Case Study: Show and Sell

"Early on in our 22-year history, we performed some home alarm system installations, so we had some heritage in home integration," Harrison says. "But as things progressed, serving the home market quickly became unprofitable. Alarm systems were commoditized, and then along came Dell Computer. Suddenly, there was no money to be made in the home."

In the late 1990s, Silicon East decided to shut the door on the home integration market. "For the same cost it took to support one computer in a home, we could support 20 PCs in an office," Harrison says. "The same number of user questions came up."

Good business habits and new technology, however, soon pulled Silicon East back into the home integration space—and with a vengeance. Harrison had lots of home building industry contacts in his Rolodex, and Silicon East had continued to work with builders seeking computing and telecommunications services at their job sites. Then Microsoft rolled out Windows Media Center 2002.

"We had long since developed a vertical expertise in the home building market, primarily by wiring their offices and servicing other IT needs, so we still had entry into the consumer home market through our client base of builders," Harrison says. "And then the first edition of [Windows] Media Center arrived, and that made home integration profitable again. We could offer more services, better networked hardware, and homeowners had a product they could understand and use."

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From there, Silicon East's home integration game plan fell into place. Harrison demonstrated Windows Media Center to a key home builder contact, Pinnacle Communities in Millburn, N.J. Once the folks from Pinnacle got a taste of the software's capabilities, the road was cleared for Silicon East to offer its home technology to Pinnacle's customers—putting Harrison back in the home integration arena. "The reality of Media Center is that until you see it and use it, you don't get it as far as all its capabilities," Harrison says. "So we installed Media Center-based computers in [Pinnacle's] conference rooms, and the home builders themselves started asking for Media Center-based capabilities in their model homes." Silicon East's status as a full-service home integrator helped seal the deal with Pinnacle, according to Harrison. "We don't have to tell the builder, 'We are going to do this type of home system, but you have to buy this or that from someone else.' We fulfill everything ourselves," he says.

Unlike other integrators, Silicon East's solutions provide an improved "customer living experience," Pinnacle President Brian Stolar says. "Marc is such a cut above the usual media- or computer-only consultants that he gets a real leg up on the competition," he says. "Others we worked with could not provide the 'beef' with the 'sizzle,' and we need both."

Stolar also is keen on Windows Media Center. "We have found Windows Media Center to be the only platform available to support the true digital home living experience," he says. "We intend to use [it] as the platform for this long-term, customer lifestyle experience."

Impressing the builder at the get-go works wonders, according to Harrison. "The builder's factory, so to speak, is usually in a dirt lot someplace with a foreman sitting in the trailer. And while they may have broadband, more than likely it might just be a phone line," he says. "So when we go in there and connect a standard back office that is geographically remote, we make those trailers work as if they are sitting in the home office, with all their applications and even voice-over-IP. That first impression to the builder is absolutely invaluable."

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Silicon East shows how it can add value to an entertainment center by connecting other devices that can be controlled though a home network.

Silicon East also approached other New Jersey home builders, such as Hallmark Homes in Woodbridge and Kaplan Companies in Highland Park, and sold them on having Windows Media Center-based networks installed in their conference rooms. The formula proved successful, as the new builders invited Silicon East to offer its services to their new-home customers. Harrison says the home integration market is hot—if you have the right mix of business acumen and technical expertise. "There is unlimited opportunity right now in home integration, but it's not for everybody. You have to have the right skill set. Our combination of a Microsoft-based skill set and a home integration skill set really puts us ahead of the competition."

Most every job springs from a homeowner's desire to have a state-of-the-art entertainment center, but Silicon East also shows clients how they can add value to those solutions by connecting other devices that can be controlled through a home network, such as alarm systems, environmental controls, and lighting and home access controls. "When customers get a quote from us, the basic theme we try to put forth is that the thing that was a stand-alone PC in your old house is now going to become the center of your home experience in your new house," Harrison says.

That selling approach can continue even months after a basic install, such as a plasma display, he notes. "Adding new features is where the ongoing revenue is. That's the basis of our business: getting in there, doing a good job and then getting clients to add additional features. We see our clients at a minimum once a month, even if it's just scheduled maintenance."

Hardware margins at best come in at about 7 percent, whereas service margins can rise as high as 30 percent, Harrison says. "Services, for the past 10 years, has been where you make your money," he says.

Harrison offers this caveat to home integrators new to the market: Size up your customers. "If you pick your clients carefully, there is money to be made. If not, you can lose your shirt," he says. "If your client is comparing what you are doing to something they can buy from Dell, you need to walk away. You are not going to be able to charge for what you are doing for them. On the other hand, if you have the kind of person that appreciates paying for a home theater that is unique and cannot be bought off the shelf, you've got a good customer on your hands."

Silicon East is now taking it to the next level with Microsoft. "We are actually talking directly to Microsoft about an opportunity to create a brand that you might call a Media Center-ready home, where there'll be some sort of Microsoft involvement or specification in the building of homes that allows the homes to fully support Media Center—not just audio and video, but also home control, heating, cooling, lighting, security, all of those things," Harrison says.

Microsoft putting its mark on the blueprints of future U.S. homes also could be the first step in catching up with Asia. "The real estate projects being built in Asia, from a technical point of view, are far more advanced than what's happening in the U.S.," says Harrison, who at press time was planning a tour of five Asian countries to survey best practices.

Why is Asia so far ahead? The answer is simple, Harrison says: Recognizing home technology as something good for its people and economy, countries like South Korea put financial backing behind efforts like broadband and wireless instead of letting private-sector companies slow the process.

"In Asia, the governments have made IT in the home a priority. They backed the effort and made it profitable for the companies that are doing the installs," he says. "They realize that smart real estate not only results in a better lifestyle, but also in a more productive industry. That results in a more productive national economy. Here in the U.S., it's costing Verizon something like $1,000 a home to run broadband without the support of the U.S. government. Competing against Verizon are the cable companies, and the homeowners are only going to buy from one source. So someone is going to lose."