The Value of Recurring Revenue Explained by Successful Integrators
To be successful, integrators as well as their customers must understand the value of recurring revenue.
There are many ways integrators can create recurring revenue through managed services. The key is making sure they do it.
Editor’s Note: This year, EH Publishing and AE Ventures partnered to launch the Security Sales & Integration Summit, a new hosted-buyer style event for security dealers and integrators that was co-located with the long-standing CE Pro and Commercial Integrator Summits in Atlanta, Nov. 2-4. Together the events comprised the Total Tech Summit. The following story first ran in SSI’s sister publication Commercial Integrator.
Whether you’re working primarily in commercial, residential or security integration, it’s more important than ever to find new ways to generate steady streams of income as product margins continue to shrink.
Although that seems like common knowledge for many who read CI and sister publications CE Pro and Security Sales & Integration, a panel of experts at the Total Tech Summit in Atlanta said not everyone has realized the need for recurring revenue – and too few do it well.
Yorktel earned CI 2015 Integrator of the Year honors by developing a recurring revenue model few others in the industry could even envision. The company generates about half of its annual revenue from service contracts, often leading with service in its pitches to customers of all sizes.
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“We wanted to move from being reactive to proactive,” says Frankie Escribano of Yorktel, noting the company started with a basic on-site monitoring program that has grown in all directions and into many verticals in the seven years since it launched. Yorktel houses video network operations centers (VNOCs) in New Jersey and U.K.
“The bigger the customer is, the more they expect and the more they want either for free or at a discount,” says Escribano. “We got into managed services because we wanted to be a partner with our customers and get closer to them. [Having a managed services offering] gives you the ability to take calculated risks and bring that expertise in-house.”
Escribano says integrators should share the information they collect through remote monitoring with their clients as a way of shaping their future technology decisions. That includes dashboards that highlight what rooms are used and how, “so they can see the value they’re paying for,” he says.
Integration firms that don’t make recurring monthly revenue a priority won’t be around long.
Why Recurring Revenue Is so Important
“Everything has to revolve around RMR,” says John Brady of TRG Associates. “You’ve got to have that culture that service is part of the sale. That starts with creating discipline among the sales team and pricing it properly.”
Wynne Walker of Symbio Lighting and Control says expectations by clients that they’ll get instant fixes when something goes wrong and that their technology should be easy to use and immune to failures puts a lot of pressure on integrators, who often work for free when they talk clients through an issue in a 15-minute phone call.
The cost of providing service is increasing, says Walker, especially for remote support. That means integrators have to “monetize what we’ve given away for free,” he says.
Integrators should increase their labor rates, know it’s OK to make mistakes as they launch a recurring revenue program and keep things as simple as possible for customers, possibly offering a tiered program that allows them to choose how much coverage they want. Managed support is a critical element of a recurring revenue program.
“You can’t do monitoring without having support first,” says Walker.
Integrators should be data-driven and focused on being service managers, but have to be adaptable and be willing to listen to clients’ needs and desires, he says.
Craig MacCormack is an editor with SSI’s sister publication Commercial Integrator and can be reached at [email protected].
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