What Happens To Integrators As Product Profits Disappear?
So you think eliminating a major component of profit and revenue from the integrator profession will make only the hardest working ones stay around?
Try it with doctors, lawyers, waiters and plumbers.
See who sticks around and works for less.
Oh, I know they will provide value and so will get paid accordingly well.
But by whom? The elated end-user, high after winning their Pyrrhic victory over the fat cats in the middle? They are going to turn around and be ok with paying what seem to be HIGHER hourly rates than ever before?
I hope I am wrong, but I'm not blind either.
NOTICE: This comment was moved from an existing discussion: Cutting Out The Integrator - Why Shouldn't I Be Able To Buy My Hardware Directly?
"So you think eliminating a major component of profit and revenue from the integrator profession will make only the hardest working ones stay around?"
Yes, I do, mostly.
Go back to 2001 - 2005 and security integrators were flush with cash, fueled by dealer protected DVRs (which were a massive improvement over VCRs much more than IP cameras were to analog) and by the 9/11 response.
This made it easy for many integrators to be sloppy and stupid, rewarding slick sales types. The money absolutely came from product sales as 16 channel DVRs were ~$10,000 in those days and you would get a 100% markup on them. It's almost absurd to think now that someone could make $5,000 gross profit on a DVR sale.
Because of this, a good salesman, with minimal technical skills or staff could make a killing.
That's no longer the case. So I think it's a positive thing that tighter margins punish the sales types who added no technical value.
"The elated end-user, high after winning their Pyrrhic victory over the fat cats in the middle?"
To that end, I don't think it's a Pyrrhic victory. End users have definitely won by punishing / hurting the old school security integrator who was just pushing boxes.
"Try it with doctors, lawyers, waiters and plumbers.
See who sticks around and works for less."
The old school security integrator was typically not very skilled in computers, networking, IT, etc. The average tech back then had an electronics background and the average sales person not much at all. So those people, in 2015, have little choice as there's no hot industries looking for people with electronic repair skills.
Overall, I think the squeeze is good to push out the integrators who don't know what they are doing, who use their firms as cash cows with little regard to technology and technical skills.
Even with product sales, professionals can still make money though. Accountants, lawyers, consultants, etc. sell nothing but their labor but still manage to have upper middle class or higher lives.
Were you a value added integrator or a box pusher?
Do you lie awake at night thinking "Now's the time to get back in. What with product margins disappearing, a guy who really knows their stuff will rise to the top and clean up!"
Its about options. Better skilled, harder-working workers will simply have more higher paying options than others. So disproportionate numbers of the better ones will leave the field since they can.
On the other hand, of those who DO stay will the best do the best? Absolutely they will. If this is your point I will agree.
But that is a different thing. I didn't say Joe at Best Buy was not honest or hardworking, I just implied they were less knowledgable.
And the best jumpers are the first off a sinking ship.
Do you lie awake at night thinking "Now's the time to get back in. What with product margins disappearing, a guy who really knows their stuff will rise to the top and clean up!"
The disappearing margins have no impact on my desire to be or not be an integrator. Indeed, I do believe that lower margins are flushing out the big talker / relationship salesmen, which is beneficial to my skillset / personality.
There are 2 big other challenges:
- Selling time for money does not scale well, especially considering the Internet has enabled so many businesses to sell information / knowledge / code. Install one camera, design one system, get paid X once. Build some tool, publish some report, get paid many times X. That's the biggest advantage to me of an online service over an integrator.
- Differentiating technical abilities. Since common practice in this industry is to give away designs, it undermines one of my relative strengths. I guess I could try to charge but it's tough to convince people when most of your competitors throw it away to hope to sell some boxes and get some labor contracts.
Better skilled, harder-working workers will simply have more higher paying options than others.
I don't disagree here, but for different reasons than the margin crunch.
Related: Should Talented Young People Get Out Of The Security / Surveillance Industry?
"Even with[out] product sales, professionals can still make money though. Accountants, lawyers, consultants, etc. sell nothing but their labor but still manage to have upper middle class or higher lives."
I do not think that comparing system integrators to accountants or lawyers is fair. There are significant barriers to entry to those professions, and professions like them - mainly in the form of education, training, and certifications. These barriers are well known and bring prestige to those who attain these designations, which in turn affords such professions the license to charge for their knowledge labor. These types of professions also have professional organizations that represent them / police them. Again, more social license to justify their work / fees.
Also, most people working within these professions are also taught / trained to know the value of their time / work and do not typically undercut each others price structures because they understand that they de-value their entire profession by doing so.
A lot of jurisdictions do not require system integrators to be certified or licensed, and even if they did, these certifications are not valued in the same way as a lawyer having passed the bar or an accountant receiving their CPA designation. To the common end-user system integrators are "cabling guys", or "alarm guys", and do not understand that a quality integrator must be a jack of many trades, and a master of a few to boot.
I do agree that "quality" integrators will always have work, but more than likely only at the high-end of the market. With the erosion of product margins I can see many small to medium sized integrators being forced out of the market, becoming glorified sub-contractors, or pivoting to becoming more of an IT organization selling services beyond alarm, access control, CCTV integration.
"There are significant barriers to entry to those professions, and professions like them - mainly in the form of education, training, and certifications."
Simon, that's a good point. I agree specifically about licensing for CPAs, lawyers, doctors, etc.
But if security systems integrators don't need (or customers don't value) eduction, training and certifications, what does that say about the value buyers put on security systems integrators?
'But if security systems integrators don't need (or customers don't value) eduction, training and certifications, what does that say about the value buyers put on security systems integrators?'
John,
The fact that integrators "don't need" certification is an industry issue. An industry with no recognized certifications, or licensing becomes an industry that is easily devalued. A National certification that requires thorough knowledge of basic electrical theory, electronics, IT fundamentals (think CCent, A+, Security +), construction fundamentals, safety training, as well as a brief apprenticeship would go a long way to show / prove the value of a system integrator. With such a training / certification / licensing system Integrators could easily justify their labor costs to an end-user.
This would also be a great way to eliminate the "trunk slammers" that so many people on this forum speak of with derision. It would also be a way for integrators to not have to rely so heavily on margins from hardware sales.
Also, I don't believe that customers don't value education, training, etc but rather that the burden for them to qualify how educated / knowledgeable / capable an integrator is is quite high. They have to do research to understand the complexities of what we do, and what it takes to be good at it. They will also have to look at reviews and references, etc. The large majority of end-users / customers won't take the time (and should not be expected to) to research and understand all of the things that go into making someone a good integrator. Thus, they won't be very well equipped to judge how educated / trained / knowledgeable an integrator is.
In my mind this is why the majority of end-users don't necessarily see the value in system integrators, and why they feel that they can / should be "cut-out".
The disappearing margins have no impact on my desire to be or not be an integrator.
Are you motivated by money? When you were an integrator, roughly what part of your income do you think came from margin, either directly or indirectly (higher salary justified thru companies product margin)?
If that had gone away you wouldn't have cared?
Indeed, I do believe that lower margins are flushing out the big talker / relationship salesmen, which is beneficial to my skillset / personality.
So Taps for the Colonel? I can see that.
Do you think that on average that integrators will be making more adjusted income in 2 years?
If you think more, explain where this more money is coming from, (e.g. fewer people charging higher rates)
If less, explain why lowering the average income of a profession raises its average competence?
"Be careful what you wish for, you might get it..."
Much as it might seem, I am no defender of the channel. But I have tempered my view thru exposure to this forum and its members.
Before this site, I was an occasional poster on the control4.com forum, mainly because I was saddled with a system thru no fault of my own.
I remember posting various technical questions and getting the run around, with the ultimate answer usually being "you need to talk to whomever sold you the system". Which was my brother-in-law;
And I had no intention of talking to him about it because I was quite determined to demonstrate how an end-user could easily manage any home entertainment system. Getting forbidden manuals and gaining access to the dealers only site was the fun part; setting up the system optimally was not so easy.
Though I never asked for help, I realized that someone else without the time to burn that I did might be better served by someone like my brother in law, than going it alone.
I also realized the considerable setup time required by one of the systems. Yet I think the typical consumer doesn't. A control4 controller might have cost $2000 back in the day, maybe $1000 was going to the integrator. But if you could have bought the controller for $1000 I think most would try real hard not to spend $1000 to have someone put it in.
I don't know what it is about product costs vs service costs, but there is definitely something psychological going on the gives us less pause when buying a product than the install.
Be that as it may, I don't see it changing, and therefore I see tougher times in general for integrators as the built-in incentive disappears and the consumer will only grudgingly replace by paying directly for labor.
Smart integrators will need to find a way around this conundrum or move into to something else. Which will leave a lot of people doing installs cheaper and cheaper and of poorer quality.
Thats why I feel that it's a mixed bag and not simply a win for consumers like is oft portrayed.
The user has very limited tools to appreciate the value of any particular integrator. What differential benefit or risk will be incurred from choosing integrator "A" over integrator "B"? That's only a hair's breadth away from the next logical step: ...from choosing no integrator at all?
How much value can an extremely proficient integrator offer over a trunk slammer?
How can the customer differentiate between the two?
Honestly, a capable salesman can move coal in Newcastle. What does the buyer wind up with?
I wonder if video surveillance would be more widespread if it were marketed as a commodity than if it were marketed with all this FUD justifying the existence of a high priesthood? FUD often causes one to question one's choices, then delay. With delay, if nothing bad happens, then could it be that maybe we didn't need it in the first place?
Technology and advancement has taken the mystery and complexity out of security sales. Any competitent IT department can do a CCTV install these days. When it comes down to it its just networking, data management, and configuration. I am sure a dedicated integrator could do the job 10% better possibly, but will a customer be willing to pay the premium for that $$ investment. With hardware now a comidity and having seen the writing on the wall a while ago, we have drastically diminished the focus on cctv sales. With Amazon, BH photos and now distributors selling direct, the channel is slowly decaying
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