What follows is a conversational piece that I wrote for the August 2009 edition of Essential Install magazine:
Today the custom install (CI) market is experiencing a shift of seismic proportions. The earthquake has been triggered by the increasing availability of mass-produced, low cost yet high quality networked hardware for media storage and whole-home control. Change is not just coming to the custom install market, it is here, and the pace is being set by the largest technology companies in the world.
They have decreed that every home is to be a smarthome, every home is to have super-fast broadband internet connection and, most crucially for CI, every home is to have a standard ethernet network, allowing for plug and play services including audio, video, security, HVAC, lighting and automation. From Microsoft to Apple, from BT to Nokia, from Netgear to Cisco, the smarthome - the former bastion of CI - is the focus of their growth strategies. The challenge to custom installers right now is: adapt or die, because the world is evolving, and to survive you must evolve with it.
Why can't our proprietary systems survive? We've learnt how to roll out a high quality, tried-and-tested solution. We've invested in the technical training for our people and written banks of integration software. And it "just works".
Unfortunately, the past is no guide to the future. Time and again, the rules are rewritten when new technology fundamentally changes an industry's cost structure and delivers groundbreaking customer value. Today, the new rules allow customers to buy practically limitless networked storage with built-in media servers and beautiful touchscreen interfaces running open computing platforms to control just about everything in a smarthome - at commodity prices!
Then the Internet does its job and ensures that awareness of the new rules spreads far and fast. Customers have access to all the information at their fingertips. And in the midst of a tough recession, we are all seeking information and acquiring knowledge to make more carefully considered purchase decisions. People still spend money in recessions, but our buying criteria change. Bling is suddenly less relevant; long term value suddenly priority number one.
In this climate, proprietary systems just don't measure up. Proprietary systems introduce cost all along the value chain; think of all the manufacturers who have their own network infrastructure, or internal storage solution, or matrix switching solution, or bespoke programming language. All of this duplicated effort is passed on to the customer as cost. What about your business? Your people need special training from each manufacturer to learn their secret codes, and in return it limits what you can offer the customer. Again, value is destroyed. Proprietary systems make it harder for customers to benefit from future developments. Not only does the customer have nowhere to go, but the opportunities for the custom installer to make additional revenue from that customer by extending or enhancing the system are non-existent. Value is destroyed.
Many manufacturers have now woken up and embraced the change and introduced products that plug into the open network and are open to control from any interface. Some are making only the most tentative of steps out of sheer necessity, a sure sign that their business model is fundamentally flawed; Crestron and NetStreams (Essential Install, May 2009) may have lowered the drawbridge to their proprietary castles by supporting control via the iPod Touch but make no mistake, the power in the relationship lies with Apple. The trend is only going in one direction.
There are custom installers too, who have embraced the new business model - you could find them dotted around ISE 2009, at the edges of the halls, showcasing totally open networked solutions for the whole home. Many have an IT background. Whilst some see complexity in open networks, and worry about the robustness of the solution, these guys have no such fears and see only opportunity. They have just one set of technical skills to support - open networking skills - and they choose only products and services that interoperate on the open network. They deliver open solutions that can be upgraded over time, allowing them to develop long term customer relationships. They can pick and choose from the best-in-breed, open manufacturers and swap products in and out of their customer solutions without having to invest in new technical skills. They carry a major cost advantage over their more established competitors and are ramming it home in this financial climate. If you are attending CEDIA this year, seek out these installers, look at what they're doing and prepare to see many more of them at each successive CI event.
If you wish to adapt and build for the future, my advice is to start looking at what goes on the network rather than the network itself. The move to open is inevitable and at times such as these, the requirement to meet new commercial challenges compels us to examine what we are doing, and do it better. To seize the opportunities ahead we must stop seeing CI expertise as the installation of proprietary systems and instead install standard, open infrastructures, great value control solutions and deliver genuine customer value from the best-in-breed solutions for audio, video, security, lighting and everything else a customers desires.
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