Unless you’ve been in a hole the last few years, you most likely have noticed the increasing conversation in AV about software, managed services, and IP based signal distribution. Given all of the buzz and apparent end-user demand for all of the above, surprisingly, only a select few AV companies have turned the corner on one or all of these categories.
Why is that?
The truth is that selling soft services is hard.
It’s even harder if your business model relies on a 50/50 split between hardware sales and labor. And exponentially harder if it relies on hardware margins to mitigate losses that occur due to labor inefficiencies or poor job costing.
My theory is that three main things are stalling the evolution of AV from hardware to software and services.
- Business models — The reality is that businesses need to make money. The easiest way to do this is by collecting a high profit margin on a high priced item and then charging a premium price for installation of that gear. The software model flips that on its head. There is no high priced hardware and the software is typically sold on a subscription basis which still yields high margins but on a lower priced sale. The long term benefits are great, but the short term impact can be painful. Proliferation across a large number of clients is the only way to build the revenue stream back up to what it was in the hardware based business model, and that transition could be deadly if not managed well. No wonder some companies are gun shy.
- Sales Plans — The second reality here is that sales people are revenue driven creatures. Commissions and bonuses are paid on sales, and selling hardware produces big amounts of income at a time. But how does a salesperson get paid on a yearly subscription service? Even if the integrator can plan the transition, how motivated is the sales team to promote solutions that directly affect their own personal paychecks? Salespeople have families and bills just like everyone else, and for the company to move int a softer ecosystem, they have to be willing to man the front lines of that battle.
- Liability — Finally, many AV companies are not ready to assume liability for their customers computers and networks. I was at a trade show the other day where we loaded some software on a partner’s laptop to play content on one of the screens. He said, ” I’m glad you touched my computer because now everything that goes wrong with it for the next year will be your fault.” The client’s attitude could be that “if you touched it, then you broke it.” That’s scary. And if you think its a scary thought to be responsible for their individual PCs, you can multiply that anxiety when you start thinking about touching the whole corporate network. I once heard an integrator tell his team that they were watching video over IP but they did not want to sell it yet because they didn’t provide the switch and they didn’t want to touch it.
In my humble opinion, these are the three major things that need to be overcome in AV in order to realize the promise of software, managed services and IP based distribution.
The good news is that other industries may hold some clues how to do it and I’ll share those in my next blog!
Do you have thoughts on why software, service and IP have been slow to take off in AV? I’d love to hear them in the comments below.