This trend spells big business opportunities for savvy systems integrators. The key is learning how to effectively compete and operate on a global scene.
Moreover, U.S. companies can't just dip a toe in the water. “If you're not prepared to ride for at least three years, you're not serious,” Simpson says.
Douglas reports that SPL won't go into anything that looks negative, even in the short term. “You can't just jump into a market if you don't have any conception of what the returns are going to be,” he says. “You don't just go there and hope for the best.”
For SPL, evaluation of potential overseas markets starts with an assessment of just how much business a market might offer. “We talk with the different general contractors and local trades, and ask them how busy they are,” he says. Next comes an appraisal of how well local labor availability can meet demands.
“Do the local people have the skill sets to support you or not?” Douglas asks. At a minimum, low-skill manual labor must be available for cable-pulling and similar jobs. At higher levels, though, SPL is very much a construction-oriented company and needs to be able to call on the whole range of traditional construction skills.
Potential players also need to be familiar with local building codes, trade customs, and other complexities. “If you can't do business in a way you know how to do business, it's probably not going to work,” Douglas says.
Finally, are there already a lot of local companies in the target market doing the same things? “What would you do to set yourself apart from all of those guys?” Douglas asks. In this sense, he adds, jumping into the London market would be “like jumping into Los Angeles,” a major domestic market already served by large numbers of suppliers.
ISE's Blackman notes that manufacturers are often doing more and better business in Europe than systems integrators, and Crestron's Singer says this global orientation must be reflected in a company's marketing.
“We communicate with each of our 20 offices so that there's some unified message, but each region creates its own marketing to appeal to the local culture,” he says. “We don't dictate or push marketing on the various regional offices from headquarters.”
This kind of detailed local knowledge is a strong reason for either a manufacturer or a systems integration company to open its own offices in key markets and staff those offices carefully, Simpson says. “You had better have someone who's in with the local culture,” he adds, “and not just send your guy from home.”
Whatever happens, you have to be close to your market, Simpson continues. “It's no good saying that because you're a systems integrator in New York, you'll automatically be one in Germany,” he says. “Unless you're really in with the local market, you won't get a single job. Germany, for example, is very regional, and they expect suppliers to be very local. People there are loyal to their local suppliers.”
This loyalty is also reiterated in InfoComm's “2006 Market Forecast Survey,” which found that European survey respondents “typically target sales to a single country, usually their own...Overall, respondents report generating an average of 84.4 percent of their total gross turnover within their top country for sales.”Europe: A different approach to distribution
“Europe is a continent, but it's not that big of a place,” Wilson says. “Languages may vary, but the business approach seems fairly consistent.”
The American model, blending manufacturers, dealers, distributors, and consultants, doesn't hold up in Europe, Wilson says. “Most manufacturers go through a master distributor in a given country, or in a region with a similar language,” he says.
This master distributor is the only source of products in that region for the companies it represents. “Yet, they don't do the installations, which is strange to us in the U.S.,” Wilson says. “There are smaller companies that do the installs.”
In fact, Wilson believes Europe is full of small companies that collectively account for a large slice of the install business, but that “don't really show up on the radar screen.”
Simpson believes “the independent AV consultant model is no longer unique to the United States. It exists in different forms in different places in Europe, with the United Kingdom being most similar to the U.S. In the European Union (EU), consultants tend to work out of engineering practices.”
Simpson says some major progress has been made in recent years in overcoming familiar obstacles like differences in electrical systems. Most electronic equipment now works well with a wide range of voltages, without adapters, he notes. In many other areas, technical standards are being adopted by the European Community. These standards, though, may not be embraced in the U.K.
For that matter, Douglas says, building codes and similar norms can vary even within the EU. “It's a lot more than just being comfortable with metrics,” he says. “U.K. standards are far different from Germany, which in turn are far different from France.”Asia: Obstacles range from simple to complex
Language may not be a barrier when doing business in Europe (Douglas notes that “English is the standard business language”), but it definitely comes to the fore in Asia.
Simpson notes that even the most basic rules of business are more difficult to apply in Asia. “We have this tremendous language difficulty,” he says. “You become wholly dependent on the ability and motives of your intermediaries. Even if you can acquire local native-speaking staff, and this doesn't only apply to Asia, you can find either that they don't have the requisite business motivation, or, if they do, they may be using your business as a springboard to start their own.”
Wilson cites some fairly workaday concerns for companies moving into Asian arenas. “There's a great thirst for knowledge,” Wilson says. “They understand the most advanced technologies, but when it comes to building codes and the way the most fundamental concepts are applied, they don't have a real understanding. There's a real lack of knowledge on the building side.”
Another problem also bedevils U.S. firms, Simpson says: “In China, one is always used to the concept of ideas being ruthlessly copied.”
However, “in terms of sophistication of applications, you get some very elegant ideas about how to use AV techniques,” he says.Unexpected markets
“Even in quite unlikely places you'll find sophistication at the top end of the market that can be quite surprising,” Simpson says. “We did some of our very best work with the Czechs when Czechoslovakia was still a Communist regime. We owe a great debt to people like the Czechs,” who Simpson says pioneered in using multiscreen projection, mixing live action with video, and other applications, even while still under Communist rule.
“Even today, you'll find some really interesting work being done by the Czechs. The French are hugely imaginative in their use of light, sound, imagery, and projection on water.”
Easy travel and the Internet have really helped “shrink” the world, Simpson says. “There used to be big differences in technological sophistication, but not now. It used to be that people from remote markets such as Australia were the best informed, because they made a point of going to all the trade shows. This made them difficult customers to deal with,” he adds, citing the combination of sophistication and distance.Is international play really worth it?
“Certainly for us it's been worth it,” Simpson says. Not only has Electrosonic's international business been lucrative, but it has also helped company personnel stay excited. “It's an enormous stimulus, to get the chance to find out how other people tackle problems,” Simpson says.
Douglas, though, suspects that many U.S. firms could do just as well or better by growing their domestic business. “We'd judge an international opportunity the same way you'd judge any project in America,” he says. “Is it winnable, and can you make a dollar?”
For many firms, there's often an added impetus to grow internationally, namely, keeping U.S. clients happy. “A lot of our design and consulting clients are reaching out all over the place, and they expect us to be there at the other end as well. If they're doing a project in Singapore, they don't want to have to find someone else,” Simpson says.VERTICALS VARY INTERNATIONALLY
For at least a decade, houses of worship in the United States have been doing some of the most ambitious AV installs in the business, generating large chunks of revenue for integrators large and small. You'll look long and hard, though, to find a similar phenomenon in Europe.
InfoComm's recent “2006 Market Forecast Survey” took particular note of this difference. “The residential and worship markets stand out as exhibiting a particularly strong differentiation,” the report says, noting that worship, which was ranked by American survey respondents as their second most important market, “is in last place in the European sample.”
Robert Simpson, CEO of Minneapolis-based AV systems integrator Electrosonic, agrees with this observation, and points out a surprise. “Worship isn't a negligible market elsewhere, but a very small one.”
In contrast, Simpson says, Europeans are crazy for high-end AV in their homes. “At Integrated Systems Europe in Brussels, we had residential people coming up to us to ask about the box we had to transmit very high-resolution images over networks,” Simpson says. “That's a $10,000 box, and it never occurred to us that this market would have that sort of money for a behind-the-scenes item.”
Simpson adds that “we're seeing installations in the residential market that are significantly more complex than the corporate ones.”
Residential work, InfoComm reports, accounted for 10.6 percent of all of the business done in 2005 by European AV firms participating in its study, compared to less than 5 percent in North America.
John McKeon is an independent consultant and writer based in the Washington D.C. area. He can be reached at email@example.com.