Is the Magician about to die? Part 3

How iDevice GUIs have taken away your "magic," forever changing the Custom Integration market and some suggestions on growing your business in spite of them.


Preface: If you have not read Part 1 and 2 of this series, please go back and do so now. If you don't, this continuation of the magician's story will not make any sense to you. Let's pick up where we left off...... 

June 2007 - The ushering in of the Dark Ages.

1. The New Construction collapse.

2. The introduction of the iPhone.

 What happens when your whole world changes? It seemed like over night that "sticks" stopped coming out of the ground and my regular contractor clients stopped calling. On top of that, contractors that still owed money, were getting very hard to contact and corner. Clients that were still in the midst of building projects, started coming back to the design table wanting to cut certain sub-system controls or leave rooms pre-wired for future fill in. The press was in full swing of casting serious doubt on the economy and the public was listening! The press did not have to tell the banks that our gold mine of a housing market was about to play out, because they caused it and knew they were just bidding their time. A lot of our clients couldn’t afford our toys anymore because the banks wouldn’t allow them to get rolled into the mortgage. The ride had officially come to a stop and a lot of dealers started to exit that had based their model on new construction and automation.

About this same time, that pesky little iPod company pioneered and shipped a new cell phone that re-defined the word magic and how I practiced it. Our clients wanted to buy our cool toys, but began to save their money in fear of the economy. They could however, let go of 500 or so dollars and buy Apple's latest gadget. It was far more than a gadget in retrospect.

Let's talk about what happened when it was released:

Sales - They sold 6 million iPhones (touch panels as far as we are concerned) the first year! Let me ask a question...how many touch panels do you think we sold as an industry since the first Pronto or RAV came to us in 1999? That's right, everybody reading this should have their head hung low by now. It's been 12 years since then and Apple eclipsed us in just 1 year!

GUI (The start of my blog point) - Their GUI immediately became the standard to which everyone else’s was compared. Most of Apple's customers had never seen or touched a touch panel before. Their first experience was one of fun and amazement. The GUI educated millions overnight to the simple expectation that all touch panels should be easy and just work. Even we as an industry could not wait to get our hands on them and we had been doing touch panels for at least 12 years!

  

Multi-Touch - Try explaining to an AMX or Crestron client that his 12 thousand dollar touch panel he just paid you for will not do flick or gesturing like his iPod in his iPhone does. That is not a good conversation! 

What did the iPhone's introduction do for us? 

Loss of credibility - We have to look through our clients eyes and step out of our industry to fully understand what was going through our clients’ minds when we were pitching them on our touch panels since the iPhone's introduction. Most of our new clients were introduced to touch panels through the iPhone and here we were pitching them something that does not do as much (in their eyes) or is not nearly as clever for four to twenty times the price of their iDevice.

Decrease in customization = decrease in programming billing hours - Their GUI spoiled our clients and caused many to settle for it instead of desiring a fully custom GUI from us.

Bye, Bye Margins - No more high margin touch panels sales.

Made some of us Trunkers! - I have a lot of dealers during this time that looked at their bottom line and realized that the total margin they were showing did not have enough money in it to support a showroom anymore. They closed it and became "by their own definition," a Trunker with a van. In all honesty, they were better off because the jobs that they were getting, were by referral anyway and the client never entered the showroom.       

January 2010 - The iPad is introduced. See my thoughts above and multiply by ten!      

Here is where I make the point that it’s the iDevice GUI, not the hardware, that is changing our industry. Could I sell another twelve thousand dollar touch panel? Sure I could, as long as it could make the iPhone /iPad GUI of today look terribly outdated like their GUI and features did to us in 2007. Most of our rich clients have as much or more money than they did back in 2007, but they have to feel justified that what they’re buying is going to be tops in the market for a while and turn their peers’ heads just like my Pronto did back in 1999. For now, you have to tip your hat to Apple. They have done an incredible job! Here is the scary part.... Apple did this to our industry with a ricochet. They weren’t even going after our industry or developing a product for our channel when they introduced first the iPod and then the iPhone. We’re but a pebble in their pond. What would happen if they took aim at us and put serious resources and thought into developing for our channel?         

September 2010 - Little black boxes and the cloud.

CEDIA 2010 brought a barrage of companies wanting to "play nice" with the iPad and iDevices. Companies started to spring up (Bitwise, Red Eye, etc.) that had these little networked black boxes that had control ports on the rear and claimed that all you needed for control was one of these boxes (that are inexpensive-low margin) and an iDevice. Dealers were flocking to these companies trying to understand how they could use them to spring board into the lower/middle end of the control market. Just as my clients pushed me in the early days of the iPod, their clients are starting to give them push back and demanding to use their iDevices to control their home. These clients are being educated by the iDevice GUI and the App Store that going forward, they should only buy networked equipment and "programming" is as simple as downloading the App. Even if they spring for a Crestron or AMX processor, they are cutting back on the number of sub-systems attached to it because of the high cost of programming. 

To add to the race to zero on automation margins, later that year, companies like ADT and Schlage Link started using the "cloud" to monitor these boxes and even give (included in your monitor fees) you storage space in the cloud to store your footage from your IP security cameras and re-stream them back to you. 

So now, as a dealer, I'm not making much margin on the iDevice or core equipment and programming of these systems is much less complicated resulting in not as many programming hours billed. My "gold mine" in the midst of the booming new construction market has turned into a "coal mine" in the downturned new construction / iDevice era. I have to move a tremendous amount of systems in order to make a decent living now. 

The worst thing that has happened here is that magic is starting to dissipate from our industry. Even today, we do not get the reaction that we used to when we would press one button and the client would watch a multitude of things happen as a result. In the past, that was an "experience" to him and in some degree, magic and it validated us as pros at what we could offer him. In the next few years, that experience is going to turn into a DIY project for most of our clients. It will be expected and part of everyday life because of iDevices and devices like them that are yet to come.