As commoditisation grows, AV pros are rethinking how and where they can add value. Tim Kridel explores the strategies and opportunities.
Back in December 2019, roughly 10 million people used Zoom each day. Three months later — after and largely because the world went to hell in a handbasket — it had 200 million users.
To borrow a word from the pandemic, that surge is the latest example of how AV applications are increasingly being democratised — and commoditised.
“Our platform was built primarily for enterprise customers — large institutions with full IT support,” Zoom CEO Eric S. Yuan wrote in an April 1, 2020, blog post. “We now have a much broader set of users who are utilising our product in a myriad of unexpected ways, presenting us with challenges we did not anticipate when the platform was conceived.”
To support all those new users — and help keep them from defecting to rival platforms — Zoom expanded its trai
ning and support offerings. In education, for instance, it developed guides for setting up and securing virtual classrooms.
Whether it’s due to hands-on experience with Zoom, Teams or another platform, videoconferencing and streaming are now more mainstream than they were two years ago.
“Today events are done by kindergarten classes,” says Jörg Weisflog, Dekom founder and board member.
A byproduct of this democratisation is commoditisation that affects the whole pro AV ecosystem.
“The professional AV vendors like, for example, Crestron or Extron — which built their business models historically around proprietary, expansive and complex solutions — get strong new competition with new AV players like Logitech, which come from a customer-oriented IT market,” says Oliver Mack, macom CEO. “For consultants, the work shifts from classic CAD-based AV engineering to an AV lifecycle approach covering technology strategy, requirements management, standardisation, roll out and service management tasks.”
Some AV pros say another type of commoditisation is when previously separate pieces of hardware and software are integrated into a single box, such as Android players embedded in digital signage.
“There’s almost an invisible commoditisation happening that maybe we aren’t paying attention to,” says Jenny Hicks, Midwich head of technology. “You get a lot of videowalls now with more than just an inbuilt matrix. They’ll have multi-viewing capabilities and so on, maybe some sort of image-processing capability, [such as] picture in picture.
Scale brings cost drivers in. Everyone in that ecosystem has to look at it differently as to where their value is because the value isn’t in customisation any more. It’s in efficiency. - Byron Tarry, GPA
“It’s very easy to say that show controllers and videowall controllers aren’t being commoditised because they’re professional products that require high-level commissioning, programming and so on. That’s not the case. We are seeing commoditisation of the lower end feature sets. Previously you might have leant on a Datapath or a Barco to do every job for a videowall. Now 10% of that is built into the product.”
A healthy market for customisation remains
But commoditisation doesn’t necessarily portend a bleak future of razor-thin margins. For starters, there’s an enormous amount of rooms that are potential projects.
“With 140 million meeting rooms worldwide, only 7% digitally enabled, you can’t argue that we have reached saturation and therefore real commoditisation,” says Joel Chimoindes, Maverick AV Solutions vice president for Europe.
Another bright spot is that although a lot of hardware and software is becoming plug-and-play and intuitive, there will always be a big segment of the market that requires specialist knowledge to install and train.
“Some analysis we’ve done is while 70-80% of the rooms we’re delivering are commoditised, that’s only about 50% of the revenue,” says Byron Tarry, GPA managing director. “So 50% of the revenue is still going into those customised environments because they’re the big, expensive ones: the auditoriums, the experience centres and so on.”
Even in a commoditised segment, there are still opportunities to differentiate and command a price premium.
“Commoditisation helps drive adoption, which in turn creates opportunities for higher end solutions,” Chimoindes says. “Barco ClickShare, for example, has seen mass adoption but is still considered premium. There are lots of brands in the industry which will achieve this market-leading position by delivering a great user experience.”
That said, commoditisation still requires every member of the ecosystem — vendors, integrators, consultants and distributors — to rethink their business strategy.
“For integrators, the air gets thinner,” says Macom’s Mack. “These highly scalable, commoditised solutions require less integration skills, but more logistical competence – a shift in needed skills. In addition, the gross margin per unit decreases constantly. This means a shift from low volume to high volume with smaller hardware margins.”
Tarry agrees: “Scale brings cost drivers in. Everyone in that ecosystem has to look at it differently as to where their value is because the value isn’t in customisation any more. It’s in efficiency. You’ve got to say, ‘My job isn’t to go look at every room individually and decide what the perfect solution is.’”
Hence Velocity, the GPA’s portfolio of dozens of room designs. It’s designed to help integrators quickly deploy large-scale projects — as in a thousand rooms in 90 days. From a commoditisation aspect, this speed also helps AV firms compete against room-in-a-box solutions that vendors sell directly to enterprises, and against multi-national telcos that target the collaboration market.
The GPA worked with Legrand to develop a display mount that eliminates a trip to inspect the wall in each room prior to installation. “It removes the need for an equipment rack, for wall reinforcement or conduit pathways, and even allows for a simplified and cost-effective mechanism to match room and furniture finish,” the Velocity website explains.
Covet thy neighbour’s room system
Sometimes envy influences product choices — right down to the brand and model.
“You go to a different office and think: ‘Wow! I want one of those in ours,’” Hicks says. “We see end users that quite literally are making buying decisions based on that. They come to you and say: ‘I saw this other company’s boardroom. I love it. I want it.’ And you have to go try to recreate that.”
The fixation on a specific product creates challenges for integrators.
“A product alone is worthless,” says Dekom’s Weisflog. “A solution can provide what you need. But the market is now dividing into customers that require a solution and customers who know they want to buy a product.
“This [latter] part is increasing. People are coming in saying, ‘I need 50 Logitech Rally.’ That’s not a solution where you can add value. And you can’t just invent a lot of new services to [offset] the lower hardware margins.”
This satiation also highlights how a buyer’s AV knowledge — or lack thereof — influences their purchasing decisions
“From an unexperienced buyer’s perspective, the decision might be comparable to buying a PC,” Mack says. “The challenge is that even a commodity UCC room system, for example, is part of a solution.
“Besides the product, there are other important factors to consider, like acoustics and lighting in the room, ease of use and manageability in combination with connected peripherals like displays, external mics, etc. If the solution is not designed well and tested, the buyer may make a wrong decision because even if the product itself is good, the integrated solution may not meet the user’s expectations. Here we see the important role of an AV consultant.”
“Margin will still be there for deeper knowledge and consultation and new services,” Weisflog says. “But you need a customer who has requirements and wants a solution. The customer who wants just a product can buy that everywhere.”
The IT aspect
Many IT departments inherited AV. They’ll understand the networking aspects of a piece of AV gear, but not necessarily lumens, pixel density and other non-IT specs.
“More and more IT guys are informing themselves by the internet without the necessary time for [considering] what their company really needs,” Weisflog says.
The less AV knowledge that a client has, the more important education becomes for steering them toward the right solution, such as a pro-grade product. Sometimes IT vendors can help
“Some of the commoditisation in terms of the consumer side of things has been mitigated in that environment because of the certification process that the platform vendors have started to drive,” Tarry says. “If you don’t have a Microsoft stamp on your product saying you’re certified, then the IT department says, ‘No, we’re not touching that because Microsoft hasn’t given its stamp of approval.’”
Showing how one product is a better fit for the client’s IT environment — such as in terms of security capabilities — also can be a differentiator.
“There is a role for the AV industry to work alongside IT teams, providing specialist knowledge, but it’s really not about lumens and pixel density anymore,” Chimoindes says. “We need to understand cloud, IT integration, security, big data and networking to stay relevant and to truly deliver a brilliant user experience.”
Finally, although IT is a major decisionmaker, increasingly it’s not the only department that needs to be educated.
“IT aren’t the only stakeholders now involved in AV, as we’re seeing it move into C level as digital transformation becomes a critical topic in most businesses,” Chimoindes says.
Can consumer make the grade?
Consumer AV gear also creates pressure. For example, to the untrained buyer’s eye, a TV might look just fine for digital signage, leading to questions about why they should pay a premium for pro-grade displays. In these situations, the consultant or integrator has to educate about factors such as 24/7 operation, warranties and lockouts to keep people from fiddling with controls. But that isn’t always compelling enough to sway the buyer.
“There has always been a segment of the market which will purchase consumer products rather than business-grade displays,” Chimoindes says. “Although they won’t stand up to long periods of use, they are so cheap they can just be replaced more regularly.
“However, as sustainability moves to the fore for businesses in every sector, there is an argument that ‘buy once, buy better’ will return to favour.”
Another example is the iPad. When it debuted in 2010, speculation abounded that it would cut into demand for certain types of AV gear, such as replacing conference room touchpanels with an app — especially in enterprises that already provided employees with iPads for other tasks.
With 140 million meeting rooms worldwide, only 7% digitally enabled, you can’t argue that we have reached saturation and therefore real commoditisation. - Joel Chimoindes, Maverick AV Solutions
“I have no doubt that it will displace some of the market,” Joe Andrulis, then AMX vice president of marketing, told Inavate at the time.
For the most part, the iPad hasn’t cut into sales of pro gear.
“One of the strongest arguments [back] then was around theft,” says Midwich’s Hicks. “The control panels that are dumb in all other ways are of no use to somebody. So there’s less of a [theft] risk. Longer term, I think it’s come down to simplicity.”
For example, with a purpose-built touchpanel, there’s less risk of users tinkering with other functions because they’re hidden or simply unavailable. That, too, can help steer clients toward pro-grade solutions installed by AV pros.
“People think they know too much about iPads because it’s a consumer product, so off they go and fiddle and change,” Hicks says. “The next person comes in and has a poor experience because it hasn’t been set up to perform only the functionality required in that use case. Then you get reports that the technology doesn’t work.”
Photo credits from top: Andrii Yalanskyi/Shutterstock.com, Naypong Studio/Shutterstock.com and Musicheart7/Shutterstock.com