Industry Insider: Why H.A. Manufacturers Fail
By Julie Jacobson
March 01, 2006
Did you see this press release: "[XYZ Company] Launches Industry's First Affordable Home Automation System for Mid-market"?
Or are you just confused because you've seen a dozen more claims just like it in the past week?
Unfortunately, if history is anything to go by, it seems the startup is doomed to fail. In the 12 years I've been covering this industry, only two or three automation startups have succeeded in North America -- at least according to my barometer, which is two years of unqualified success with a strong indication of future viability.
Yet hundreds have tried. Why do virtually all new H.A. manufacturers fail?
Too many features
Almost all of today's successful automation vendors started with systems that did one thing really well -- lighting, security or A/V, for example -- and then slowly added new features to their products, once a trusting base of dealers was established. Today, newcomers try to offer too many features at once, making their products costlier to roll out, and riskier for dealers to employ.
Software-only models
How many times have we heard it: "We're a software company. We're hardware-agnostic. The dealer should be able to select the hardware of their choice." Bad recipe! The fact is, regardless of how "standards-based" your automation software is, it will work with some pieces of hardware better than others. Integrators don't want to mess around with finding and testing all of the components that work best with a piece of software. Like their customers, integrators want a complete solution.
Misguided recurring revenue plans
Shell Homegenie was one of the more visible flops. But several other companies like Shell have based their business models on recurring revenue (a good idea) without letting installers in on the action (a bad idea).
In the security business, dealers get the overwhelming majority of recurring revenue, which encourages them to buy lots of product at full price, and discount it for their customers. The security manufacturer wins! On the other hand, H.A. manufacturers think they're giving dealers a good deal when they offer 2 percent of the monthly take. I don't think so.
All IP
Internet protocols are nice to incorporate into an automation system, but folks from the PC industry erroneously assume that TCP/IP is the best and only standard for whole-house communications and control. All you need are run-of-the-mill IP adapters to connect legacy components to the whole-house network, they say.Who do they think is going to write the drivers? And, by the way, IP is a poor protocol for distributing audio and video throughout the house. Furthermore, WiFi is a poor vehicle for controlling components. It takes too long to wake up and connect.
Money
Ultimately, H.A. vendors fail because they simply run out of money. It's an expensive proposition. Forget about trying to design, create, beta-test, manufacture and ship product. It takes about two years to gain a following among home systems integrators. It takes a lot of money to generate awareness, get discounted products into dealers' hands, set up training, and establish sales and tech-support departments. Regardless of how good the product is, most startup manufacturers cannot commit to a two-year sales cycle.
Return to full story:
http://www.cepro.com/article/industry_insider_why_ha_manufacturers_fail/
March 01, 2006
Did you see this press release: "[XYZ Company] Launches Industry's First Affordable Home Automation System for Mid-market"?
Or are you just confused because you've seen a dozen more claims just like it in the past week?
Unfortunately, if history is anything to go by, it seems the startup is doomed to fail. In the 12 years I've been covering this industry, only two or three automation startups have succeeded in North America -- at least according to my barometer, which is two years of unqualified success with a strong indication of future viability.
Yet hundreds have tried. Why do virtually all new H.A. manufacturers fail?
Too many features
Almost all of today's successful automation vendors started with systems that did one thing really well -- lighting, security or A/V, for example -- and then slowly added new features to their products, once a trusting base of dealers was established. Today, newcomers try to offer too many features at once, making their products costlier to roll out, and riskier for dealers to employ.
Software-only models
How many times have we heard it: "We're a software company. We're hardware-agnostic. The dealer should be able to select the hardware of their choice." Bad recipe! The fact is, regardless of how "standards-based" your automation software is, it will work with some pieces of hardware better than others. Integrators don't want to mess around with finding and testing all of the components that work best with a piece of software. Like their customers, integrators want a complete solution.
Misguided recurring revenue plans
Shell Homegenie was one of the more visible flops. But several other companies like Shell have based their business models on recurring revenue (a good idea) without letting installers in on the action (a bad idea).
In the security business, dealers get the overwhelming majority of recurring revenue, which encourages them to buy lots of product at full price, and discount it for their customers. The security manufacturer wins! On the other hand, H.A. manufacturers think they're giving dealers a good deal when they offer 2 percent of the monthly take. I don't think so.
All IP
Internet protocols are nice to incorporate into an automation system, but folks from the PC industry erroneously assume that TCP/IP is the best and only standard for whole-house communications and control. All you need are run-of-the-mill IP adapters to connect legacy components to the whole-house network, they say.Who do they think is going to write the drivers? And, by the way, IP is a poor protocol for distributing audio and video throughout the house. Furthermore, WiFi is a poor vehicle for controlling components. It takes too long to wake up and connect.
Money
Ultimately, H.A. vendors fail because they simply run out of money. It's an expensive proposition. Forget about trying to design, create, beta-test, manufacture and ship product. It takes about two years to gain a following among home systems integrators. It takes a lot of money to generate awareness, get discounted products into dealers' hands, set up training, and establish sales and tech-support departments. Regardless of how good the product is, most startup manufacturers cannot commit to a two-year sales cycle.
Return to full story:
http://www.cepro.com/article/industry_insider_why_ha_manufacturers_fail/