Six CEDIA Integrators Join Forces, as AT&T, Comcast and Others Target Their Turf

Via, a new custom installation company launched this week by six veteran custom integrators, is hoping to solidify its position in the home control market, as high-profile service companies including AT&T, Comcast, Best Buy and ADT extend their reach into entry-level home automation. “There are a lot of new entrants to the market on the low end,” Via CEO Randy Stearns told Consumer Electronics Daily. That, combined with the fragmentation of some 9,000 small companies in the custom home electronics space, led Via founding companies to realize they needed to “consolidate our efforts,” said Stearns, owner of Engineered Environments, San Francisco, which also has offices in Houston and Hawaii. A consolidation in the industry was “going to happen anyway, and we wanted to be the first mover and take advantage of the opportunity,” he said.

Responding to whether Via members feel threatened from the likes of Digital Life, Xfinity, the Geek Squad and Pulse even after other large companies including IBM and Microsoft failed in the custom market, Stearns said no. AT&T and the others “haven’t made much headway to date,” and largely “aren’t trusted by the individuals who trust us,” he said, referring to luxury-level clients. “They have a long way to go, but we're acutely aware that major multinational corporations have their eye on this space and we want to combat any potential successes they might have just because we're too comfortable in our own little niches,” he said. Citing the small integrators’ position against the Goliaths of the industry, Stearns said founding members are aware that if they remained independent, “there is an opportunity for someone to walk all over us.”

The other five charter integration companies in Via are Cyber Sound, Scottsdale, Ariz.; DSI Entertainment, Los Angeles; Paragon Technology, Aspen, Colo.; S3 Aurant, Park City, Utah; and Studio AV, Bozeman, Mont., which operates also in Missoula, Mont., and Jackson, Wyo. The new merged company “didn’t require or accept” outside financing, Stearns said, and is 100 percent owned by the founding companies, with revenue of a projected $72-73 million this year. The goal is to be operating nationally within five years in 50 U.S. hub locations with revenue topping $200 million, Stearns said. Each company exchanged ownership of their previous company for ownership in Via, and the company plans to expand to “fill holes” in the western part of the U.S. before moving east, Stearns said, but expansion will be measured. “We're not immediately looking to go out and acquire companies,” he said.

Next steps for Via are to “get our feet under us first,” Stearns said, including standardizing best practices, codifying a common software platform and centralizing operating functions. When Via starts looking at acquisition targets, potential companies will have to be number one or two in their area in market share, have an “outstanding reputation” among industry peers and have proven “supreme talent,” he said. Via doesn’t want integrators interested in “selling out” or “moving on.” It wants companies that share its vision of growth and becoming “the dominant industry leader in custom electronics,” he said. Owners have to be “mature but have plenty of fuel in the tank” to drive growth in their markets, he said. Via is also eyeing international expansion, he said.

A looming issue as Via sorts itself out is which buying group the new company will align with, because five members are currently part of the Home Technology Specialists of America and two belong to Azione Unlimited. Stearns said Via is “talking to buying groups, but we haven’t made a decision on what direction to go in,” saying there’s no deadline for choosing one. Richard Glikes, president of Azione Unlimited, told us Via’s selection “is not a decision that will come hastily.” Saying all but one of the Via companies is a member of HTSA, Bob Hana, HTSA managing director, said those companies “know well the benefits of HTSA and how it has and can continue to help them be more successful and profitable in this changing industry.” HTSA embraces the change brought about by the consolidation, he said.

Via members will continue to operate under their individual names for now, and in six months, the Via name will take prominence, followed by the former company’s name. After a year, the companies will operate solely as Via, he said. The name came from a branding consultant based on the Latin word for road “or path forward,” he said.

Product portfolios, too, will narrow as a result of the merger, Stearns said. Via doesn’t envision a private-label approach, but it will have a two-tier structure. One will be a “standardized system design and implementation” that will accommodate more than 90 percent of projects, he said. Those projects will use standard products and design philosophies that are “consistent from project to project” within all locations, he said. The remaining projects will be customized to the needs and wishes of clients willing to pay a premium for the tweaking, he said. A benefit of being part of a larger company is the ability to tap into expertise that members have in different control platforms, Stearns said. While manufacturer relationships “will only strengthen,” not all manufacturers currently serving the six companies will make the transition. Those decisions have been made but Via isn’t ready to announce the results, he said.

Customers will benefit from added expertise and more solid business practices deserving of the “high net-worth” clientele the integrators serve, Stearns said. To date, “we haven’t been able to give our customers the Ritz-Carlton experience across the board,” he said. More resources and a standardized approach to business will enable companies to achieve a higher level of service and support via social media, education and project design, including more professional proposals and detailed drawings of a project, he said.

A recurring revenue model is in the mix, too, something that custom integrators have long sought following installation of a system. “Our industry missed the boat,” said Stearns, saying that in the past integrators aligned themselves with a project during the construction or remodeling phase and then moved on. Via wants to change the model to where a customer’s relationship with an integrator “doesn’t start until after move-in,” when it becomes about “the years of service” companies will give to clients. “We're changing the paradigm,” he said. The financial model hasn’t been set, but under the new vision customers will pay on a recurring basis for keeping technology current, monitoring equipment remotely, making fixes where possible and sending alerts. Via will bank off a system developed by member company Paradigm, which already has a cloud-based monitoring system in place. Stearns called the Paradigm system “ihiji on steroids,” referring to an industry remote monitoring services company. “We'll monitor every aspect of what goes on in a home and repair most things remotely,” he said.