INDUSTRY DATA: INFOCOMM MDSS
single-digit, in emerging markets. Unsurprisingly, projectors are losing ground to flat-panel displays in many markets at entry level; however, increased adoption of videoconferencing technology has benefited projector sales. Categories to watch include:
Audio and video conferencing equipment – currently worth over $4.1 billion globally and growing at 21% per annum. Signal management and processing – worth nearly $4.7 billion and showing 18% growth. Streaming media and webcasting – valued at just $799 million currently, but with the highest growth rate of any single category – 28% per annum over the next three years.
SERVICES Globally, services account for one-third of revenues in the AV industry. This proportion is higher in more mature markets (41% in North America, 38% in Western Europe), but it is growing faster in emerging markets. Overall, the contribution of services to total global revenues is falling slightly, as InfoComm’s Duffy Wilbert explains (see box, opposite). At $14.8 billion, installation/
integration accounts for more than half of the $25.9 billion global market for services. Its growth rate is increasing (from 12% in 2009-12 to 15% in 2012-15) as the market becomes driven more and more by systems rather than products. The picture for the rest of the services market is less uniform across the globe. The next largest category is managed services, valued at $4.5 billion and, at 14%, showing the fastest current growth for a category in this sector. However, the market is dominated by North America and Western Europe, where systems integrators find this part of their offering to be a useful way of retaining customers. In other markets, repair-based ‘maintenance on demand’ is the most common approach. Rental and staging is the
next largest sector – worth $3.8 billion, but only growing at 5%. This market, says the report, is growing more slowly than the pro-AV market in every region of the world. In developed markets the demand for rental and staging services tends to follow the
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pattern of the general economy; however, in Asia, Eastern Europe, the Middle East, Africa and Latin America, the economic downturn has boosted this sector as buyers have diverted expenditure from purchase to rental. A small but significant part of the survey is the sector called ‘other services’: this consists of a group of services too small to be considered on their own, including content creation, CAD documentation, strategic planning and other consulting services. This market is growing at 12% per annum; however, it is dominated by North America, almost to the exclusion of other territories. One missed opportunity for AV professionals identified within this sector is content management for digital signage: while these services can be charged out at $55 to $125 per hour, there seems to be little appetite for this work among AV companies.
CUSTOMERS The survey also looked at the different customer segments in the market. The largest customer group worldwide is the corporate sector, which represents 30% of the market (and has a CAGR of 11%, rising to 14% in 2012-15). The combination of a desire to reduce travel budgets and a willingness to find new ways to communicate is driving investment in technology here. Government (including
military) is another important sector, comprising 12% of the global market; in Latin America and the Middle East/Africa, high levels of spending have pushed these proportions to 15% and 17% respectively. Education accounts for 10% of the market, and is expected to show 14% growth to 2015 – driven primarily by higher education. The best opportunities are in emerging markets such as Latin America and the Middle East. The fastest-rising sector is healthcare – listed among the ‘Others’ category in previous surveys – which is projected to grow 17%. But this figure masks a mixed picture around the world: in emerging markets, education is a more valuable sector; in North America and Western Europe, however, some AV professionals see healthcare as their best opportunity.
TRENDS Finally, the survey report comments on a number of
‘TAKE A HARD LOOK AT SERVICE’
Duffy Wilbert, senior vice president of InfoComm International, talks to Installation about the MDSS
What do you hope the study will achieve for the industry as a whole? It’s really two things. Internally, the idea of the MDSSis for people to look at it and validate their own business and what’s going on there, but secondarily for them to look at the trends and prepare their business going forward. Externally this study has become a piece that a lot of financial institutions and investment firms use. When we did our first MDSSit put the AV industry on the map, and it continues to give the industry legitimacy.
Didn’t it come about when someone asked [InfoComm CEO] Randy Lemke what the industry was worth, and he didn’t have an answer…? That’s right – about eight years ago now Randy was in China and that question was asked. Up to that point we all had a guess, but we didn’t have any research that gave us the number.
What was the finding that surprised you the most? For me, the impact of Asia, especially China. We hear in the international news about the growth in China, but this one for me drove it home. What is going on in China in particular, and in Asia in general, is really driving the overall global marketplace. The absolute growth from
2009 to 2012 and the projected growth to 2015 – that astounded me. If projections continue as they are, Asia would come close to being the size of the North American market, which for years has represented 40% of the AV market. In 2009, the European and
Asian marketplaces were about $3 billion off each other [$12.9 billion and $15.6 billion respectively]. In 2015 we’re looking at the Asian marketplace being nearly $40 billion and the North American being $44 billion.
My expectation was that the contribution of services to overall market value would rise over time, as it would be no worse than flat in any
territory, whether developing or mature. But the MDSS has this figure falling slightly – half a percentage point over six years. What’s causing this? When I first saw the global number I probably had the same thought – but there are two things driving this. The traditional AV integrators that you and I know – their service revenue is increasing. However, service is just now starting in the Asian marketplace – traditionally they’re much more into buying the box. Service in Asia isn’t increasing at the same rate as the sales of the product, so that retards the overall service model on a global perspective. The other thing that contributes to that is that we measured more internet sales this time than we have in the past. So when you put together the growth of the Asian market and the increase in internet sales, that’s why the service growth number looks flat.
‘When we did our first MDSSit put the AV industry on the map’
In the report, just after the discussion about industry skills, there is a reference to a lack of professionalism in North America and Western Europe. Please can you elaborate on this? What we’re finding is that the customer continues to be better informed and more experienced worldwide. Also they’re influenced by other industries they’re dealing with, whether it be the IT industry, or construction or whatever. They’re looking to the AV industry for more certifications, more standards. That’s what we mean by
professionalism – better educated, better certified, those kinds of things. [We didn’t mean] someone who doesn’t look good and does shoddy work – that’s not the issue. What we’re trying to say is that customers are looking for a higher-level person, and a higher-level interaction with the AV industry.
In this survey, healthcare has become large enough to justify a category on its own. Looking ahead to the next MDSS, are there any areas that you think may similarly emerge from an ‘others’ category due to changes or trends in the industry? There are a couple of things in the MDSS, and elsewhere, that I don’t think we’ve seen the results from yet. We put a chart in the MDSSfrom Cisco saying that mobile data traffic would increase 18 times from 2011 to 2016. Also the Cloud – we haven’t seen what the full impact of that will be on the AV industry. So will we have new
categories in two years’ time? I’m guessing we will. There will be changes in service models, driven by the way we think about the Cloud. There may be new categories of products and the way we move information – when you think about the whole idea of mobile and Bring Your Own Device, which is still at an early stage but is having a major impact. I can’t say what those categories would be, but the results of the Cloud, mobile data traffic and IP traffic are going to create new revenue models and categories that we’ll be looking at in a couple of years.
Are there any final points you’d like to make? We talked just now about service growth: it’s clear that the AV industry needs to take a really hard look at the whole service model, because that’s where the profit margin is going to be, that’s where the business is going to be, moving forward. When you look at the growth of maintenance services, what they’re projected to be over the next three years, there’s certainly revenue opportunity there that we all need to focus on. We all know that margins
are decreasing on our hardware, so I would encourage people to really dig into the report, look at what’s going on in the service areas and take a look at their business.
August 2012 17
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