Hey guys,
Let’s all cut the crap right here and now. I’ve made many posts on the “Who Owns The Code,” thread and my position was always to hand over exactly what the client paid for, and who cares. The bottom line is someone is always working to build a better mouse trap for ease of use not only for the installer, but also the end user. IMO, the days of Crestron are over. As fine as a product it is, it’s become way too expensive to the client, and a pain in the ass to the dealer to program and troubleshoot. Crestron is not the only brand guilty of this… It simply was the 1st thing that came to mind.

IMO, the only thing we have left is the expertise we bring to the table that BB and other big box stores cannot deliver. If we don’t adapt to the fact that the term, “Disposal Income,” is no longer in the dictionary, we will become extinct. I have no problem selling a hefty Denon receiver with a complete Paradigm speaker surround sound system for $5K. Throw in a mid priced URC remote for another $500.00 and you’re done.

Even though I have a couple of very large jobs in the bin, my future marketing plan will be to cater to the lower to mid-fi client until this economy turns around… and it ain’t going to happen any time soon. Just like having a new born baby in the house, we can all “OOOH & AAAH,” over another dealers beautiful showroom. The fact is that behind the scenes it still craps when the company is gone and keeps us up at night trying to figure out how to feed it the next day.

What I don’t understand is why CI doesn’t go Open Source? and really make the value add the Consultation, implementation and experience.

The technology is there, it has been for a very long time, the issue is the product offerings. No one has built the suite of products to do it easily.

There are enough OEMs/ODM’s to put together a pretty amazing suite of Open source products that have value really in the integration. I would argue many of us have tried that with HAI and others, but it always falls short.

I think there is a way to do this where the value is taken out of the hardware (which clearly the market is doing anyway).

But I think that integrators should not overlook security/fire and other re-occuring revenue streams; and I think the Green space will be a great place to do it.

Either way I don’t think there is enough business to sustain the long haul until housing market picks back up. Marketing to commercial business is a totally different beast, those that are savvy can adapt.

-A-

Dave Stevens - 12 October 2009 02:25 PM

Hey guys,
Let’s all cut the crap right here and now. I’ve made many posts on the “Who Owns The Code,” thread and my position was always to hand over exactly what the client paid for, and who cares. The bottom line is someone is always working to build a better mouse trap for ease of use not only for the installer, but also the end user. IMO, the days of Crestron are over. As fine as a product it is, it’s become way too expensive to the client, and a pain in the ass to the dealer to program and troubleshoot. Crestron is not the only brand guilty of this… It simply was the 1st thing that came to mind.

IMO, the only thing we have left is the expertise we bring to the table that BB and other big box stores cannot deliver. If we don’t adapt to the fact that the term, “Disposal Income,” is no longer in the dictionary, we will become extinct. I have no problem selling a hefty Denon receiver with a complete Paradigm speaker surround sound system for $5K. Throw in a mid priced URC remote for another $500.00 and you’re done.

Even though I have a couple of very large jobs in the bin, my future marketing plan will be to cater to the lower to mid-fi client until this economy turns around… and it ain’t going to happen any time soon. Just like having a new born baby in the house, we can all “OOOH & AAAH,” over another dealers beautiful showroom. The fact is that behind the scenes it still craps when the company is gone and keeps us up at night trying to figure out how to feed it the next day.

I think your post totally misses the point here. This is far beyond trivial issues such as who owns the code and what not. Its also not entirely a product problem ( you point out crestron). I am certain you are good at what you do but the question that is at stake here is what do you do when your expertise is no longer required? This industry continues to believe its own marketing when people state that what is brought to the table is something that BB and other big box stores cannot deliver. This is precisely what Mainframe folks said about the PC, what GM said about a then insignificant Toyota, what Xerox said about Canon (home printers). Structural changes happen to ALL industries. Also the high end wont be the death of CI (in my opinion) it will be what remains of CI. What will you do when that hefty Denon receiver & Paradigm speakers are available at that big box store or online for about dealer cost?

But I think that integrators should not overlook security/fire and other re-occuring revenue streams; and I think the Green space will be a great place to do it.

Either way I don’t think there is enough business to sustain the long haul until housing market picks back up. Marketing to commercial business is a totally different beast, those that are savvy can adapt. 

Docauto , you make some valid points here. The real key to survival will be companies that can find revenue streams OTHER THAN CI. Security /Fire, even partnerships with electrician shops. Also the commercial market is a beast of a different nature. To use crestron as an example again i think this is where entities such as themselves and AMX will live—in ultra high end residential and certainly commercial. I believe that the indispensable middle tier that Dave mentioned above will be gone or mostly gone for CI.

I agree..

And Ergo.. the issue. As all of us would expect the industry like any statistical population is a bell shaped curve with the mass of the market around the middle.

The data points that only companies with successful strategies to live at the tails or with re-occuring revenue streams can sustain enough revenue to like at the tails.

I hope the green space will even the score, but from my analysis (and its very indepth as I opened a completely different entity with its focus) will bring some of this back for a time. I think commercial Green space is where CI integrators who can use some of the same skill sets can be very successful.

The residential market will continue to live scarcely at best.. at the high end; because no matter what class you are in mid-fi is the real value, and everyone’s discretionary income is gone or reduced significantly. It will thrive with hobbiest’s and DIY.

docauto - 12 October 2009 04:33 PM

I agree..

And Ergo.. the issue. As all of us would expect the industry like any statistical population is a bell shaped curve with the mass of the market around the middle.

The data points that only companies with successful strategies to live at the tails or with re-occuring revenue streams can sustain enough revenue to like at the tails.

I hope the green space will even the score, but from my analysis (and its very indepth as I opened a completely different entity with its focus) will bring some of this back for a time. I think commercial Green space is where CI integrators who can use some of the same skill sets can be very successful.

The residential market will continue to live scarcely at best.. at the high end; because no matter what class you are in mid-fi is the real value, and everyone’s discretionary income is gone or reduced significantly. It will thrive with hobbiest’s and DIY.

Doc i dont disagree with a single thing you said. I think its quite interesting that you believe the green sector can absorb the skilled labor form CI. As of yet i have not studied this market enough to comment, but i can see where you make valid observations.
We can never underscore enough what has happened to the US consumer here either. As i believe has been already pointed out, we are unlucky enough to be witnessing a generational smackdown in how consumers spend their money. The savings rate is about 7% and climbing. It was the middle /upper middle that lost the most. It will be ingrained as a new found set of values to avoid self indulgence and anything that smacks of luxury vs needs. Reckless debt and spending will be curved dramatically (for those lucky enough to have survived with their shirt on their back) The middle may be sheepish at best for years to come before they are exposed again to the financial typhoon most folks suffered this time around.

Gentlemen,
Both of you bring up very valid points. However, I must disagree with some of them. I’ve been in this business for over 33 years and have owned my own since 1989. When I first opened up my doors, we were strictly appealing to the upper high end 2 channel client. Our average, (for lack of better words), stereo system was $35K, and that was without a turntable. Back then expensive remotes did not exist, nor did the internet as we know it today.

My store is located in one of the richest towns/cities in NJ… In those days Malcom Forbes and Liz Talylor would drive by my store on their motorcycles, (Malcolm lived just down the road and one of my sales people was on his balloon team that would take off from his back yard), and Jackie O would frequently be seen in the coffee shop next door on the weekends. Matter of fact, my very 1st customer was Mike Tyson who just moved in after he won his first championship belt. The average home was 1.5 million, and that was considered small in the late 80’s.

If anything, the new homes that have built in the past decade are so large, (16-20K sq feet), the town passed an ordinance against “Monster Homes,” that literally have 16 chimneys. My business grew in leaps and bounds year after year as the homes did.

My point is simply this… I strategically geographically set up my shop after carefully examining the demographics of the average income in every town/city in the state because the ultra high end of this business is at best 1%. That formula worked then, but it doesn’t any longer. I’ve lived through the “Yuppie” era of 20 year old’s driving BMW’s & Mercedes, and living comfortably in their new $800K town houses. All of a sudden, their cars and homes were up for sale because they could no longer afford them… and that was well over a decade ago. Now, the so-called, “rich,” can no longer do it either because they’ve been living way beyond their means for too long and have always been mortgaged up to their eyeballs.

Thus, please tell me the difference between a middle class person living paycheck to paycheck to send their kids to a decent college and pay their bills, VS. an upper class person doing the same thing because they either lost their money in the stock market, 401K plans, and severe bonus cuts, (providing they still have a job), from the companies they work for.

There is only one difference, (IMO),... The rich are more afraid of “keeping up with the Jones’,” then the middle class guy is. Ergo, the MC guy is the easier sell because he’s used to fighting against this type of economic climate. Not to mention, I’d rather sell 10 average systems to a MC guy over the years, than just 1 mega buck system to a UC guy with an attitude.

My staff and I have are considered to be one of the best in the field for our talent, product knowledge, and the brands we carry. We have long time established relationships with the best builders, architects, designers, and electricians throughout the state who have always referred us to their best clients. When they are no longer calling us as frequently as they used to, to me it shows that their “high-end” attitudes and services are no longer required because there is presently no market for them. That’s why it’s my opinion, (for the time being), we begin focusing on a clientele that has been ignored and freely given over to a Best Buy because we didn’t have the time for them before to give them our full attention.

Our talent and knowledge can never be taken away, so the high end will always be available and never dropped to the wayside for anyone who can afford it. However, I still stick to my guns when I say BB cannot presently meet these standards, but then again it’s only a matter of time. I’ve seen too many high end people lose their jobs because their services & salaries no longer fit the companies they were working for. I personally know 2 people
who, (after many years in this business), are now working at BB because they have to pay their bills like everyone else.  Thus, it’s only a matter of time before BB gathers the talent we can no longer afford and give them the opportunity to become a real player in the pro CE industry.

If your business is not referral based, you’re screwed when God forbid that day ever comes.

Just to restate the central points of discussion:

- There is a cyclical downturn that may be more profound and pronounced than anything in memory (or anything projected at the beginning of 2009). Is it generational (like the depression)? Is it a 9 month thing or a 24 month thing (from now)? Does luxury discretionary spending bounce back or does it lag? Do home-based purchases suffer long-term because the house is no-longer considered a mythical store of value?

- There is a non-cyclical technical transformation brought by many things: cheaper hardware, faster product design cycles, cheaper R&D;, better APIs, more interoperability, more user-accessible configuration, sexier interfaces.

- This suggests that huge chunks of the mid-tier and high-tier (though admittedly not all) can be acceptably satisfied via DIY and BB channels, and low-end CI guys with less tech training and understanding (though more than the consumer).

- There will always be a segment of ultra high-tier projects that demand high-touch, custom design/install/programming. Is this a growth market? Shrinking? Will this be a real market or a super-niche concierge biz?

And separately, there are some business general tenets:

- Those in the industry tend to over-assess their value to the consumer AND often assume that that value is self-evident and margin-sustaining.

- The key beneficiaries of market disruption tend to be outside innovators. Regardless of one’s power and position in the industry, there are rational and natural forces that prevent one from adapting appropriately (per “The Innovator’s Dilemma”).

Depending on what you think about the above, there’s a different plan of action. I tend to view this whole thing bearishly. Which suggests that even if you’re good at what you do, you may not survive…which might be a good thing if it hurries you along to a more sustainable, higher-growth business.

I don’t see green energy as a white knight. EVERYONE is hoping to be saved by green installs…every under-capacity HVAC guy, electrician, general contractor is now selling PV etc. And the pure play energy guys are attracting significant private equity even in this downturn. It’s already hypercompetitive in most markets.

Anyhow…I just wanted to do a reset of the topic, as I see people answering the cyclical downturn question with a criticism of Crestron, which misses that point (but it addresses a dfft point)

- There is a non-cyclical technical transformation brought by many things: cheaper hardware, faster product design cycles, cheaper R&D;, better APIs, more interoperability, more user-accessible configuration, sexier interfaces.
- This suggests that huge chunks of the mid-tier and high-tier (though admittedly not all) can be acceptably satisfied via DIY and BB channels, and low-end CI guys with less tech training and understanding (though more than the consumer).

I agree here although there seems to be a lot of misconception about what this means & how to deal with it. There are suggestions that this is simply a matter of embracing new market segments (DIY),  low margin product (sonos) or BYOTV. To say that this is an over simplification of the issues at hand is a gross understatement. A couple of point that require serious consideration:

-reforming a business to cater to a new market is more than some abstract idea that you simply do or dont do. It has to make financial sense. The real effects to an organization have to be taken into account AND you have to consider wether you are retooling for sustained long term growth or downsizing in delay of the inevitable.

-losing revenue should be taken seriously and should be interpreted as red flags. As clean cut as BYOTV is, these are earnings that must be replaced not simply filed in the “That was That” folder. Again—is this a one time occurrence or a long term trend?

-if you start selling product to an enthusiast for example—is this a long term viable solution? Can you still be considered “CI” when in the aforementioned scenario you are providing the services of a retail channel (selling goods) and a consultant (lending your expertise). The “custom” is cloudy at best and there is no “installation”. Knowing the fundamental changes to your business, is it still something youd be interested in pursuing ?

- There will always be a segment of ultra high-tier projects that demand high-touch, custom design/install/programming. Is this a growth market? Shrinking? Will this be a real market or a super-niche concierge biz?

I think after a war of attrition at the top, the remaining players will resemble the business models of luxury cars and yachts etc. the closest. I see low volume, high dollar, highly custom, highly skilled. CI will finally become that which was always sold to us as our true calling—re: “we don’t compete with big box stores, we compete with the boat and the vacation to Europe”. anyone remember hearing that in past decade—it was the CI mantra!

- Those in the industry tend to over-assess their value to the consumer AND often assume that that value is self-evident and margin-sustaining.

This is often the most unfortunate part of all this. I think many of us here truly enjoy this industry and many have a vested interest in it continuing to be what it was 20 years ago.

- The key beneficiaries of market disruption tend to be outside innovators. Regardless of one’s power and position in the industry, there are rational and natural forces that prevent one from adapting appropriately (per “The Innovator’s Dilemma”).

I would add 2 glaring examples here for anyone that cant follow. One disrupting force that has taken root & another that is coming soon.

1) the iPOD. There was a time and place where devices called “music servers” roamed the earth. The descendants of the mega CD changer, they were sleeker, faster, more advanced and complex. They carried heavy price tags, mostly required professional setup and came from small CI shops. One day, like a meteor hurling towards earth—a portable device crash landed on the CI community with the impact of a megaton bomb. It was small, portable, sleek and easy to use. The CE community scrambled. As a strategy mounted word rolled out to dealers and reps alike. It was a simple maneuver—discredit this small virus. After all it was a walkman reborn, its sound quality was sub-par. We were to stand fast. FFWD to today. Nearly every single CE device has some method of ipod integration. It is embraced today as to suggest youd be suicidal not to. That music server, so promising and profitable, is now the subject of emails distributed by large dealers and reps desperate to unload entire inventories for pennies on the dollar because the product is unsellable.

2) Coming to an apple store near you—-the apple wireless tablet pc (Do yourself a favor and google it if you havent already).  A 10 ” touch screen running osx with a rumored retail price tag of around $800. Anyone care to predict how this product will affect the residential control market (for starters) ??
**im actually curious to hear what net effect you think this product will have on CI, PVbill or Docauto?

Depending on what you think about the above, there’s a different plan of action. I tend to view this whole thing bearishly. Which suggests that even if you’re good at what you do, you may not survive…which might be a good thing if it hurries you along to a more sustainable, higher-growth business.

Couldnt be better said—nothing to add here.

I don’t see green energy as a white knight. EVERYONE is hoping to be saved by green installs…every under-capacity HVAC guy, electrician, general contractor is now selling PV etc. And the pure play energy guys are attracting significant private equity even in this downturn. It’s already hypercompetitive in most markets.

Like i mentioned before i hadnt studied this market enough to comment, the input across the board is interesting. What do you think about the health care industry? This is a market which is at the earliest stages of disruption. Technology will have a heavy hand as hospitals and med centers will be refitted to prosper in new business models.

HTI’s are the new CI’s, and are no more likely to be squeezed out by the likes of Best Buy than are physicians to be replaced by Duane Reade pharmacy counters.

The role of big box stores and online retailers is to provide cost effective distribution of technology product and a limited amount of support and counsel.  For the average household to successfully navigate the dizzying array of technology products and associated operational mess, more sophisticated providers of planning, integration and support will be required than what these mass merchants can offer.

For our industry, this means giving up the attachment to product margins as a key revenue source as much as it means adopting scalable service practices and institutionalizing knowledge.  Scale and efficiency provide the only way to solve the dual requirements of pricing that households can tolerate and profit that businesses require - high touch, ad hoc processes driven by intuition backed by brute force experience will no longer cut it.  CI’s who can embrace this new reality will thrive as HTI’s.  (Just as PC Week became eWeek, CEPro will need to become HTIPro.)  Beyond that, the best of the old school CI’s will thrive on the high end niche and the rest will be flushed out.