Home Automation Cost....doesnt have to be 50K - Page 2

Robert,

While I don't want to attempt to discuss the issue in this thread, I didn't want to let your post go by without anyone commenting. It's an excellent, excellent post that's asking a lot of the right questions. Rest assured everyone from custom installers all the way up to billion dollar companies have contemplated (and in many cases attempted) it. I'd say right now it's still a work in progress.

Clearly a key factor is reducing price is to come up with pre-done systems that you can install with minimal modifications in each successive customer site. Otherwise, the programming work (and spelunking required to figure out what programming you need to do) can be very significant, because the customer is going to expect it to work just right every time and that can be quite painful to do if you've not installed that exact set of components a number of times before and worked out how to deal wtih any quirks that they might have (and they often have plenty of quirks.)

So I think that if you took that system above and completely standardized it and had all the user interfaces and events and logic worked out ahead of time, and built in plenty of flexibility by using CML pretty widely to wrap devices and do the complex logic (so that you can tweak it easily for the particular customer), then you could about get it down to charging for physical install/setup time plus margin, which are semi-knowable values.

Otherwise, you'd be taking a pretty big chance setting a fixed price (unless you were really experienced and could make a reasonable call on what it was going to take, even then you could get screwed I'm sure.)

And you could always have a few variations on the system, where you could leave out a this, that or the other (which would amount not to really tweaking, but just removing stuff from your standard configuration, which is pretty easy and safe to do.)

But, if you have available work from people wanting you to come in and automate their existing systems, and you don't have any immediate work doing a pre-fab system, which kind of requires that you are going into 'virgin territory' of which there is a lot less than the slutty kind, what do you do?

Funny how it's okay to have a "cash cow" business when it's your business, but when it's someone else's business, they're taking advantage of people. I used to be very bitter about my boss' stinginess when I was an employee, but now that I own my own business, I understand him a LOT better. I'm still trying not to be an a-- like him, but I know where he's coming from now.

The fact is, there is no such thing as price gouging unless there's a monopoly situation. As long as it's an open market, you charge what the market will bear. I DO think custom installers are making ridiculous amounts of money, but it's because people are PAYING ridiculous amounts of money. If at some point everyone just said, "You know what? screw $50K! I'm just not gonna have home automation," guess what? prices would go down. By the same token, if a bunch more guys like you set up shop (assuming your views on price don't change once it's YOUR business), the expensive installers would lower their prices. (If the demand shrinks, or the supply grows, prices must fall.)

That said, if you want to do MY home automation setup for a labor cost of $5K, I'll fly you out to my location.

David

David,

Your post is spot on except you fall into a couple of the same incorrect assumptions that you are responding to.

1. The fact that CI's sell high priced systems doesn't mean they are making "ridiculous amounts of money" (even though I know you said that without any negativity attached) any more than the fact I'd assume the same about a small software company that sells 50K software systems. Last I noticed MS makes BILLIONS selling software that costs a few hundred dollars per seat. My point simply is that the fact that the average sales size for a company is "large" does not equal "ridiculous amounts of money". And of course in the end what matters is NET profit.

2. I suspect that most custom installers would LOVE for you to be right. Unfortunately, you aren't. I don't think you'll find a lot of wealthy custom installers any more than you'll find a lot of wealthy electricians.

I'm sure not saying we are all poor - just that like any industry I think most people pay the bills, perhaps a little more. Only a very small number make a very good wage.

What makes a 8.4" touchscreen worth $5800?

active matrix LCD, integrated VOIP, and all AMX trouchscreens have fully programmable microprocessors (just like the masters) which is why all their touchscreens cost so much.

Not saying I agree that it should cost that much, but that's how much they charge (and not really that since they only sell to dealers who don't sell it for that much).

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To be fair though, he never said service from a dealer/installer was worth a little or a lot, he was talking about markup on some types of equipment, which has a lot of sources along the food chain, and is not the same thing as paying for a service.

I think that some of this comes from the fact that installers don't seem to want to put the real price on their service, but instead they try to spread it out in the equipment costs. In a way I can see that, since the customer can't claim that they didn't receive a piece of equipment that had cost X, whereas they can claim that this or that service wasn't rendered sufficiently to warrant X. And the customer might be more likely to haggle about service costs I guess.

But one of the things that installers tell us that they are uncomfortable with with a product like ours is that they cannot sell proprietary hardware with it, therefore the price of the hardware is a known value to the customer, therefore they cannot mark it up and would have to put the real cost of their service into the contract and that makes them uncomfortable. Not that they cannot mark up the hardware if they are getting it at dealer cost of course, but they just can't distribute what is really payment for their service around in the hardware, and give the customer a seemingly lower price on that service.

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The above reflects a fundamental misunderstanding of the CI business. I don't want to debate it too much, and it's also off topic to this thread. The mistake is in assuming that the business model for one industry (in this case the computer consulting industry) transposes to another (in this case the CI industry), but that's often not the case.

It's not the least bit uncommon for many industries to have their profits "spread out" between services and hardware. A dentist charges xx for his services. He also often makes money on the materials. Does anyone honestly think the price the dentist pays the local lab to make a fake tooth is what he charges the patient? Does that mean he's "not putting the real price on his service, but instead trying to spread it out in the equipment costs". I guess you can put it that way but that's the way the profession works.

In the cell phone industry they give away "free" phones.

And so on...

Geez. Lighten up. If it's a misunderstanding, it's not mine. I'm just saying what we've been told by more than a few installers, that they don't feel comfortable with our product because of exactly that issue, that they cannot distribute the costs of their service in the hardware markup, because the price of the hardware is well known. My position is always that, in the end, the end overall cost of the solution is what counts, but I'm just repeating what I've been told.

Maybe I'm missing something here but from where I set here on the outside it appears all three of you are saying much the same thing.

And yes if I were to be presented with a $5K bill for a $800 PC expect to be questioned about it even though I know at a general level that the cost of your buildings, trucks, taxes, insurance, labor etc are rolled into it.

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I am sure it is a very nice touchscreen computer, but the list prices on things like this seem crazy to me, I hope nobody is paying that price. I know the C.I. guys have to do a lot of work setting up a system so I wouldn't mind paying a premium on hardware but that price shocked me.

Then why do you say this:

Could you please point out the posts in this thread where "almost all the CI's are against why it doesn't have to cost 50K".

Because I believe Fletch was simply pointing out that if you were operating as a businessman and installing what you installed for someone else you'd have to charge a lot more.

As for you, I thought this thread was a nice change from your constant CI bashing and trolling in these forums.

If I reacted strongly it's only because I think the way you worded your post, perhaps unintentionally suggested dishonesty on the part of CI's.

I understand what you are saying but my point was are you truly interpreting/understanding what those CI's are telling you? I think you are, but I think there are some subtleties you may be missing not having come from this industry. Perhaps we can continue this offline sometime.

Fair enough but that's how a lot of your posts come off to me. My position is that what i see guys like you and IVB and RobertMe and countless others doing is great. I also continue to be interested in CQC which I'm testing on the machine I'm typing on.

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That's fine but what you or I believe doesn't matter much. It's a very very simple matter of economics/market forces and supply and demand.

People were posting similar stuff in the digital projectors forum for years - "it's absurd that a front projector costs more than a rear projection television". Well, for the first time it doesn't. But that doesn't mean people were being taken advantage of when it did. It's all about supply and demand.

I've been looking at UMPC's with 7" screens. Still running around 1K. Yet I can get a laptop with a 15" screen for $599! Obviously from a parts perspective that 7" UMPC should cost less than that 15" laptop. And I'm quite sure that when tons of people want them they probably will. Like you, I can say "I don't believe a UMPC should cost $999". But I look upon it as a simple matter of market forces and supply and demand.

And then there's the chicken and egg argument. "If they'd lower the price more people would buy them". Well, sort of. I think the market place will work it out.

And as long as the wheels on a car turn they are all the same .