IHS analyst weighs in on COTS debate
Tim Kridel asks IHS Markit senior analyst Po Li whether AV software will increasingly run on Commercial Off-The-Shelf (COTS) IT gear and why that might be the case.
TK: QSC’s deal with Dell is an example of how AV can use COTS IT gear. Do you see more pro AV vendors following suit? Why or why not? If so, what are the main benefits for them? For example, does focusing on software provide bigger margins than if they had to develop the hardware, too? Does a software-centric focus enable more product differentiation opportunities?
PL: QSC’s deal with Dell reflects a market mainstream where more AV vendors are decoupling existing software from proprietary hardware and offering a centralised management system to process it in the data centre. AV processing (store, package, deliver) vendors are moving to this standard mainstream.
The streaming media market exhibits broadly flat growth, even as storage needs are increasing dramatically. This value stasis reflects product maturity, high competition, and price erosion. Components of the media equipment chain are migrating to the cloud, which is depressing hardware sales but catalysing a new generation of high-efficiency, high-value, software/software-defined servers, which can then be sell standalone or with as a service (aaS) business models.
The major benefits are simplicity, flexibility, reliability and cost-effectiveness, particularly for the AV industry and global enterprises with AV needs. After Amazon Web Services demonstrated a great success in its aaS business model, vendors and buyers from various industries who have AV-related needs tasted the importance of deploying an agile, simplify and low-cost business models.
They are gaining more room to move, add, change and automate the process if deploying or switching to an opex-centric operating model. Vendors are more effective to support, distribute and upgrade current software to the next level. On the other side, buyers don’t need to lock in to a massive capex investment before planning to launch a new content or AV-related program.
TK: Are there any types of pro AV products that are a particularly good fit for migrating to COTS IT?
PL: It depends on the application of COTS IT, video data and market competition. AV servers are dedicated, purpose-built hardware devices for performing AV functions. Media servers are off-the-shelf, commodity servers that, when used within an AV ecosystem, are loaded with and run AV software.
AV server industry trends closely parallel media server dynamics. Video data is the key catalyst in this sector. Audience demand, coupled with video-enabled device ubiquity, imposes new requirements on content creation, storage, processing and distribution, and consequently, on server infrastructure itself.
Major decennial events comprise important, punctuated instances of content creation, investment, and infrastructure spend. While content demand and content distribution show no signs of abatement, major events typically precipitate larger-scale upgrades and equipment purchases. We expect the 2018 and 2022 FIFA World Cups, as well as the 2018, 2020, and 2022 Olympic Games, to be vital sources of global server spend. At the same time, we see increased competition in as APAC vendors begin to take market share away from western vendors, due to a comparatively lower per-unit prices.
TK: AV-IT convergence is one reason why some IT vendors and IT integrators have expanded into pro AV over the past several years. Do you see QSC’s deal with Dell, and any other similar relationships, attracting even more IT firms to pro AV?
PL: Globally, two forces are catalysing AV product’s demand. First, corporate enterprises rely increasingly on a wide complement of video-centric technologies, AV equipment and software are part of content ingest, store, package and delivery process.
Second, the growth of video data, specifically digital video content. On the supply side, AV product process organisations’ treasured AV assets, retain high intrinsic value as a consequence and exhibit low elasticity of demand. This results in suppliers coming from the traditional IT industry such as Dell, HP and IBM experiencing flat growth in its AV products. Dell and EMC deal is a good example of how major IT players came together and consolidate their current market share via M&A.
IBM on the other side has switched to cloud centric and stepping into Media and Entertainment industry via several acquisitions of the AV processing companies like Clearleap and Ustream. HP Enterprise has been investing on AV workflow automation and virtualisation, utilising cloud technologies in providing 0AV manage system software to clients as a service.
Chinese IT vendors like Huawei and ZTE are getting very much involved in the AV industry as domestic IT manufacturing and support reaches level broadly equivalent to those of Western vendors.
Po Li also contributes to a wider article that looks at how manufacturers are responding to this trend that you can read here.