|The report states that integrators can remain
profitable if they focus on increasing service
and maintenance revenue
As dark economic clouds continue to linger across the world, how can building automation integrators guarantee future success? A recent report from IMS Research
(recently acquired by IHS Inc
. (NYSE:IHS)), states if integrators focus on increasing service and maintenance revenue they can remain profitable despite the economic conditions.
The IMS Research report titled Integrating Smart Building Systems – A Quantitative Market Analysis, estimated the market for building automation service and maintenance was worth $2.6 billion and $2.7 billion in EMEA (Europe, Middle East and Africa) and the Americas, respectively in 2011.
William Rhodes, senior market Analyst at IMS Research comments, “Maintenance is seen by most systems integrators as the area where they can make the most profit. Service contracts generate regular revenues, allow the integrators to develop their relationship with the customer, and provide an opportunity to win future business.”
A maintenance contact is not always the easiest service to sell. During the installation phase of a project the integrators could be working on behalf of a mechanical contractor. In these circumstances the integrator may not have direct contact with the end-customer, preventing early discussions on the maintenance of the new control system.
Rhodes continues, “If you can get in front of the end-customer, offering additional value-add services such as building analytics, remote monitoring and benchmarking will often help encourage a customer to sign a service and maintenance contract. Integrators can use value-add services to identify broken or faulty equipment and notify the customer, before they find it not working properly.”
One strategy taken by integrators to win a service contracts is to lower the installation margin they charge for the building automation equipment. Their aim is to take a short-term hit putting them in a better position to win the service and maintenance contract and return the desired profit on the project. In theory this strategy works well, but the installing integrator is not guaranteed the service and maintenance contract once the project is complete.
Whichever way the integrator secures the elusive service contract, once signed they can guarantee future recurring revenue, enabling the company to batten down the financial hatches no matter how bad the economic storm.