Where is the money?

Are UK government cuts taking their toll on the country’s AV businesses? Is the private sector investing and what should the AV market do to make the most of the available opportunities? Anna Mitchell asks where the money is in the UK.

As Europe claws its way out of financial crisis government spending plans, approaches and austerity measures are increasingly scrutinised, criticised and applauded. There doesn’t seem to be one right approach and, even among top economists, it often largely depends on personal opinion and not empirical analysis to decide which plans will be most successful.

In May 2010 the UK didn’t exactly vote in a new government. Due to a hung parliament they were given one and that coalition government has set out and embarked on quite vicious spending cuts. Given the massive hole in the country’s finances and mounting sovereign debt many believed it was the only approach to secure the country’s future.

But, to avoid a double-dip recession that approach relies heavily on one thing: the growth of the private sector to shore up cuts in public expenditure. Although some indicators were looking positive recent stock market activity, low growth and a huge dip in the UK Purchasing Managers Index don’t add up for a positive outlook.

Both sectors have, at various times, afforded great opportunities for the AV marketplace and if both were to shrink at the same time you would think the nation’s consultants, distributors and integrators would struggle.

For Martine Dodwell-Bennett, marketing director of UK distributor Steljes, the growth area is firmly in the corporate sector. But, that’s not necessarily because the market is financially flush. “This is driven by two things,” she explains. “One is product readiness, in terms of software application for interactive tools within the workplace. Secondly the recession has helped us immensely. Businesses are looking to increase their return on investment, reduce travel and become more productive. We have a product portfolio that supports those aims.”

So certain AV solutions can actually play into a market trying to reduce costs. That said, Ray Phillpot, chairman of AV integrator proAV, did note a slump in investment from the finance sector after the crash of 2008.

He says: “The investment sector took quite a big hit and saw budgets cut. Now we’re seeing those companies start to spend again. We’ve just won a couple of sizeable contracts with financial institutions. Corporate as a whole is looking good at the moment with technology firms looking very strong.”

But, as Phillpot’s managing director, Richard Brooks, warns the market should still be approached with caution. “We are not sure that we are fully out of the recession with the markets currently in turmoil. Certain market genres are more affected by the economic downturn, in particular our public sector division has seen significant restrictions on budget and project opportunities associated with traditional meeting and conferencing applications. However, there is still growth in video communication based on its ability to reduce travel costs and increase efficiency.”

Lessons can be learnt from both Steljes and proAV. The companies have both reacted to the changing face of the UK market and both seem to have reaped the benefits. Steljes recently ploughed resources into what was perceived as a growing corporate market, largely at the expense of its strong education division. And ProAV has reflected the shift towards video communications and an increasing need for service solutions, launching proVC and revealing to InAVate the forthcoming launch of proFM.

Phillpot explains the rational behind proVC. “We’ve worked for quite a while with major vendors such as Cisco and Polycom and we didn’t want to be seen as another AV integrator in the UK that simply rolled out video conferencing.

“Armed with IT skills, which have so long been short in AV companies, we’re in a strong position to deploy video networks, and have the agility of being a relatively smaller company. Most importantly we have a background in AV.

“The reason system integrators are being taken so seriously by the big vendors, such as Cisco and Polycom, is because we represent a great channel to market providing we are able to take up those skill sets.”

ProAV has also responded to what it perceives as a post-recession shift to service. “Our support services division, soon to be rebranded proFM, has a revenue stream in excess of £5 million. The greatest loyalty is found through support services. I think the future is not just about growing business through new projects but developing opportunities with existing clients, by introducing new technology such as video streaming solutions, telepresence and digital signage systems.”

Back to Steljes and Dodwell-Bennett explains the company’s recent restructure. “The overall headcount didn’t change here at Steljes but we did move staff over and recruited heavily into the corporate side. We needed a different skill set.

“Selling into corporate is very different from selling into education. Education customers are often very clear on the solution they want as they are very familiar with the benefits of interactive technologies having such solutions in the classrooms for over ten years now. The solutions are quite similar but there’s a massive difference on the software side and the service wrap around is much more demanding for corporate. Margins and opportunities are better in corporate as a result.

“The shift in staff was required to service the amount of leads we were getting in corporate. At the same time education had a complete restructure. Before there were lots of local authority contacts for us to deal with but the new government changed all that. We’d employed people to engage with these authorities and suddenly there was no one to talk to.”

So who are the integrators and distributors talking to in the UK? Both Phillpot and Dodwell-Bennett note the importance of the AV consultant. So nothing new there. More interestingly the end user cropped up as an important target for both companies.

“End users are becoming more technologically informed all the time,” explains Phillpot. “Particularly when you’re selling a video solution you must demonstrate [to the end user] the competencies of a credible video organisation and the appropriate software skills. Let’s face it no IT department is going to let you anywhere near their network unless you have certified network technicians.”

So who is this end user? Brooks says it includes C Level executives, IT managers and directors, AV managers, facilities managers and purchasing teams. Decision making can go with any of those job titles but how to you promote your services to a range of people with such different demands? A CEO will look at the productivity benefits, or even consider company promotion, when implementing a telepresence system. The IT manager is going to be far more interested in security and the impact it might have on the company’s network.

“I wish there was an overwhelming job title or department specifying these technologies,” says Dodwell-Bennett. “But there isn’t so we try and focus on the benefits products will bring rather than being too technical until we get to a certain point.”

The opportunities are there in the UK market but the landscape has changed. The approaches that stood AV companies in good stead maybe two or three years ago simply won’t cut it in today’s market.

Integrators, distributors and even vendors must be aware of the increasing importance of the end user. They must know where the money is and understand that a sales approach for one market will not fit well into another. They must understand the massive importance of service contracts and how this can protect against diminishing margins.

Finally, and perhaps most importantly, they must embrace convergence of IT, video communications and traditional AV. This has major impacts on the traditional AV model as integrators are forced to talk to and understand the needs and concerns of network managers.

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