There are a lot of transitions happening in the world—from presidential elections to Brexit—all of which impact the global economy. There’s just as much change occurring on the technology front as Industry 4.0, the Industrial Internet of Things (IIoT) and digitization create more connectivity, data analysis and knowledge that will ultimately increase manufacturing agility and productivity.
All of this activity represents an opportunity for system integrators. That was the message delivered by Jose Rivera, CEO of the Control System Integrators Association (CSIA) during his opening remarks at the CSIA Executive Conference taking place this week in Fort Lauderdale, Fla.
This year’s conference attracted over 500 system integrators who have a very important decision to make: embrace change or become extinct.
The challenge—or opportunity—they face is adopting a subscription-based model and specializing in an industry. This is different from the broad factory automation and control integration approach. “The opportunity is the interconnected world, which needs more system integrators,” Rivera said. But it also requires a change in mindset and business model.
According to Rivera, analyst groups such as Gartner and IDC have predicted that 50 percent of system integrators (SIs) won’t be here in three years if they don’t transform their business model or merge with another company. “That is a dramatic prediction that puts urgency into the need for transformation within our industry,” Rivera said.
As a result, CSIA is evolving to provide best practices and guidance to its member community to help them adopt the new business models. That includes building out a financial benchmarking system based on specific operational KPIs for SIs. CSIA is also extending the global organization in order to benefit from approaches to automation happening in other parts of the world.
As part of the business model transformation, CSIA brought in experts like Mike Harvath, president and CEO of Revenue Rocket, a company specializing in business growth strategies and mergers and acquisitions. During his presentation on business model fundamentals, Harvath drove home the point that profit trumps revenue growth. Simply, the more profit in the business, the more it is worth.
And growth comes in stages: profit first (getting the organization aligned around making money), scalability second (now that there’s profit, invest in business models and people), and then growth comes third (growing the business in new ways by changing up the revenue model).
SIs looking for growth should look no further than IIoT, Harvath said. “There is a huge opportunity presented to everyone in this room as it relates to analytics and selling access to data. Data has huge value if you mine it properly, build an offering around it and sell it back. Most of you don’t do enough of it yet, but it is an emerging trend that you should think seriously about,” he said.
Furthermore, it is time to focus, Harvath said, noting that SI business models must align more vertically and offer reoccurring revenue models through service-level agreements and long-term maintenance and support agreements. Consider that the buyer has changed, too, as they are more focused on business outcomes with a need to have meaningful planning discussions before implementing any technology or equipment.
Change doesn’t happen overnight, but it has to happen. “The biggest challenge and risk you have in your business is your lack of willingness to change,” Harvath said.