Variables aren’t variables if you count on them, so let’s lay out market factors to consider in strategic planning. Here are nine things that systems integrators can be absolutely certain about in 2014.
1. Technology will continue to advance rapidly, making it more difficult to keep up with change. Integrators will need to be far more “engaged and informed,” and become experts at anticipating the next generation of product offerings they need to incorporate to remain relevant to clients. Industry expertise will become absolutely necessary to become or remain profitable.
2. Numbers and financial metrics will become your best source of information. With no room for error and with eroding margins, it will become a necessity to know the true cost of each and every project. You will have to know your labor utilization ratios and per-employee revenue numbers based on industry average versus actual.
Identify and bid based upon the true cost of labor on projects, as well as what it costs to “roll a truck.” You will learn to determine whether your margins and markups are ahead of or behind industry averages. You will start to compare wages, benefits, and operating expenses with similar companies. (To benchmark yourself against the industry, find NSCA’s Labor Installation Standard on nsca.org.)
3. Health-care reform will not be repealed. Even if Republicans upset the pollsters and win both houses in November, they’ll never get the two-thirds majority in each house needed to overturn the Affordable Care law. They can defund it and chip away at it, but it’s not going away. It’s the law, so plan accordingly this year because the employer mandate will happen on Jan. 1, 2015.
Be sure to consult experts who can not only help with the insurance issues, but also help identify your future cost model. Also, beware that even with the delay of the online SHOP enrollment, there are still avenues for small businesses to participate in Affordable Care if need be.
4. Interest rates will stay low, and then rise slightly. The federal funds rate, which is the rate the Federal Reserve uses to influence interest rates and the economy, is at 0.25 percent, a historic low. The Fed is beginning to taper its easing as the economy heats up. It has promised no rate increases while the U.S. unemployment rate remains above 6.5 percent. The economy will grow this year, which means that rates will not go down.
To minimize inflation, the only effective way for the Fed to try to control the flow of money leaving its $4 trillion balance sheet is using interest rates. Interest rates could go up sooner if it’s not managed effectively. I doubt this will be significant, but it could be costly to business owners who don’t lock in rates soon.