Customization Comes Home

Steven Miller, president and CEO of BTI Infosystems Services in Union City, Calif., entered the digital SOHO/home market by virtue of the "wow factor."

BTI would implement a hot wireless solution, hang a cool plasma display, install the latest videoconferencing system, or feed a new remote service to one of its corporate clients, who would inevitably say: "Wow, do you think you can do something like that in my home?" And few products elicited a more enthusiastic "Wow!" than BTI's custom servers, the cornerstone of the company's SOHO/home solution.

"When we first walk into a home, the client is so excited that we're giving them a fully equipped, secure home office that they start asking about plasmas, distributed A/V and how that can all tie into the home network," says Miller. "The customer sees what we can offer and says, 'You know, I've been thinking about these other products.' It takes off from there."

This wow factor is driving integrators' sales of custom PCs and servers, tied to a full networking solution, into small offices and homes across the country. The reasons have as much to do with the integrators as the end user. For the integrator, custom systems generally earn 20 to 30 points more than branded systems, are fully scalable and accept a steady stream of cutting-edge off-the-shelf components. Intel's new 915 and 925 chipsets, designed to support Dolby 7.1 surround-sound audio and high-definition video; Advanced Micro Devices' 64-bit architecture; and the general release this month of Microsoft's Windows XP Media Center Edition OS will dramatically increase custom-system sales into the home, they say.

On top of all that new technology, custom systems allow integrators to create their own warranty and service programs, which lead to closer customer relationships."By selling custom systems, we're selling something that has a premium value," says Sheldon Sievert, manager of Computer Specialists Unlimited, an integrator in Alexandria, Minn., that sells custom systems from Now Micro, a regional system builder, to the SOHO/home market. "The customer is willing to pay us to come out to them. We're selling them our brains, our expertise. That's something that the Gateways and Dells can't give them."

Nor can the tier-ones give the customer a unique system, built specifically to the end user's need. "Executives wanted office capabilities in the home, but they also wanted something different, something to show off to their friends," Miller says, recalling how he got started in the home market. "Wi-Fi took off because they wanted to work by their pools. Then they wanted to tie several systems together. We started building digital jukeboxes and tying in their audio and video systems. It was evolutionary."

Many integrators are using the new variety of components, cases and peripherals to create a marquee product, a base from which services and other products generate. BTI's server, for example, is based on Microsoft's Small Business Server 2003, includes a RAID 5 system with automatic backup and storage, Maxtor One Touch external drive, McAfee security, Check Point Software Technologies firewall, Hitachi SCSI drive and Hewlett-Packard's suite of multimedia software. The server starts at about $2,000. BTI's average base SOHO/home solution, including a custom PC and full line of services, runs about $15,000, with margins starting in the 30 percent range, typical for high-end systems. That base solution, as is the case for most integrators, creates a loyal customer that returns for additional products and services.

"We package a complete end-to-end, true convergence solution. We tie in services like remote monitoring, preventative maintenance and patch management," says Miller, whose laid-back California demeanor is offset by an intense business drive that has built BTI and Pacific Voice and Data, a spin-off focusing on VoIP solutions, into a combined $20 million corporate and home player.

The secret sauce to this new technology mix is the integrator's bench of seasoned system engineers, technicians, support staff and sales teams that are transferring the skills they honed in the cutthroat commercial market"where ROI, value-added services and scalable solutions reign"to the home market. "A lot of white-box builders, who have historically been successful due to the customization and services they've provided into commercial accounts, are now bringing those same skill sets into the home," says Dan Schwab, vice president of marketing at D&H Distributing, a Harrisburg, Pa.-based distributor with a strong focus on the custom builder and home markets. "Building a high-end gaming, video-editing system or media-type system allows them to compete successfully against the tier-one OEMs because the OEMs can't come close to offering that breadth of systems and services."Joel Koltz's customers had that in mind when, a few years back, they began asking him for revved-up custom PCs for their homes. It just so happened that several of them were starting to build some type of home theater. Koltz, a diehard video/audiophile who works as operations manager at Mainboard Computer, a large Waltham, Mass.-based system builder, and Integrated Design Systems, the company's home-focused spin-off, decided he could build a system with DVD progressive scan features, pack it with additional functionality and sell it at a lower price than a consumer-electronics device. Integrated Design Systems continues to improve upon those systems and builds an A/V server for the storage and distribution of music and movie collections.

Another selling point in custom systems, Koltz and other integrators drive home, is their scalability. Based on open standards, a well-built custom system has a long life that can continuously grow off the latest components and technologies. That's especially important today as more cost-effective, open-standard, home-control, storage and distribution products find a niche once filled by expensive proprietary systems. It is also opening opportunities in the middle and upper ends of the market.

"The big thing with custom systems in the home is being able to upgrade them in a flash. As the technology advances, so does the opportunity to continually improve upon what you've built. You can't upgrade a consumer device; you have to replace it. One custom system can also replace several consumer-electronics devices," Koltz says.

Koltz and other integrators say the home market will be a permanent and growing segment of their business. "There are a lot of new services we can drive into the home: security, Wi-Fi, power protection," Miller says. "We're finding we're getting into the market in ways that most people wouldn't be thinking of."

Marc Wojtasiak, marketing manager at Now Micro, Roseville, Minn., which builds the Frontier brand of high-end desktops, servers and storage units, as well as Mega small-form-factor media-centric home systems, agrees. A local ad campaign the company embarked upon two years ago attracted strong interest, so it added a retail element to its Web site and inked a deal to be the exclusive system and solution provider partner to Fiber To The Home Communications, a Roseville-based company that delivers an all-fiber platform to homes and businesses and relies on its dealers to handle sales, installation and other services. "With the big convergence of PCs and communications devices, custom systems enable our customers to go beyond a normal PC device. When we show the home user how the systems can integrate with the home entertainment center, it leads to the sale of higher-end graphics cards, wireless networking and adapters, digital cameras, you name it," Wojtasiak says. "Custom systems create more margin and flexibility for our dealers and new opportunities for everyone."0