An Alternative View: Viability of the Technology Integrator Business Model
Specialty high-end custom retailers and technology integrators with showrooms have evolved into very sophisticated enterprises. The complexity of components and systems dwarfs what was sold just a decade ago. We now operate in more product categories than we ever dreamed of. Think about the expansion into categories entered into during this period of time, not to mention the expansion of your role as major contractors on new and retro construction.
While this evolved business model has been the basis of most companies’ growth, if not their survival, it does come with some financial impact. Think about all the additional fixed overhead that is now required: Staff is needed to do system engineering, documentation and project management, and to provide for such necessities as more demanding networking, longer-term installations and never-ending technical support. It’s not like these systems have gotten any easier; integrations are more complex and product use is frequently non-intuitive. It also seems as if there is an inverse relationship between a product’s performance and its reliability! Thus, it’s not uncommon to realize significant amounts of client technical support, on-site system rework, and product replacements. All of this erodes project profitability.
Far and beyond, the biggest challenge many businesses face is erosion of operating margins. While everyone has realized significant increases in fixed operating expenses, most margins from manufacturers have remained the same. High-performance audio hasn’t grown significantly over the past decade.
Fortunately, high-end retailers and technology integrators have grown by diversifying their product categories and services offered. Fortunately, some audio categories have recognized this challenge and changed their margin on specific products categories.
It’s also worth noting that most surveys have documented that many companies don’t realize labor as a true profit center but unfortunately, at best, break even once fully loaded expenses are applied and the net transactions are completed.