As some of you will know, I recently attended ISE 2014 in Amsterdam with the rAVe team. We spent a very long week seeing and documenting the entire show, and afterward Gary and I reported on what we thought the major news and themes of the show were.
Gary and I (as usual) had somewhat differing opinions, but one of the overall ideas we agreed on was that unified communications (UC) was one of the most significant themes for the show. Nearly every piece of electronics was described in the light of its role within UC; even furniture was being described as part of a UC environment. In addition to the large number of new products being introduced for UC, electronics that have been on the market for years were all outfitted with racks of new literature describing them as unified communications devices.
But what are we really talking about?
Wikipedia defines it this way: “Unified communications (UC) is the integration of real-time communication services such as instant messaging (chat), presence information, telephony (including IP telephony), video conferencing, data sharing (including web connected electronic whiteboards interactive whiteboards), call control and speech recognition with non-real-time communication services such as unified messaging (integrated voicemail, email, SMS and fax). UC is not necessarily a single product, but a set of products that provides a consistent unified user-interface and user-experience across multiple devices and media-types.”
Doesn’t this read like part two of what we once referred to as “convergence?”
In reality, that definition is also likely to prove to be too narrow — because “unification” is happening in every other aspect of our technology, too.
I have remarked before on the trend toward consolidation of equipment into fewer components. In fact, we have been talking about it as an industry for many years, and nowhere more than the rental portion of the industry, where we typically charge daily rentals for each piece of inventory used. This consolidation of components has had many effects on the rental market, as we will see.
Let me give you an example: For me, entering the rental market in the 1980s, the first time I saw this kind of equipment consolidation really happened in audio during the late ’80s and early ’90s. At that point, the microprocessor and DSP were beginning to come to market, and although not yet having the power for the kind of commercial applications in video we now use them in, they were just right for the lower-bandwidth audio stream. So then we first saw dedicated audio components such as equalizers, limiters and speaker processing begin to consolidate into single boxes. My audio engineers got very excited over those components, and their ability to be easily programmed and repurposed for different shows. The boxes were expensive at first, so the consolidation had little pain because while we lost a number of components from the rental, we could charge higher rates for the “converged” boxes.
However, the second step of this consolidation brought a little more pain because, once the components converged, manufacturing numbers went way up, bringing the price down. Those of us who used a traditional rental model began to see a reduction in revenue if we were charging a straight line percentage price for rental of the box.
Then there was the third stage of pain because once these components were reduced to boards and chipsets, it became easier and easier to bring out a new model with improved capabilities. Therefore it brought the rental industry into a time when those components were rentable for shorter and shorter periods of time as obsolescence accelerated.
So there’s a cycle: First, components converge into flexible, general-purpose devices; second, the converged devices become cheaper as manufacturing yields go up and parts counts are reduced; finally, the cheaper devices converge again. We stay ahead of this by adopting the latest devices, with the rental market lending a big boon to the sales market as customers like to kick the tires in rental first. Of course, then we pay an additional inventory price as those new components become obsolete faster and faster.
There is also an operational price to pay in rental for this type of convergence. First, we pay a price in that programmable, digital components that work on the network basis are somewhat more difficult to make redundant. In this kind of convergence, we make everything dependent on a smaller number of power supplies, using components that the manufacturer is attempting to make cheaper and cheaper as time goes on.
The second price that we pay is something I call the “Swiss Army knife principle.” I love having a Swiss Army knife (actually, for me, a Leatherman) on my belt, but if I have the opportunity to go back to my tool case for a real screwdriver or real pair of pliers, I would still rather do that. Every time you combine the functions of a tool or component, you run the risk of making each of those functions somewhat less capable in favor of simplicity.
And, although I have used an audio example in this column, this kind of convergence is happening in virtually every electronic component we deal with. Is this good for the rental industry? That’s a complicated question, and in our next column we will examine how this convergence has affected our video components, our computer components and most importantly, our profitability.