“There are no shortcuts in evolution.” —Justice Louis D. Brandeis
Evolution is not a foreign concept to the videoconferencing industry. Since
the technology’s introduction at the 1964 World’s Fair in New York it
has seen many changes. We have seen products and manufacturers come
and go, the migration from H.320 to H.323 to SIP, and the move from SD
to HD. Even the name of the industry seems to be in a constant state of flux,
from video-teleconferencing to videoconferencing to visual communications
to telepresence to collaboration.
The industry continues to evolve with the current
period migrating away from hardware-based
infrastructure to software-based infrastructure
components. Software does bring some key
advantages and there are hundreds of articles about
the shift, but a topic that I believe goes untouched is
how we got here and what impact this will have on
the AV integration reseller channel.
From a “how did we get here” perspective, it is clear
that the reality of Moore’s Law regarding processing
power has enabled us to move from dedicated
hardware to software—but it goes much further than
the technological advancements. If you step back
and look at the videoconferencing and AV industry in
general, manufacturer and reseller business models
have been primarily structured around the sale of
hardware. Yes, almost all have some type of firmware
or software included, but the primary focus has been
on the hardware sale.
In today’s global and connected market there are
some inherent problems with a hardware model,
both for a manufacturer and reseller. Development
time for a new hardware product is typically slow and
can create a delay between new technology creation
and bringing new value to the
market. Hardware can create large
inventories for the manufacturer,
distributor, and reseller, and become
a cash drain on the organization.
Another challenge with hardware is
that it traditionally will follow a life
cycle that results in declining sales
and/or commoditization equating to
lower and lower margins.
On the flipside, software negates
many of the hardware challenges
mentioned and can bring additional
value. Time to market is typically
reduced providing technological
advancements in a compressed cycle.
The flexibility in delivery of software
eliminates the cash drain associated
with inventory. The overall sales cycle
with software traditionally brings
much higher margins than the
life cycle results of hardware.
Additionally, most software
models lend themselves to some
type of cloud mode—either private
cloud or SaaS.
So what is the potential impact
of hardware to software migration on the AV
integrator that sells videoconferencing? In short,
there is a lot to consider.
First step is to understand the business model.
That might seem a little obvious but there are many
nuances and things to consider. The overarching
difference between the hardware / software model is
when and where the revenue comes from. Hardware
sales are about getting the PO, which may include
a minor percentage of service or recurring revenue.
Software can be totally opposite with the majority
of revenue on the recurring side through renewal
of licenses and maintenance contracts that include
feature upgrades. It is critical to understand the
software licensing procedures and how to deal with
everything from upgrades to license transfers.
Another area of major importance is your
compensation model. Since the revenue model is so
different you will also need to look closely at your
compensation plan for sales. The incentive will shift
from a hardware PO to building software licenses
and associated renewals with high margins and little
or low cost of sales.
Also, don’t forget about new engineering,
installation, configuration, and
technical support skillsets that
will be required. It brings a
whole new level of certification
skills will require planning and
designing of virtualization solutions,
installation, and configuration will
need training in implementing and
managing both server and desktop
virtualization. And yes, there are
training and certifications for
virtualization technical support.
A move from hardware sales
to software sales can be very
challenging, have a major impact on
your business, and become quite
expensive, but the flip side is that
the reward potential is extremely
high. The good news is that the
shift will not occur overnight,
which should allow for solid
strategy development and
R. Randal Riebe (email@example.com) is the director of AV integrator
business development at Polycom.
infrastructure brings a variety of positives
for the AV integrator. Software
is relatively quick and easy to deploy,
opening new doors for trials or proof-of-
concept for your customers. It provides
scale flexibility not available in
hardware. Need to add additional
video capacity today but will need to
potentially scale down in six months?
Not a problem. Being software, the
end-user is potentially able to show
some reduced total cost of ownership
by utilizing existing IT resources.
With all of the advantages of
software, the demise of the hardware
platform is being predicted by many.
But at the same time we are seeing
many customers continuing to purchase
hardware infrastructure. So
what’s up with that? Actually there
are a variety of reasons.
One element is timing. There are
many enterprise customers that currently
have and use hardware infrastructure
and any potential for shifting
from hardware to software won’t
happen overnight. As time passes
and the quantity of multiple small
conferences increase due to mobile
and desktop applications, expect to
see software take a larger role.
The other item that is often
glossed over is today’s hardware platforms
have been designed and optimized
for a particular function. They
are extremely stable, highly secure,
and in environments that require
larger configurations with higher call
speed requirements, hardware is currently
the best choice. Best guess is
that we will see a variety of hybrid
deployments including hardware,
software, and cloud services for the
next few years.
Because of this it is critical to
understand the technology that is
available (hardware and software),
understand what the customer is trying
to achieve and how they will
be using the technology so that you
can make the best recommendation