This Is Why Larger Integrators Have Higher Overhead And Charge More

#1, thanks. I made this its own post since I thought it was quite helpful in explaining the issues involved.

The larger integrators have higher overheads. Accordingly, they charge more.

Do larger integrators really have higher overheads, per employee or however we figure the math?

We all collect data, if you want everyone's number then write your own RFP and send it to all your competitors.

Can IPVM create a fictitious RFP so everyone can bid on it? No holds barred.

Here is food for thought.  We have a name in our industry if an integrator has only one tool in their bag, "price".  They are considered a trunk slammer.  What is the equivalent for a customer? That person whose main and perhaps only focus is the price?  

This is a really good post.

I work for one of the largest integrators in the country. I would wager that we have more people in our monitoring centers alone than 99.9% of other integrators in the country have on their entire staffs. I don't say that as a source of pride, but rather as a matter of fact. We have 50+ offices across almost every state, thousands of technicians and support staff across the country, a couple hundred salespeople, a legal team that has to review everything we do to protect us as best as possible...the list goes on and on. The best part? We're a public company and our financials are available, including our operating margin. Let me spoil it for you and save the time -- big integrators don't make insane money regardless of what they charge, and it's not just because we're grossly ineffecient. Are there things we could do better? Absolutely. But anyone who thinks we charge too much clearly doesn't understand the fundamentals of our business, or simply doesn't value what we can offer. 

For the record, that's not suggesting that there is always value to offer for every customer. There may not be anything for them to value. Just saying that I fundamentally disagree with the idea that big integrators just overcharge everyone because they can.

"But anyone who thinks we charge too much clearly doesn't understand the fundamentals of our business, or simply doesn't value what we can offer."

How does the overhead of the integrator factor into the value proposition to the customer?

Answer:  it doesn't

I think this is the key point that a lot of people are missing:

What is the value to a customer to go with a larger integrator where they will definitely pay more?

Extra services that the smaller integrator can't provide has to be the answer - or nobody will pay more.

At the end of the day most businesses, integrators or otherwise, only make what the customer is willing to pay. Pseudo-monopolies like cable or telecom companies, auto manufacturer dealerships might have a little more leeway, but in general, where there is competition, no customer really has the right to complain.

Limited channel video surveillance products (Genetec, Avigilon, etc) may create some issues if local partners can not perform, but the customer should be aware of that when they originally purchase a system. As an integrator sales engineer I used to name the 5-6 other competitors in the area. I believe it showed the customer we believed we were not trying to hide anything, and let them know they wouldn't be stranded with no support if something happened to us.

The concept of overcharging is an excuse for the customer not doing their due dilligence.

For many/most, it is the same reason customers choose a national bank rather than a local.  They can get service no matter where they are and the larger bank has more to offer.   

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How does the overhead of the integrator factor into the value proposition to the customer?

Answer: it doesn't

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Interesting......and,  in my opinion, half right.

I agree that it does not factor into the value proposition but it does impact sell price, which, in turn, effects a customers interpretation of both perceived vs actual value.

Because different customers have endlessly different mental or procedural processes in determining their view of value, based on such things as personalities (or personality disorders) temperament, experience, knowledge levels, and other pure variables - trained sales professionals become necessary (whether you techs like it or not).

It is their job to properly assess the decision maker, understand their quirks and eccentricities, understand their organization and its budget restrictions, and then proceed to throttle the pitch up or down.   There is no one-size-fits-all customer.

So costs, and (more directly to your comment) the basis of that cost, (cost plus overhead) represents the foundation of the interrelationship between a more complicated value proposition analysis by the customer, and its vendor who provides product and services.

We deal with some clients who have ranging between "technically" to "officially" their own security tech staff. I say that because some have dedicated, full time security tech staff whose primary job is the security system and anything else is secondary. Those do pretty well on their own because they can truly do things proficiently. Yet they still use us for labor, mostly for new installations, while they perform their own administration and maintenance. It saves them from having to increase their staff size.

The ones that commonly run into trouble are the ones who are "technically" the security tech staff, but it's only a part of their responsibilities and not their main focus- usually it's other IT work. These are the ones that usually complain the most about cost. They go from contractor to contractor based on the lowest price- poorly run wires, no consistency, ryhme or reason to the system setups and layouts, some don't even know how to set an IP address in the camera and the IT person has to help them.

We have a few big clients who operate that way and what we have seen is that alot of their staff has developed, over time, advanced levels of CCTV knowledge........

........,Analog CCTV, that is.

And so it has been a challenge for us to find a respectful way to advise them that everything that 4 or 6 of their loyal employees know about CCTV is basically no longer practiced, without them perceiving it as a control or money grab.  And these are good people who we work well with.  But when a major enterprise analog system shifts to IP and the staff has no prior IP training, it gets a little tricky when trying to get the job done while simultaneously tip-toeing around fragile egos.  

Bottom line is the supply and demand for experienced and talented people.  If you want to employ the best, you will have high overhead.