labor Costs
The cost of labor is one of the biggest
drivers of ongoing conversations about
project profitability. " It seems like very
high percentages are reporting [these]
higher labor rates, " LeBlanc observes.
And, indeed, our research study finds
exactly that. In last year's survey, modest
numbers of respondents reported higher
hourly technician labor rates: $101 to $150
(44.9%), $151 to $200 (6%), and $200 or
more (0%). By contrast, this year, we see
rising percentages across all these categories:
$101 to $150 (47.7%), $151 to $200
(15.9%), and $200 or more (6.8%).
" The top three labor-rate categories
showed at least incremental - if not significant
- growth this year, " LeBlanc confirms.
" And it's very consistent with what
we're hearing in the NSCA community. "
This is a direct result not only of inflation
but also of integrators competing for the
same highly sought-after technical talent.
Typical hardware
margin on
projects
21% to 30%
48%
11% to 20%
25%
The Need for IT Expertise
Another driver of higher labor rates is
integrators' increased focus on bringing
in IT-trained talent for more networkcentric
projects. There's no doubt that,
if traditional integrators want to transition
to the tight client partnerships that
master systems integrators enjoy, they
18 Commercial Integrator+Security Sales & Integration | Jan/Feb 2024
need to focus on improving their in-house
IT expertise. " It's hard to overstate how
important it [is] to focus on IT right now, "
LeBlanc declares. When integration
companies aren't focused on increasing
their IT capabilities, he says, it puts them
at a competitive disadvantage. " Customer
needs require integrators to elevate
their ability to provide managed services
and provide network-centric solutions, "
LeBlanc explains. Indeed, any integrator
that hopes to seize on managed-services
trends discussed earlier will require
growth in their in-house IT expertise.
Not
Not
sufficiently
trained
14%
applicable
7%
Completely
ready
30%
Training and
readiness to
tackle IT
installations
Still working on it
49%
Our research study paints a mixed
picture of integrators' readiness to tackle
IT-centric installations. Three in 10 respondents
say that they're completely ready for
IT work, while another 49% say they're still
working on it. Just 14% rate their current
status as not sufficiently trained. Curiously,
another 7% indicate the question is not
applicable to their business.
The question we posed is similar to
one from NSCA's Financial Analysis of the
Industry, a research project whose pool
of respondents tends to come from larger
companies. Reflecting on those findings,
LeBlanc says, " The average staff count
dedicated to internal IT support is growing
in most [integrator] categories. But
the larger companies seem to be [putting]
a much greater percentage of their overhead
cost toward IT. "

Commercial Integrator + Security Sales Jan/Feb 2024

Table of Contents for the Digital Edition of Commercial Integrator + Security Sales Jan/Feb 2024

Commercial Integrator + Security Sales Jan/Feb 2024 - Bellyband1
Commercial Integrator + Security Sales Jan/Feb 2024 - Bellyband2
Commercial Integrator + Security Sales Jan/Feb 2024 - Cover1
Commercial Integrator + Security Sales Jan/Feb 2024 - Cover2
Commercial Integrator + Security Sales Jan/Feb 2024 - 1
Commercial Integrator + Security Sales Jan/Feb 2024 - 2
Commercial Integrator + Security Sales Jan/Feb 2024 - 3
Commercial Integrator + Security Sales Jan/Feb 2024 - 4
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Commercial Integrator + Security Sales Jan/Feb 2024 - Cover3
Commercial Integrator + Security Sales Jan/Feb 2024 - Cover4
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