Some commentators have suggested the market for visual technologies - screens, projectors and signage - may provide a solution for IT resellers with shrinking hardware margins. But several years down the track, is this market still holding promise for IT VARs, and is the margin and investment worth the risk?
Martine Dodwell-Bennett, group sales and business development director at distributor Steljes, believes it can definitely be worthwhile for a reseller to build out an IT-based portfolio with audiovisual (AV) projects - with certain caveats, however.
“We are generally seeing more IT resellers and integrators moving into the AV market - that has been occurring over the past 18 months,” she says. “The ones that are doing well out of it are the ones offering whole solutions - those that include other things, such as AV, but with IT at their core.”
Whole in one
Dodwell-Bennett (pictured, right) says Steljes is seeing organisations implementing video conferencing, control systems, and smart interactive technologies as a whole solution for a range of meeting spaces - and they are doing nicely out of AV, primarily because they are also doing services wrapped around the technology and earning from doing the installations.
“Some IT resellers are moving into the AV market, doing it with a fulfilment model, but I don’t think they are doing so well,” she adds.
Box-shifters are unlikely to make enough margin for it to be profitable, she notes. Furthermore, if an IT-focused channel partner is not offering something above and beyond what a specialised AV reseller would offer, there is little clear benefit for the end customer in choosing an IT reseller.
Generalist IT VARs are, by definition, not specialists - so they are much less likely to have the expertise of a dedicated AV reseller.
However, Steljes’ training programmes have been providing highly suggestive evidence that IT resellers are entering the AV market and perceiving it as a net gain, Dodwell-Bennett adds.
“I was looking at our training data earlier, and if you look at that, for example, the corporate IT resellers are looking to get more trained in the corporate market. We are seeing an increase of 43 per cent,” she says. “They are coming on board for certified training for installations and other training.
“People are investing and getting their staff trained on how to support and install the products. The other angle is that the end-user customers are looking at AV solutions and investing in training their people.”
Dodwell-Bennett says customers tend to see AV as just another technology, so they are most likely to turn to their current technology supplier, which tends to be an IT reseller. Integrators and resellers may need to do some legwork to get the best results, at least to understand what solutions may be integrated into the overall network and how that network works.
“So IT resellers are coming to us and saying, ‘Look, I’ve got this opportunity with the end user client, so can you help us and close the deal?’,” she explains. “We have definitely got some partners that have grown significantly [through AV deals] over the past year.”
Satisfied customers will then come back for more product, or more services such as training, and the VAR can go on developing its AV angles. Some may spend four times as much on training as they do on the solution, says Dodwell-Bennett.
A good little earner
John Duckworth, enterprise imaging and printing products category manager at HP IPG, says imaging products such as scanners can definitely prove good earners for VARs and other resellers. But look at the whole process, he adds.
“Typically, a customer requires an imaging product such as a document scanner because it needs to put documents and data into some form of workflow,” he says. “This means the product is important to their business process. Indeed, what the customer usually requires is not just a scanner but also some means to manage the documents and data once they have loaded it into their systems.”
To complement the scanner hardware, the reseller also has an opportunity to provide other products, such as document management software and storage. Making the best margins, according to Duckworth, is partly about having a broad portfolio that matches individual customer needs and enables the VAR to build a value-added solution for the specific organisations involved.
“It’s important that resellers understand exactly what the customer wants to do with their imaging product in terms of the type and quantity of documents being scanned,” Duckworth says. “That way, resellers can ensure they are offering the appropriate imaging product, as well as other solutions for the customers’ business processes.”
Ian Vickerage (pictured, left), managing director of video communications distributor Imago Group - which operates in the UK and in France - indicates that while the overall picture can be more complex, IT resellers are definitely succeeding at AV, at least where it is defined in relation to video conferencing and video communications.
“We don’t really see ourselves as an AV distributor. We are more about video conferencing,” he says. “The thing is, I don’t think I have ever suggested that IT people should get into AV per se. Video communications, on the other hand, is kind of a business looking for a home - AV resellers only really want to do projectors and screens and stuff like that - so I think video communications doesn’t really fit into their remit.”
Vickerage says that Imago’s revenue split is about half via “about 10” IT resellers and half via “about 10” AV resellers, so clearly those IT resellers have had some success with video communications. In France, it is roughly the same.
“Yet the IT business resembles the Titanic more and more every day, with people leaping into an insufficient number of lifeboats around tablets or cloud. The AV business is not a lifeboat, it is a picture of a lifeboat,” he quips. “But the video communications business has been growing strongly. We grew 34 per cent by revenue last year.”
Resellers that specialised in display products have mostly gone bust or moved into other areas, he adds. In video communications, meanwhile, there are two main recipes for success: either be an expert specialist, or more of a marketing expert - not necessarily technical but focused on building customer relationships and able to source expertise as required. Also, they need to be prepared to invest in developing their video business, he warns.
“We thought networking specialist companies would do really well with video communications, but that hasn’t happened,” says Vickerage. “People might not be good at switching from or adding one specialisation to another. But for the people who are used to selling a great range of technology, with the right support, that does work.”
Lee Bevan, chief executive of Manchester reseller Leapfrog Group, says his company has grown quickly since moving into AV after the bottom dropped out of the OEM system builder market 10 or so years ago. But the key for Leapfrog has been an increasing end-to-end capability.
“We moved from being an IT company to an AV company, and then moved to a group structure. We took on a large proportion of large-format displays and also VoIP technology with telecommunications. And we still have our computer business running in the background,” he says. “Back then, OEM was the best business to be in because people didn’t have the technical knowledge. By 2004, things were changing.”
Manufacturer consolidation, plus the entry of low-priced PCs sold directly - via Dell and others - made life tough for the OEM specialist. People were spending tens of pounds on PCs rather than a thousand or more per unit, according to Bevan. Then they were skipping upgrades, simply purchasing a new PC in a year or two. To survive, Leapfrog moved with the times.
“The market for us in IT was getting worse and worse - trying to express that we were a value-added solution provider, that you never needed to deal with an online system or send your computer back against, for example, a Dell opportunity,” Bevan says. “That didn’t work, although I do think things go full circle and value-add could be coming back.”
In fact, Leapfrog is reopening its repair centre in a few weeks, as different pressures operating today suggest there could be a market once again, Bevan suggests. Meanwhile, Leapfrog has seen considerable success in becoming what it calls a true unified communications (UC) provider - putting together solutions for a range of customers that involve AV products such as screens, projectors or signage offerings as a component.
The common denominator, according to Bevan, seems to be communications, with visual communications becoming an increasingly important aspect.
A good example might be the high-profile implementation Leapfrog did for The Point, a £12m events venue development at Lancashire County Cricket Club. The venue now has a 12-screen Samsung videowall - recessed into the wall and meeting various green criteria - to show live Sky feeds or other messaging and media. There are also Samsung screens on every floor.
An ability to demonstrate AV technology as part of the whole solution is important, says Bevan (pictured, right).
Samsung had scheduled a reseller event that deployed lots of technology and displays, so Leapfrog took full advantage by inviting the entire board of Lancashire County Cricket Club to the venue before the reseller event started. That sealed the deal, according to Bevan.
“Once they see the technology, they are hooked,” he says.
Other AV-related deals are for Manchester City FC, Honda, Pennine Care NHS Trust, Southampton University, Manchester Visitor Centre - for which it deployed 28 screens as well as other AV kit - and Chill Factore indoor skiing centre.
As Bevan notes, a lot of audiovisual technology has an IP component, which is right up the IT reseller’s alley. Expertise segues from screen hardware to projection to internet connectivity to security to voice communications and back again.
He also maintains that margins can be pretty high - even up to 38 per cent gross. The company has done well enough to have imported a new managing director from the US banking sector, not only to head a plan for further growth but to allow Bevan to focus more on sales at the 15-staff VAR himself.
“In 2004, we invested £250,000 [to move to audiovisual] but realised it wasn’t enough,” Bevan says. He has since invested more - the learning and developing does not stop.
“With smartboards, we only sold about four this year. We used to sell one every day, but now we are seeing digital signage expanding. We sell communications, VoIP and all sorts of gimmicky sounding software,” he explains.
Bevan says the company inked £250,000 in letters of intent in August, £168,000 of which have already been confirmed. “So, come on over to AV,” he says.
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