For me, the most fascinating thing about being in the group communication and collaboration industry is not the technology – It’s actually watching the market evolve and adapt to change.

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As an example, for many years technology manufacturers focused almost exclusively on developing new and more advanced hardware.  After all, manufacturing facilities are expensive, which made the barrier to entering these markets high, plus it required the intellectual property associated with technology production, which added a competitive edge.  Within the audiovisual industry, there was a time when simply making a projector lighter, brighter or with a higher resolution was a big deal and a serious competitive advantage – Not any longer.

Fast forward to the present day and manufacturing is relatively easy by comparison.  Today, there is a large manufacturing capacity within the technology industry.  Many of the manufacturers in the market use the business model of replicating, in mass with speed, an existing product as a competitive strategy; a strategy that will only accelerate with the implementation of 3D printing.  This trend towards mass production benefits the consumer as it drives price down, however, as the time between innovation and replication shrinks manufacturers struggle to be profitable.

So, where will the profits come from if there is little margin left in making the product?  In an attempt to solve this problem, many of the innovative producers are moving from making it, to making it work.  What does that mean?  Intellectual property and managed services are now the name of the game.

Recently, LifeSize reorganized to focus on a “software as a service” (SaaS) model.  This move is an acknowledgment that the days of highly profitable videoconference infrastructure sales are a thing of the past.  The same is true in the interactive whiteboard space.  Once a hardware centric offering with free software and updates, companies like SMART Technologies are now moving to the SaaS model.  SMART’s most recent innovation SMART kapp is a Cloud based collaboration service with a high-tech flipchart as the interface.

This trend is not only within the audiovisual industry either; recently I read an article that GM was in court arguing that its customers buy the vehicle (the hardware), not the software that allows it to operate.  The software GM argues, is simply licensed for use according to the terms and conditions of the End User License Agreement (EULA).  In other words, your vehicle may soon be like your cell phone.  You buy the hardware but you can’t use it without the operating system and the carrier’s network.

Hardware, it seems, in many industries is fast becoming simply an access point to a piece of software that will either provide a service or simply permit the hardware to function.  This new model provides an on-going revenue base for the manufacturers with software renewals and/or subscription service fees.  For the consumer, it can offer conveniences such as flexible cloud-based access, automatic software updates and infrastructure management outsourcing.  However, for businesses, it will require a shift in thinking as they build strategies around managed services.  And, a fiscal change in how they budget and purchase managed services instead of capital assets, which are now migrating from the Balance Sheet to the Profit and Loss Statement and becoming ongoing operating expenses.

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