Segmenting the Technology Integration Industry

When I first started working in Pro AV journalism, I had to delicately explain the industry to my friends and family. I couldn’t figure out a one- or two-sentence way to encompass what integrators actually do. Maybe technology integration shouldn’t be described so briefly, considering how many types of spaces it serves and how many technology categories are involved.

Likewise, technology marketers shouldn’t use only one basic strategy if their goal is to reach integrators in more than one market. Security, Commercial, and Custom Home Electronics integrators all function similarly, but their markets, clients, and business practices keep them incredibly nuanced and different from each other.

Here, we’ll divide the technology integration space into residential, commercial, and security sectors and further subdivide them to examine what makes each of these integrator channels unique, and how technology marketers can better target each segment.

Residential tech integration

The custom electronics industry, unlike the commercial and security spaces, actually saw impressive growth over the past year despite the global pandemic’s effects on just about every conceivable aspect of life and business.

As our sister site CE Pro reports, these businesses saw an 11.5% increase in revenue on average — despite nearly half of all pros working from home throughout 2020. About 70% of CE integration companies did not even furlough a single employee during the crisis.

Part of this was due to the fact that integration companies were deemed “essential” by the federal government early in the COVID-19 pandemic.  

“Without custom integrators providing the backbone in the home for connectivity and entertainment, homeowners would have suffered much more than they might have,” says CE Pro Chief Content Officer Jason Knott. 

Influence on purchases 

It seems brand familiarity among tech-savvy homeowners can only get CE manufacturers so far. 

On over 75% of the projects counted in CE Pro’s state of the industry research, it was integrators who had “great influence” over which brands are selected.

Residents/property owners were unsurprisingly the next-most important technology decision-maker.  

Even fewer than 30% of projects listed a “third party” (likely a consultant or IT expert) as the primary decision-maker. 

With these numbers in mind, it seems dedication to the custom electronics channel is likely the best tactic for most manufacturers and software providers to adopt if they want to land more sales. 

Where they’re buying from 

Digital portals are still the most common way that CE dealers purchase the technology used in their systems, most commonly direct from the manufacturer, but also through distribution channels.

One takeaway from this data could be that integrators will reward brands they already trust with more business if the purchase experience is made to be more efficient.

CE dealers had less time on their hands this year to deal with slow, inefficient, or otherwise-confusing websites or ordering procedures.

Other stats:

• Almost 40% of the CE integrators surveyed list their company size as 25 people or less, while about 25% are between 100-500 and roughly 20% have between 26-75 employees
• 68% of revenue was earned through residential AV systems, while 17% of revenue was made from commercial projects and only 14% through service-model earnings and systems monitoring
  • the 14% of earnings through commercial jobs suggests growth in that sector for would-be resi-only companies; commercial AV manufacturers take note!

Commercial tech integration

Who are integrators trying to please, and who’s making the final decision on which technology is chosen? 

Almost 45% of the commercial integrators surveyed said IT directors have the final say. In previous research, it’s noted that people in these positions are also growing more savvy about how AV technology works and, most importantly, how it affects their networks. 

Over 25% of those surveyed said that their primary decision-maker is a manager specific to an organization, such as in churches, schools, offices, malls, or government facilities.

It may therefore benefit manufacturers to spend extra time understanding the needs, anxieties, and questions these professionals may have – and then market products to integrators centered around that knowledge. Integrators tend to lack that same complex IT understanding, so they may value one manufacturer over the other if it is able to provide this valuable context. 

One other thing to note: the commercial dealer space is not a very diverse one (honestly, none of these industries are).  

As the findings below signify, commercial integration is still very heavily made up of Caucasian men.   

Other stats:

• 83% of jobs in 2020 were categorized as “AV, Acoustic, or Audio”
• 32% of jobs were categorized under “Digital Signage”
• 30.5% of jobs were categorized under “Building Automation & Control”
• 25%: “Data Networks & IT”
• 18%: “Life Safety”
• 8%: “Lighting”
• 3%: “Phone Systems”
• 11%: “Other”

Security technology integration

Similar to the other two channels, the security integration industry seems to suffer from a lack of diversity. But that extends over to the buyer side as well. 

Some research our colleagues at Security Sales & Integration wrote about suggests men are either wholly or at least partly involved in almost 7 out of 10 smart lock purchases.

“Although it appears from these statistics that men are the slightly greater purchaser of smart locks, a recent study from Hippo Insurance posits that women are more interested than men in smart home technology that will keep them safe, while men gravitate towards devices that will increase energy efficiency,” SSI wrote.

Demographics only tells us so much. Let’s examine other facets of the security installation industry — such as the fact that we’re dealing primarily with companies which have been around the block, so to speak.

According to 2019 research from Security Sales & Integration, roughly 75% of alarm companies have been in business for 11 years or longer. Almost half of those operators have just one office, while 10% have 13 or more locations.

That tells us we’re looking at a semi-cottage industry of experienced professionals who value bottom-lines over frills and extras. They’re here to provide a serious service, not necessarily take over the market.

“The electronic security business has grown up considerably from its cottage industry roots, but remains entrepreneur-centric running the full gamut from mom-and-pop residential alarm dealers to regional commercial security dealers to global industrial systems integrators,” says Scott Goldfine, Associate Publisher/Editor-in-Chief of Security Sales & Integration.

“That diversity means their operational and sales inventory needs are similar to those of any other technology-oriented, service-based enterprise with customer bases ranging from local towns to worldwide, and everything in between. And although there continues to be a steady flow of new market entrants, most company owners and operators are industry veterans, meaning they are prudent and by the very nature of security itself circumspect where it comes to taking strategic or product risks.”

Related: Best Practices To Engage Buyers With Creative Video Content

As one might expect, about half of all jobs make their money on video surveillance, intrusion, and access control solutions. The other half consists primarily of fire safety and “other” types of security systems, with only about 9% of income being attributed to home automation.

Geographically, security pros are pretty well spread across the United States.

Over 20% of them are in the Western states; 25% in the South; over 20% in the Midwest; and 23% in the Northeast.

Expectations on manufacturers

According to SSI research, security pros continue to place a high level of expectation on manufacturers to help mitigate cybersecurity threats and protect them from litigation or loss.

On a scale from 1 to 10, with 10 indicating the “highest level of expected mitigation,” 31% provided a rating of 10.

Additionally, a combined 42% provided ratings  between 7 and 9.

This suggests manufacturers who put extra focus on the cybersecurity of their offerings may earn more trust from security dealers.

Another similar question asked to rate the extent to which a manufacturer shows cybersecurity awareness impacts buying — over 60% rated between 8 and 10.

Aside from cybersecurity preferences, it seems security pros just want to build steady, reliable recurring monthly revenue (RMR). Here’s what they said manufacturers can do to help in that department:

(Click image to enlarge)

Other stats:

• In 2019, the average number of residential and commercial intrusion alarm systems installed annually by dealers (including national companies) was 380
• In 2019, gross profit estimates were between $1-5 million for over 25% of security dealers; while 26% said their gross profit estimate was between $5-10 million; and 25% said it was between $100,000 and $1 million
• Companies surveyed average 21 residential installations per month, 18 commercial installations per month, and 16 large industrial installations per month
• 68% of providers partner with a third party central monitoring station