The cause of lower expectations is a mix of factors, including adverse macroeconomic conditions, led by inflation, COVID expense reductions that have not bounced back, and shifting project cycles. What do these signals suggest about the remainder of the year? The macroeconomic realities are unlikely to change, especially as elections in many democracies create uncertainty about national leadership. COVID expense reductions are likely here to stay. These factors suggest bracing for slower industry growth.

Technology innovations such as AI and XR have just started to make a dent in product differentiation. These innovative technologies have not been a major revenue driver at the industry level, yet.

Offsetting macro factors are key segments where growth continues, including corporate, where upgrades in board rooms, collaborative spaces, and individual workspaces, as well as training, are showing robust growth. Breaking corporate down into regions and vertical enterprises there are signs of high growth in conferencing and collaboration in US manufacturing, where agile practices and distributed work forces require significant UCC support for project planning and design.

In Asia, there is an increased emphasis on control rooms, alongside a prioritization of security and surveillance. Heightened security concerns globally remain a strong driver for this segment, as well as continued security themes such as integrating physical and cybersecurity and upgrading threat detection with technologies such as facial recognition and AI.

Opportunity for Services

The budget situation requires end users to do more with less. This trend drives opportunity for services. End users will need to supplement staff with third parties who can provide higher level skill sets, since they cannot afford to hire new employees. Firms may also opt for managed services with the expectation they will save on total cost, as well as shift capex to opex.

Amidst all the mixed signals, a surprise in the MOAR data came from France, where users bucked the tide and reported increased budget expectations for the second quarter. AV production rooms and individual workspaces were the top targets. That said, France’s spending has trended particularly low among European countries, suggesting the country has been slower to switch from COVID cost constraints to the new normal post COVID world. French end users also reported the lowest number of projects in the first half of the project life cycle (scoping, planning, and design) at 35.7%, against a global average of about 50%. This data highlights that though spending will be higher, there will be fewer new projects relative to peers.

For manufacturers and integrators, this data suggests navigating toward the strong market segments, bolstering services sales and marketing, and preparing for a slow but steady year.

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