Commercial Integrator + Security Sales - January/February 2025 - 17

Business Climate and
Integrator Optimism
The confl uence of numerous factors (e.g.,
ongoing talent-related issues, uncertainty
related to stiff tariff s, still-high interest
rates) might cause the integration community
to be in a cautious mood at the
moment. Accordingly, during our survey
fi eld period (late fall and early winter
2024), although we found most integrators
feeling relatively optimistic about their
future prospects, sentiment was less rosy
than it had been 12 months ago.
It's true that 39% of respondents
described the business climate as either
" Excellent " or " Very Good, " as compared
to 36% who said the same last year.
However, 15% percent of survey takers
said the current business climate is " Fair "
or " Challenging, " a bit more than the 11%
who indicated that last year. Looking to
the year ahead, 66% indicated that they
expect an upward revenue trend. That,
on its face, looks very good; however,
last year, 82% of respondents forecast an
upward revenue trend, indicating more
muted optimism this time.
Industry sentiment, of course, does
not exist in a vacuum; it's infl uenced by
dominant media narratives, political
messaging, geographic factors and more.
Thus, it's worth doing a " reality check "
on the economy and its relative strength.
For Wargo, the American economy tells
a story of resilience despite ongoing
pressures (e.g., high interest rates, infl ation).
To wit, core metrics of economic
strength like GDP still look pretty good;
for example, estimates indicate that the
U.S. economy enjoyed a 3% annual rate
of growth Q2/24 and a 2.8% annual rate
of growth in Q3/24. " We've done better
in a lot of quarters than we thought we
would, " Wargo refl ects. " And certainly no
indicators, at least on that metric, of a
recession so far. "
A Saddle Year?
Wargo does acknowledge a few specifi c
indicators associated with recession risk
- namely, declining workforce growth
and slowing/weakening consumer
spending - that have manifested in
recent months. These perhaps factor
into why he hypthesizes 2024 might
prove to be a " saddle year, " marking a
low ebb for growth, but with growth
accelerating in 2025 and 2026. " We're
expecting better growth even than we
saw in 2023 as we go into 2025 and 2026, "
Wargo forecasts.
Data-driven positive predictions notwithstanding,
NSCA clearly detects a level
of unease among its members. " It seems
like integrators are very concerned with
macroeconomic issues this year as compared
to past years, " LeBlanc says. This
prompted NSCA to arrange for its economic
analyst, Dr. Chris Kuehl, to send
regular integration industry-specifi c economic
reports. Like Wargo's, Dr. Kuehl's
grounded take - free from the infl uence
of panicky news in the media - doesn't
paint a picture that raises big concerns
for 2025. This is especially true given the
Federal Reserve's posture to continue
cutting interest rates, an economically
stimulative action. LeBlanc points to the
Fed's 50-basis-point rate reduction last
September as a move that will likely fuel
investments. " That's going to be good for
our industry, " he refl ects, " but it's also
going to take time [to be felt]. "
Industry-Specifi c Factors
Let's consider some factors more
endemic to the integration industry,
such as project backlogs and the cost of
labor. Our industrywide survey suggests
that backlogs aren't quite as robust as in
recent years, with 34% of respondents
saying their current backlog is either
" Down Slightly " or " Down Signifi cantly "
as compared to this time last year. Perhaps
more tellingly, this year, 12% are in
the " Down Signifi cantly " column versus
the 7% that characterized themselves that
way in fall 2023. And only 10% of survey
takers called their current backlog " Up
Signifi cantly " this time as compared to
25% who selected that description in fall
2023. What explains this apparent weakening
of backlogged project work?
According to LeBlanc, there is less
" smoke and mirrors " now (i.e., less
backlogged work not ever coming to
fruition or being indefi nitely delayed);
as we enter 2025, what you see is what
January/February 2025 | Commercial Integrator+Security Sales & Integration
17
Excellent
7%
Very
Good
32%
Describe
the current
business
climate
Challenging
5%
Fair
10%
Good
with
Growth
Slowing
22%
Good with Room
for Improvement
24%
Up 11%
or more
17%
Down 6% or
more
2%
Down 1%
to 5%
20%
Up 6%
to 10%
27%
Full-year
2024 revenue
vs. full-year
2023 revenue
Flat
22%
Up 1%
to 5%
12%
Up 11%
or more
12%
Down 6% or
more
5%
Down 1%
to 5%
10%
Up 6%
to 10%
34%
Expected
revenue trend
in 2025
Flat
19%
Up 1%
to 5%
20%
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