CES 2007: Digital Home Growth Puts CES On VAR Radar
And by the end of the week, he'll have viewed hundreds of products and gathered a small mountain of brochures and data sheets, most of which will get piled up on a shelf in his office and then eventually get filed in the wastebasket. After all this work, Stover may only add one or two new products to the short list he recommends to his customers.
It is happening more and more, say Stover and other solution providers. Yes, consumer electronics products are becoming more critical to the solutions they build for their small-business and home networking customers. But sorting through the vendor hype and technobuzz also is becoming a monumental task.
"There are hundreds of incredible technology ideas at CES that will never get off the ground because they don't deliver the functionality that our customers want," Stover said.
Stover's strategy is to keep his product line small and manageable. And it's working: Digitainment's revenue has grown nearly 2,400 percent in the past three years. Stover said the key to continued success in 2007 will be to remain focused on a simple set of products that deliver good value for his customers.
"I call myself a 'practophile,' " he said. "I want great audio and video at an affordable price. My message to vendors: Give me something I can use, not a bunch of specs and numbers."
Solution providers are facing a consumer electronics onslaught. More products by the vendors and more promises by the big-box retailers are translating into more choices as they search for ways to take advantage of the growing opportunity while also managing the sometimes unrealistic expectations of consumers and small-business customers.
Some integrators such as Digitainment are dealing by limiting their product sets, some are taking advantage of the integration opportunities these products provide and are even forming partnerships with other solution providers to add to their core competencies. SMB-focused VARs are expanding into the home market, systems integrators are partnering with system builders, and some integrators are saying 'no thanks' to basic projects in order to move up the food chain.
"We don't want to do $2,500 cookie-cutter systems anymore," said Gerard Lynch, president of Newburyport, Mass.-based digital integrator System Seven, who said he's sick of competing with the Geek Squad. "We need to move forward and on to more complex systems."
Whichever tack they take, solution providers say 2007 promises to be a year of continued adaptation.
NEXT: Fighting misinformation Fighting Misinformation
At CES, the launch of Microsoft's first consumer editions of Windows Vista, along with new PC form factors geared toward the living room and new IP-based devices designed to integrate seamlessly with HD TVs, hold out as many possibilities for increased profit as headaches for digital integrators.
Although integrators have struggled linking Microsoft's Windows Media Center with consumer electronics, some hope the latest incarnation will finally bridge the gap between PC software and hot consumer electronics, especially high-definition digital TVs and other toys that generate audio/video content for the home.
This year, vendors and retail salespeople on store floors will continue to tout the supposed ease of use and out-of-the-box integration of consumer Vista-based PCs with TVs. But consumers in many cases will quickly run into problems—and most retailers are in no position to help them out. Part of the blame for the unrealistic expectations, digital integrators say, is big-box retailers with inexperienced sales staff pushing home theater and digital home solutions that just don't work.
Kenneth Bosley, president of World Premiere Home Theatre, Mechanicsburg, Pa., said he gets more than 20 calls a week from customers who have bought a systems from a national retailer and can't get it to work properly. He said he tells them to take the system back, so World Premiere can design it from the ground up.
Trying to fix such a system is like trying to fix a house that has been built with a faulty foundation, Bosley said. "No one wants to take that job," he added.
The amount of misinformation is exponentially worse than it was three to five years ago, Bosley said, and World Premiere is dramatically stepping up its effort to educate customers through its HD University seminars. Whereas 80 percent of the marketing efforts were centered around systems and products in 2006, Bosley said this year 80 percent will be focused on educating customers on the basics before they even get in front of one of World Premiere's home theater designers.
Overpromised, Underdelivered
Tyler Dikman, president of Cooltronics, a digital home integrator in Tampa, Fla., whose home sales shot up to $500,000 in 2006 from $100,000 in 2005, said vendors that "overpromise and underdeliver" on new technology are raising his labor costs and frustrating his clients.
"I'm not putting my reputation on the line for products that don't talk to each other and aren't going to last because of reliability issues," Dikman said.
One such example: a customer who wanted a fairly simple home theater integrated with a digital music player but found the receiver he bought had issues working with Media Center. Cooltronics stepped in with an Arcam receiver and saved the day. The frustrated customer was forced to return the original receiver.
Even though Dikman is anxious to see the latest and greatest products at CES, he said he will not add a product until he or his staff has thoroughly tested it.
"We're always on a quest to find the next hot product we can integrate into the digital home," Dikman said. "But it's all about reliability and compatibility in this game. The No. 1 thing we have found that turns the customer off time and time again is the lack of reliability and the need for additional tech support."
Dikman said customers want technology to be as easy as turning a light switch on or off. "We are always on the lookout for new vendors. But it's almost impossible to ensure reliability and compatibility," he said.
NEXT: Wrestle The Technology Octopus Wrestle The Technology Octopus
Overhyped claims aside, VARs have a lot to gain from the consumer electronics onslaught. Also, the push to integrate these products into home and SMB solutions is leading to different kinds of partnerships and business models throughout the channel.
Frank DeFilipis, vice president of business development at Link Your House, Atlanta, said the convergence between consumer electronics and PC technology is forcing his company, a systems integrator, to become more of a computer reseller.
"Consumer electronics as of late seems to be driving people to us more than they did in the past," he said. "We're becoming more IT-centric than ever before, and that has affected our hiring and employment, our product mix and training. Windows Media Center has been out for a while, but with Vista, it has legs. Now, we're reselling computers, and we've never sold one or supported one in the field."
DeFilipis has reached out to the channel for help. Link Your House has formed a partnership with one local system builder to handle the PC side of the business. In the past, he said he had been recommending Hewlett-Packard or Dell PCs, but those systems were not adequate. Link Your House recently cut a deal with Vision Computers, Norcross, Ga., to custom-build Media Center PCs for its home entertainment clientele. Vision sells the PC wholesale to Link Your House and gets the PC support contract once the job is finished.
Some SMB VARs are moving the other way—from the business space to the home networking space. Business Technology Consulting, San Jose, Calif., has expanded its SMB practice to support its clientele's residential system needs.
"It's a natural evolution of our relationship, said Bill McDonnell, president of the company. "I work with a client to handle the complete issue—his needs at home—rather than sticking to one thing." He also plans to offer online backup services. "Consumers are getting to the point where they need organization," he said.
Several home integrators are planning managed services for the home as technologies become ubiquitous and prices come down. PA Computer Connections, Greenburg, Pa., plans to offer managed services that monitor home networks and resolve any problems that pop up, said Nathan Hufford, sales engineer at the company. Consumers are far less tolerant of system crashes that corporate customers, he said, so it should be a good sell—once the price is right.
DeFilipis said launching managed services for the home will be a big focus for Link Your House in 2007. The next hurdle? Trying to figure out how to entice customers to take on another monthly bill.