Steering a steady course

• Features

• 27/11/2015

The Impact Europe Group is one of Europe’s larger systems integration groups, with 14 locations around the UK and Scandinavia. At the start of what will certainly be a testing year for many companies, Chris Fitzsimmons spoke to Group President & CEO, Fredd Causevic for his take on the market, and some advice on getting through the next twelve months.

Fredd Causevic, a graduate of Norway’s famous BI School of Management in Oslo, where he trained in Business Administration, and came within six months of becoming an auditor before he saw the light and escaped. Instead he has pursued a career in the Telecommunications and IT business, with his last position being as President and CEO of OTRUM, a Norwegian based designer and integrator of interactive TV solutions for the hospitality market, a role he held from 2000 until 2006. He then joined Impact Europe and since that time the company has enjoyed considerable success, winning multiple awards for the quality of its installation work, and being recognised by suppliers and customers alike. In 2008 Impact was voted Tandberg’s Best AV Integrator in the EMEA region at the partner summit.

High on his task list was to introduce some semblance of standardisation to the company’s different offices. Another issue, which needed addressing, was the shift in the way AV technology was purchased and perceived by its customer base. “AV has changed from a luxury, to a mission critical service. Also, the responsibility for procurement has moved to the IT department. We as an organisation have had to learn a whole new language in order to communicate with our customers effectively.”

At the same time, AV has been required to pull its socks up in terms of its professional values. The industry, according to Causevic, is probably five years behind Telecomms or IT in this regard.

“AV traditionally has been an industry which is very good at selling hardware, but not been good on the project management or service agreement side of things. We’re now in head-to-head competition with IT systems integrators for video conferencing projects. They operate on about 5-10% gross margin on the hardware and make their money in the consultancy or project management phases.”

Contrast that with what had previously been the case with the AV players – make your 30% on the £10,000 projector and put it in essentially for free.

However, with a change in the economic weather comes new challenges, and I asked Fredd for his view of the current position. Like many before him he points to the order pipeline for a good indication of what’s going on. “We’re looking at the prospects that are out there, and the chances we have of winning those contracts. There are clear signs that those indicators are slowing down. Internally we are planning for a drop in turn-over of around 10% in 2009.”

There is good news though. “In the public sector there are currently a lot of initiatives centred around avoiding unemployment through investment. We see generally higher activity in the public sector.”

“But for the business available there are a lot more dogs fighting over the bone. I heard an anecdote from a colleague in the UK yesterday. He was called in for a site survey for an open tender job. It wasn’t very big, and he would have normally expected three guys to show up, but instead ten showed up including all the big players.”

So how does Fredd anticipate the Impact Group will navigate the stormy waters ahead? Well the first step has been a significant cost cutting exercise. “Our largest single cost is our employee salary cost. We have already adjusted our organisation, a process we completed before Christmas.”

This adjustment took the form of a 15% reduction in the group’s work force. That sounds like a lot, and it is, but Causevic strongly justifies it, arguing: “We had to do that. I think that in three to six months time you will see those companies who don’t take such steps running out of cash and suffering from their very high cost base.”

Causevic also believes that integrators will need to be clever about how they target their efforts. “I think you have to make sure about how you look after your customers, and how you improve your value added services. You have to keep your existing customers happy, and make sure you deliver good quality.

“Also I think if you are smart about pushing collaborative technologies such as video conferencing then opportunities will arise in 2010. We as a company have identified some key segments in which we believe we can bring something special to the market, and which we believe will be less affected by the down turn. We will also be trying to avoid those areas where we think competition will be really strong.”

Another topic of discussion around the industry at the moment is supplier pricing. Rumours abound that several large vendors are planning double-digit price increases for 2009. Fredd confirmed that several major players had come to the table with such figures in mind, but also added that he and others would resist strongly. “They are all suffering, but we say wait a minute, the market is down. How can you talk about price increases? Eventually I expect some of them will concede and drop prices to keep the sales volume up.”

In the short term however, the opposite could be the case. A lot of distributors have full warehouses at the moment, and will need to clear the stock before they can take new product at the higher prices that suppliers are seeking. This could lead to some bargains for the canny integrator during the first quarter of this year.

The issue of supplier pricing touches on what Causevic sees as the key to successfully negotiating these tricky times: relationships with partners. Of course customer relationships have always been important. Nothing has changed here. But relationships with suppliers are now also key. “During these times we see which of our suppliers are with us, and which are not. Also, we have realised that we can’t be all things to all men. Previously for example we’ve used every major display manufacturer’s products, depending on which office, and which customer we’re working with. This means we have to build warehouse inventories of brackets and everything else around this. Now we must look after our operation costs, and reduce inventories.”

So does this mean that Impact and others like them might move to a single preferred supplier model for particular product groups? “Yeah, absolutely. We need to build strong relationships and concentrate on particular customers AND suppliers. If we can say to a vendor that we prefer to supply their products then that should help us in price negotiations as well.

Finally, there is of course ISE. Tradeshows are often dangerous cash and time sinks for visitors and exhibitors. I asked Fredd what his thoughts on the 2009 event are. “I will be surprised if it doesn’t feel more subdued than previously. We have reduced numbers of staff that will attend. And those that go will be accompanying some of our key customers. We will use the show to introduce them to key suppliers and we have a carefully planned programme to make sure that both they and we get the most from the show.”