. Erik Pauklin is a partner in Estonian integration firm Digital Emotions and he talked to Chris Fitzsimmons about how his company deals with being all things to all men in all markets.
”At the moment we are working on the biggest cultural project in the country, it’s a mixture of a shopping centre and a multiplex cinema, with nine screens. Plus there’s a big concert hall in there as well.”
Erik Pauklin could have been describing a leisure project anywhere in Europe, but the fact that it’s being built in a country with a population of only 1.4 million makes it all the more interesting. I wanted to talk a little Digital Emotions, his business, and also business in Estonia. I get to hear a lot about Germany, Italy, Holland and so on but it’s interesting to hear a bit from elsewhere as well.
“Digital emotions really started working only 2004. There are two owners – myself, and my business partner Andrus Loo.
“The basic idea was to begin a wholesale company / dealership for audio brands. We started up a co-operation with some Lithuanian friends, and also our good friends at Tannoy.
“Before Digital Emotions, I was in the industry since 1991 or so. At that time I worked for an IT company and started the division that imported video projectors. At the time that was a very new thing. I was there about six or seven years, before I joined another low voltage company and became the head of its AV division.”
“I didn’t really have an AV background. I was 100% self taught at the beginning. I have been opening tape recorders since I was about twelve years old. I used to build my own car audio systems and so on when I was a little older, even before I was working in the industry.”
“We started out in 2004 with a couple of brands, and we’d also already done work with Tannoy in 2000, when we built the largest indoor arena in Tallinn.”
“Digital Emotions really was started up as a dealership, but we soon found out that the market wouldn’t really support the European style distributorship model. We had to offer integration services to, making ourselves more competitive.
“My partner has a background in TV and satellite technology, so we ended up combining both our expertise and our customers. He had a lot of contacts in private residences and so on.”
Operating in the residential market, as well as the commercial, has been central to Digital Emotions success for a couple of reasons:
“To be honest, if we are talking generally, then the audiovisual business in Estonia, and marketing, really don’t mix. What I mean is that everyone in Estonia knows someone who sells speakers, which is why the best reference is the last installation you finished. Some of our residential customers have decision making responsibility in the business field, and so therefore our relationship with them moves into that area. It can work both ways. Basically, you have to know someone personally to get a deal.”
I also asked Erik to quantify the different markets in terms of value or preference.
“Again, we come back to the population. You can’t talk about segments. At best you can talk about the private market, and the business markets.”
“Of course if you have a larger portfolio to show, then it makes getting business easier. It does put a lot of pressure on us to know all these different segments well to make sure we get the work. The biggest difference is between the business to business and residential market places in the approaches you take. But as time goes on, and if we talk about integration as a whole, then the integration combines the same products or brands in both markets.
“From year to year, we can see the same solutions can be used in the residential side as well. I noticed that particularly this year, as we seriously started working with [German distributor] Comm-Tec. We have found their alternative integration and control solution [AVIT] very useful. It’s a serious alternative to AMX/Crestron in terms of budget. To a residential client this is really all that matters. I reckon in Estonia there are less ten houses in total with traditional systems.
“On the other hand we started working with them [Comm-Tec] in the spring, and in one year we will have already done up to ten, just in the first year. This is already equal to the installed base of AMX/Crestron in the last ten years.”
So what is the mix between the residential and commercial? In terms of value.
“At the moment I would say that it’s 30% residential and 70% commercial but my goal for next year is fifty-fifty. I’m thinking, with the Comm-Tec AVIT solution, about serious integration of houses – everything from climate control and security to the AV side. This is really the first affordable control system we’ve seen. I’d really like to see this side grow for our company more than the commercial.
“The second reason is that as the big constructions have stopped now, we really need to start looking around. There will be a gap of at least two years before the next large commercial project. Private residences are not so market dependant or patchy. Similarly, we had a big bit of business in schools from the government in 2005 and 2006 but there will be a gap before there’s any more of that.”
Smaller markets are often sensitive to price, I asked if this was the case in Estonia.
“Yes, I believe so. Estonians and Scottish people are very much alike,” joked Pauklin. “In business deals they will look at three to five offers, and discard the cheapest and the most expensive ones. Then, the cheapest of the remaining ones will get the job.”
And what about the general technical skill level amongst the subcontractors? What about training, what happens there?
“Well, my partner and I do all the training needed with our subcontractors. We go to Germany, or to Amsterdam every year for training, although we don’t go to PLASA any more. We are thinking about going to the PALME show next year as well. We do the training part.
“In complex projects we subcontract out cabling or speaker installation, then do the system design and integration ourselves. Also, if a system includes DSP programming, then we will always do it ourselves.”
And finally, what about technology developments? Unsurprisingly, Erik puts his finger on something that will allow him to pass on cost savings to his customers.
“The most interesting thing for us is that I hope that by the end of next year, there is basically only one cable we have to use and install – Cat 5 or 6. This makes our life a hundred times easier!”