10 Things Systems Integrators Can Count On in 2014

January 2, 2014

Because NSCA members are primarily small business owners, we tend to complain about uncertainty, and we don’t like surprises. Let’s stop complaining (at least about these facts): Here are 10 things you 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. Because we have 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 vs. 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, check out NSCA’s Labor Installation Standard report.

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 Health-care reform will not be repealed.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 Act legislation. 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 the Affordable Care Act if need be.2014 business

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%, a historic low. The Fed is beginning to taper its easing as the economy heats up. They have promised no rate increases while the U.S. unemployment rate remains above 6.5% (it’s currently at 7%). 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.

5. There will be no significant tax increases. I see no significant tax increases on the table this year. In 2013, we absorbed increases to capital gains and individual rates (now at 39.6% for top earners), decreases in deductions, and added taxes for Medicare and unearned income. And we’ll keep paying those in 2014. But there’s nothing significantly new on the horizon. The Congressional gridlock isn’t such a bad thing for small business, as we can’t agree on what to do with taxes or spending.

6. It should be easier to get financing. The banking industry has recovered from the last crisis. The economy has moderately improved. Rates are low. Banks’ balance sheets look better. Your balance sheet looks better. The venture-capital industry is flush and looking for more opportunities. There were many initial public offerings in 2013, and many more scheduled for 2014. This will be a good year to look for cash, new financing, or investors. A healthy balance sheet is still key to your banking relationship. NSCA’s partnership with PNC Equipment Finance can help your firm and your customers secure proper funding for upcoming projects.

7. You will pay your employees more. The U.S. unemployment rate is down. Economic activity is moderately rising. Wages have been depressed for years. But, in 2014, the competition for good people will continue to heat up. Skilled workers will go at a premium. Others will ask, and receive, better increases than in prior years. It’s quickly becoming a seller’s market for employees, and that means business owners will pay a premium this year. Wage increases will also put inflationary pressure on the Fed Reserve to raise interest rates, too, by the way. (See #4 above.) Minimum wage debates will carry on throughout the entire year and, if/when approved, start a movement in many of the lower- skilled occupations.

8. Your cost of doing business in the cloud will continue to decrease. Research firm Gartner forecasts that the market for software as a service applications will top $22 billion through 2015, up from more than $14 billion in 2012. Cloud-based applications are proliferating. The number of companies that offer cloud-based managed services is increasing. And so is the number of small companies that are embracing these technologies. Companies like Amazon Web Services are cutting monthly fees for services that will be popular for small businesses. Costs are declining and will continue to go down in 2014. This year, you move more to the cloud.

9. Your customers will be even more educated. End-users, and especially clients and projects with a strong IT influence, will continue to educate themselves on your systems and solutions. Buying decisions will be influenced by this, and more buyers will test your expertise and service capabilities. We will need to stay ahead of this and continue to become IT-savvy solutions providers. We’ll be discussing this topic in detail at our 16th annual Business & Leadership Conference in Dallas on Feb. 27-March 1. Plan to attend to learn more about what your clients will expet from you in regards to IT.

10. You will not receive packages delivered by drones, create new parts on a 3D printer, or be chauffeured to work in a driverless car. But you will at some point … it just won’t be in 2014. For now, you still need to make good, solid, fundamental business decisions and do things right the first time. You will need to be more efficient and measure productivity at every level. Business owners who are highly involved and engaged will lead their companies to a successful year when realistic expectations are forecasted and a solid business plan is developed and followed. NSCA’s Essentials Online Library contains templates and information on creating a solid business plan. CW

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