A/V Integration Powerhouse AVI-SPL Turns Focus To Services

As videoconferencing goes mainstream and more and more solution providers tie video to broader unified communications and data center sales, video endpoints and infrastructure products inevitably become commoditzed. Where will solution providers with A/V expertise make their money going forward?

To AVI-SPL's management, there's no question about it: services are what will preserve the video channel. The $550 million integrator prides itself on having already made the leap toward substantial professional- and managed services-based revenue.

"The market is definitely going to services," said Mike Brandofino, executive vice president, video and unified communications, in an interview with CRN at AVI-SPL's recent national sales meeting in Tampa. "The IT guys can't keep up with all the technology out there, and if we can be that technology insurance provider for them -- because we know it and because we provide the services behind the scenes -- that's where the margin is. The endpoints are becoming commodities. They're going to keep going down. So where we differentiate ourselves is by connecting all those dots."

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About $40 million of AVI-SPL's revenue is in services, and growing fast. It's a trend that's only just catching on in the industry, notes AVI-SPL CEO John Zettel, who cited research from A/V industry association InfoComm that only about 3 percent of traditional A/V integrators are deriving roughly a third of their revenue from services.

Given AVI-SPL's status among the top ten national A/V integrators by overall revenue, Zettel likes his company's odds.

"With the acquisitions we've made and the focuses we have, I'll say without hesitation that we get to 33 percent in the next couple of years," Zettel said. "Services make video business-to-business. People don't view video as easy to use as a cell phone yet. It's too complex. Services take that complexity out and they pull through those commoditized endpoints, drive adoption and drive other services."

AVI-SPL has focused on services breadth as well as services depth, arming itself with everything from professional services -- including assessment, design and architecture -- to managed services, including full system support and hosted audio/video bridging.

"The greatest services opportunity falls on the back end," Zettel said. "That's the part that doesn't end -- it continues. But you have to have them all, which we do, and be credible in all of them."

The company's full-scale services embrace comes at a time when the videoconferencing market is flooded with vendors and solution providers touting video strategies. Many of the savvier solution providers -- including AVI-SPL, Dimension Data, IVCi and Yorktel -- have poured resources into services-centric businesses designed to create recurring revenue streams and place less emphasis on traditional A/V endpoint and infrastructure integration.

AVI-SPL ranked No. 48 on CRN's 2011 VAR500 listing, and has more than 1,500 employees in the U.S., Canada and Mexico. The company does business in 19 countries, partners with about 700 vendors, including all of the major and most of the minor videoconferencing and A/V players, and sells to about 86 percent of the Fortune 100. At least half of its more than 6,000 integration projects last year involved video, which accounts for more than $200 million in revenue.

Next: AVI-SPL Acquisitions and Vendors to Watch

Though its history goes back decades, the current AVI-SPL formed in 2008, when Tampa-based Audio Visual Innovations Inc. (AVI) and Menlo Park, Calif.-based Signal Perfection Ltd. (SPL) merged. The combined company is majority-owned by investor giant Silver Lake, and has been relatively quiet on the acquisition front since the 2008 merger. But in January, AVI-SPL acquired Dayton, Ohio-based Iformata Communications, a move that dramatically expanded AVI-SPL's managed services footprint.

The deal gained AVI-SPL both Iformata's Video Network Operations Center (VNOC) and its VNOC Symphony management platform. It kept on Iformata's existing reseller partners, which in the U.S. include AT&T and InterCall, and were already AVI-SPL partners, too.

"Any kind of development strategy is time, money and uncertainty," Zettel explained. "We felt like we could eliminate time and a lot of unknown money and uncertainty by going with Iformata."

Zettel and his team aren't ruling out future acquisitions -- they get a lot of "buy me" inquiries, Zettel said -- but plan to stay deliberate about their targets.

"We are looking at smaller integrators just to bolster our geographic footprint, or if there is a vertical need," Zettel said "But we are not going to acquire for the sake of acquiring."

AVI-SPL's overall growth strategy spans not only the Symphony platform, but also its own Unify ME hosted managed services platform for video and telepresence, and several other important ventures. It's forged ahead, for example, on offerings like its Cameleon Telepresence, a fully integrated unified video communications suite that ties in everything from HD video conferencing to multimedia presentation display and includes both dedicated controllers and control software applications for devices like Apple's iPad.

Its reach also extends to digital signage and digital media -- AVI-SPL's digital media services group is growing at a 300 percent-a-year clip, according to John Vitale, vice president of products -- and also to adjacent areas addressing design and media architecture. AVI-SPL's Control Room Group, for example, designs audio/visual control rooms and systems for high-intensity, mission-critical control center environments, and its Creative Show Services unit does major events, from conferences to stage shows, including planning and rich media content.

AVI-SPL's executives are ideally situated to pick out emerging vendors in the A/V space, and Zettel and Brandofino said two vendors the channel should definitely watch are Blue Jeans Network and Huawei.

Blue Jeans is the three-year-old, much-buzzed-about cloud video startup that has been adding major solution provider partners left and right since debuting its Any(Ware) video conferencing service in June 2011. The Blue Jeans platform is a cloud-based video meeting room from which users can host, schedule and manage their own video conferences via a Web interface, but the hook is that Blue Jeans can bridge any number of different video and audio protocols, meaning a user of, say, Cisco TelePresence could easily conference with a user of Skype, or a user calling into the conference bridge using the PSTN.

Like most of Blue Jeans' integrator partners, AVI-SPL offers Blue Jeans as a managed service.

"I could have had my guys develop an interface for bridging Skype to other video [platforms], but why? They already have it," Brandofino said of Blue Jeans. "We have customers who have five endpoints and want to use Skype -- why am I going to throw that customer away? We have something for them."

Chinese telecom giant Huawei is another vendor to keep an eye on, Brandofino and Zettel agreed. Huawei has continued to fine-tune its global enterprise push and last fall formalized a U.S. channel partner program for indirect sales of its routers, switches and telepresence products.

"They've been knocking on our door for the last year and half," Brandofino said. "I've been reluctant, to tell you the truth, but they are getting enough mindshare for customers that we think they're going to be disruptive from a price perspective. We are figuring out how that plays into what we do. If we are taking the position of where we make money is services, and that endpoints are a commodity, than the price coming down is very significant."