How Once Hardware-Focused Firms Can Thrive in a Software-Driven Market
Software may seem to be taking the value away from hardware-focused firms, but here’s what integrators must do to survive and prosper in a software-driven market.Leave a Comment
Just a few years ago, the Motorola flip phones that everyone used had an antenna that was a work of art, requiring a team of engineers to tweak it for every new model. Today’s smartphones, however, use what amounts to a chunk of tinfoil, which works because the phone’s software is so sophisticated it can pull almost any signal out of the noise. Software-driven engineers are thriving, while antenna or hardware-focused engineers are looking for work.
In our industry, the trend is the same. Specialized hardware is being replaced by specialized software running on standard, if embedded, computers and IP networks. Product-specific hardware is limited, quite often, to I/O connectors and sensors.
Accordingly, the high-value creative end of our business is moving into content and software integration.
What does all this mean for systems integrators in the professional audiovisual industry?
Buses and Trains: A Hardware Lesson
If you ask me for my favorite war story from my sales career, I can tell you without hesitation. I was the co-founder of a digital signage software company, and an audiovisual integrator had selected our company’s product for the signage portion of a large transportation project.
I told them that if they rebid the project, I knew they’d get more respondents who would likely bid lower, but that we would resubmit our proposal at exactly the same price.
The RFP was written in a way that tried to convey the essence of the project but it had a large number of unknowns. These were mostly wrapped up in how the signage system was going to integrate with a scheduling system owned by the client. Since we had been successful with a similar project in the past, we read between the lines and did our best to help our integration partner respond.
At the opening, we learned that our AV partner was the only respondent to the bid. Winner, winner chicken dinner! The bad news? The bid was more than twice the consultant’s estimate. He opened the discussion with a simple question: “Tell me why I shouldn’t throw this out and rebid?”
Because most of the project’s costs were wrapped up in custom software integration and creative work to be done by my company, I was the one to answer.
I explained that we had to work with the tenants to figure out exactly how to get their scheduling data into our product and onto the screens. We had to be sure that the content looked great and made sense to travelers hopping off trains and climbing onto buses.
I also explained how a bid that conveys desired outcomes without specifics requires creative people to figure it out, and that costs more.
I told them that if they rebid the project, I knew they’d get more respondents who would likely bid lower, but that we would resubmit our proposal at exactly the same price. It was a fair price, because providing an elegant solution is not easy.
With that, the client excused themselves for a short break. When they returned, they let us know that our systems integrator was awarded the contract. After several months of hard work, the project was a huge success. And it turned out that, for the client, the extra cost of the digital signage software integration did not cause a major disruption to the overall budget.
They came out looking smart for going with our team.
All good, right? Not so much for the AV integrator, who had a sharp pencil and earned less than they should have.
Software Lessons Learned
For the AV systems integrator, there are two important take-aways that should not be missed.
Even if you can’t do it, software integration is going to be a part of many profitable audiovisual integration projects. You’re giving integration revenue to someone else if you do not develop that capacity within your audiovisual integration business.
Writing software is becoming an essential, creative and valuable part of audiovisual integration projects.
In this case, the customer ended up being happy to pay twice what they were expecting, because they came in with only vague guesses at what the software integration and graphic design would cost. They wanted to be sure that they weren’t being railroaded (pun intended) and when they felt comfortable, they moved ahead. Because the integrator was not prepared to do the software integration or content design themselves, they had to resell all of that labor, severely limiting their potential gross margin.
The process of integrating software is often creative, involving many interactions with the customer that can lead to more business. You are making it more difficult to cultivate follow-on revenue if you outsource custom software integration.
While our integration partner did excellent work that was critical to the success of the project, it was my company that met the main challenges and built the most important relationships with the technical people at the client and their other stakeholders. As a result, when those stakeholders moved onto other projects across the country, they naturally asked our staff about helping them recreate the same success, not the AV integrator.
Writing software is becoming an essential, creative and valuable part of audiovisual integration projects. Learning how to spot, sell, manage and deliver these services is now a core part of meeting your clients’ needs.
Andrew Starks is the Principal Consultant for Starks Consulting. He can be reached at firstname.lastname@example.org.