Audiovisual: A sound investment?

With the audiovisual market growing fast, resellers are eyeing the margins to be made. Nick Booth looks at the technologies involved in the second of three special reports.

If, as some pundits insist, the audiovisual (AV) market is already the next major growth area for IT, there will be a lot of resellers considering a move into this area. But can any reseller hack it at the high end? How difficult can it be to sell interactive whiteboards and screens?

Too difficult for most ordinary resellers, claims Ian Vickerage, managing director of Imago Micro, a distributor of AV products.

Networking resellers may know about IP, but they don't have the specialist knowledge and experience of setting up visual displays, which demands understanding of more subtle aesthetics concerning lighting and shade. However, he is the boss of a specialist distributor, with specialist resellers as partners, so you'd expect him to say that.

But does Vickerage have a point? Is AV a tricky market to crack? Actually, the reverse may be true, according to another specialist distributor, MultiVision Audio Visual. Sales director Ian Appleby predicts that now every device has an IP address, any equipment you install is going to need networking skills - which opens up this market to the networking specialists.

Networking skills are at a premium in the AV market. Many AV specialists, believe it or not, are ex-pharmacists who got into selling AV products by default after dabbling with selling photographic hardware to complement their picture-developing businesses. As AV products got more complex, they expanded their businesses without ever having needed to acquire IT skills. Until now.

InFocus's new regional director, Con Mallon, predicts that this year will see companies start to spend money in order to grow their sales revenue, after two years consolidating on costs. This means arming its salesforces with new equipment to help it make more effective presentations.

Laptops are no longer considered state-of-the-art sales presentation tools. Asking a client to huddle and squint into a tiny screen is so last-century. Now that portable projectors weigh less than a kilo and can fit into a laptop bag, road warriors can present big, bold images on giant screens.

On the other hand, entry-level technology is getting cheaper. An entry-level InFocus LP120, for example, retails at around £750 with a dealer price of £600. Good margins then. "And the market is growing at 30 per cent a year," says Mallon.

Get in quickly while people still want dealers to offer advice and leadership, is Mallon's advice, because the days when buyers know exactly what models they want and in what quantity, as they are doing in the PC market, can't be far away.

While schools may represent a potential market, it's at the corporate level that Mallon sees the real opportunities coming: the high-end projectors that go into boardrooms and become part of the meeting room conferencing fabric.

They will be connected to all kinds of networking feeds carrying all the audio and visual information, which requires great integration skills.

"The state-of-the-art AV devices are products that need constantly looking after and management, not to mention the initial configuration. It's a bit like putting a server in, with all the opportunities that arise for further services that it presents," says Mallon.

As the market takes off, distributors like Ingram Micro and Computer 2000 (C2000) have thrown their hats into the ring. Gary Fowle, commercial director at C2000, which formed a specialist AV team in 2003, says: "AV products are getting better and cheaper. Our AV sales are up by about 20 per cent on this time last year and [could] do the same this year."

While a lot of the sales go through retail, mail order and online resellers, products are finding plenty of takers in business as well as in the consumer market, he argues. Products used in the home are also being adopted by users at work, and vice-versa. But the home market isn't the reseller's usual market. Isn't this ominous for the channel?

Don't start panicking yet, says Darren Lewitt, AV business manager at Midwich. There is a long way to go before people buy their AV products off the page.

"There are so many ways resellers can add value, they just have to be creative. The good thing about the AV market is it's not dominated by the box shifters, like the computer market is," he says.

In AV, it is the companies that add value and the vendors with the cleanest channels that dominate the market.

"The big three distributors are Maverick, Steljes and Midwich, and we're all AV specialists. The broadline companies haven't scratched the surface. Between them the market shares of broadline distributors like C2000, MicroP and Ingram don't add up to single figures," says Lewitt.

But how do resellers keep the market this way? You have to be constantly creative in the way you sell, according to Lewitt.

"Take the technology on site to demonstrate it. Have technical days when you explain issues to people. Arrange for customers to have a free 30-day trial. Give people a like-for-like comparison of similar products, working side by side, and let them make their own minds up. Just work more to keep the customer happy and don't just collect your mark-up," says Lewitt.

A lucrative market
Vickerage says the big market now is for large-screen displays. Large-screen LCDs are "flying off the shelf", he says, because digital signage is the next big thing. But don't imagine that lets in IT resellers.

"AV resellers are much better equipped to supply, install and configure plasma and large LCD than IT resellers. Logistically speaking, plasma screens are both fragile and heavy, and need specialist transport to deliver them safely. AV resellers have the installation skills, where IT guys don't."

The education market will be huge, says Vickerage, as a result of education secretary Charles Clarke announcing more funding for education.

Ian Appleby, sales director at specialist distributor, Multi-Vision Audio Visual, agrees. "I'd be wary about this market, though; you could waste a lot of valuable time," he warns.

Government quango the British Educational Communications and Technology Agency (Becta) put a £25m contract to supply schools with whiteboards up for tender. Once any reseller emerges through the selection process they could inherit a massive section of the schools market. But Appleby warns resellers to think carefully.

The established education resellers will be a minor annoyance compared with the hoops you'll have to jump through when Becta's next round of tendering starts in 18 months' time. The first round of tenders was very painful for many resellers.

"Before you could even be considered to tender, a reseller had to fill in a huge 20-page questionnaire. Only 30 companies were going to be allowed to tender, so they made it pretty difficult to get to that stage. Then the tender was even more onerous," says Appleby.

Before you were lucky enough to get on the list of potential tenders, any reseller would have to entertain a visit from Becta-appointed inspectors.

Then your customers would undergo similar inspection from the men from the ministry, who would cast an inquisitive eye over your installation work. Next, the reseller's books would be fully audited, followed by a test where the reseller gives a quote on an imaginary tender scenario, with full costing.

Arguably, it is only right and proper that government officials police a government contract in which public money is being spent, to prevent Dave the Dodgi Dealer from exploiting the situation. But many think this is a complete waste of money.

After-sales services
Still, if you manage to land the contract, you will be laughing all the way to the bank, surely. Don't start counting your profits yet, warns Appleby. There's a lot more to worry about.

"The after-sales services [Becta] is demanding are massively unrealistic. But everyone is signing up to supply it anyway," he says. Resellers are saying anything to win the contract. What happens when contracts are enforced is anyone's guess.

"If a light goes in a projector, a reseller is going to have to replace it within 24 hours. In the private sector, you'd send DHL round with a package and the customer would change the bulb itself. In this contract, even the caretaker is not expected to change the bulb. The reseller will have to send an engineer. Imagine how expensive that's going to be, when there are 8,000 units across Britain needing maintenance," says Appleby.

Another problem is that schools will want installations carried out in the school holidays, since they won't want resellers on the premises in school time. This will create a massive bottleneck with all the schools demanding work at the same time.

If you are an AV installation engineer and your company has won an education contract, don't count on getting an Easter or summer holiday this year. Your calendar is going to be fully booked.

More importantly, the supply chains of most manufacturers won't cope with this volatile demand, if last summer's experiences are repeated.

July 2003 was a massive month for AV, reports Appleby, but there were major supply problems. Philips, one of MultiVision's vendors, couldn't find enough units to meet a demand that only lasts as long as the school holidays. Miss that window, and the opportunity is gone.

"The same will happen this year. Schools will be an interesting proposition but the full potential of these opportunities might elude a lot of resellers," says Appleby.

Head for the corporate sector, advises Vickerage. Web conferencing (by vendors like Polycom) is being used for video streaming from manufacturers such as Optibase and Viewcast, which is increasingly in-demand in boardrooms.

"Conferencing is only going to work if you have the quality of audio that you don't get from a normal phone handset," says Polycom's director, Ray McGroarty. "That's why so many audio conferences are so stressful."

Polycom's new 14KHz system, the VSX 7000, is a response to the demand for better sound quality.

If resellers get into selling AV now, what delights can they expect to sell in the future? Wireless shows promise, but Bluetooth is too slow for video. There are some wireless protocols that will be fast enough but IT professionals will need to get over their concerns about security first.

The real interest will be in developments with large-format screens this year, predicts Vickerage. Thin-film transistor (TFT) technology is easier to produce and less fragile than plasma screens. But look out for the new opportunities arising from new innovators.

Screen Technology, a start-up based in Cambridge, is developing display technology that it claims airports, railway stations, hotels, conference centres and all kinds of public gathering places are all crying out for.

The problem with a lot of public meeting places, according to Tony Kellett, Screen Technology's chief executive, is that there is a lot of natural light flooding in that makes it hard to read displays. Plasma screens are not up to the job, which is why they are being ditched at many railway terminals.

"The resolution wasn't good enough and that put advertisers off. Pepsi won't advertise on a screen where its cans have little squares jutting out at the sides," says Kellett.

Screen formats
Besides, many adverts or information screens have static images, and plasma screens can't deal well with static images, as they burn in the phosphor, causing permanent shadows.

Screen Technology has set out to advance the technology beyond the point where plasma reaches its limit of usefulness. Whereas plasma screens do not go beyond 68in, Screen Technology is aiming to provide between 68in and 200in screen sizes.

Indeed, one potential client needs a 2ft high by 50ft wide screen (presumably for a trading environment or a shopping mall). It can reach this size by using 17in displays as basic building blocks. Each tile is equivalent to an LCD screen, but there are no visible joins and no edges.

The most important invention Screen Technology has added is a special backlight that magnifies the image and ensures it can be seen in any light conditions.

"Anyone installing massive screens on this sort of scale will also be able to sell all kinds of infrastructure hardware to support the screen. After all, the computing resources to drive this sort of imagery will be pretty big. There'll also need to be a solid networking infrastructure too," says Kellett.

So it looks like it's a network reseller's market after all.

CONTACTS

Computer 2000 (0870) 060 3344
www.C2000.co.uk

Decision Tree Consulting (01438) 316 240
www.dtc-worldwide.com

InFocus (0800) 0286 470
www.infocus.com

Maverick (0118) 988 6266
www.maverick.co.uk

Midwich (01379) 649 200
www.midwich.com

MultiVision Audio Visual (0845) 1203 939
www.mvav.co.uk

Polycom (00) 800 0033 4455
www.polycom.com

Screen Technology (01223) 875 500
www.screentechnology.com

Steljes (020) 8213 2100
www.steljes.co.uk