This year is shaping up as the start of a testing time for both the IT and consumer electronics channels as both battle to grab the lion's share of the booming digital home market. It is a battle on many fronts and one that is more likely to be won through collaboration than confrontation.
Traditional IT vendors are launching an all out assault on the lounge room in an effort to control the flow of audio and video throughout the home.
Companies such as Intel, AMD, Microsoft and others are hoping for a future in which every home has its own server in the study which can feed audio, video and images to every room in the house.
Their efforts are slowly coming to fruition as more household appliances become digital and broadband Internet access is available in more homes.
A few months after the Windows Media Center PC launch, the Australian market is increasingly attracted to the concept of turning a simple PC into an integrated home entertainment hub. Indeed, home entertainment equipment (and services) is giving the IT channel new selling opportunities.
Entertainment hubs, digital media players, gaming devices, digital cameras and multipurpose gadgets are increasingly being added to a company's product roadmap.
However, on the other side of the coin the consumer electronics industry sees opportunities opening up for it in areas that were traditionally the domain of the IT merchant. Interactive digital television with broadband Internet access, plasma and LCD TVs that can double as PC monitors and connect direct to digital cameras; networkable set-top boxes and DVD recorders with hard drives all have an IT component.
The idea of being able to network traditional CE products using IT know-how is both appealing to consumers and a conundrum for vendors and resellers. Should an IT reseller, who traditionally has the knowledge to set up such a network sell both the IT and CE components? And if so do they operate to traditionally low IT margins or the much higher CE margins? This of course is pre-supposing that they have the knowledge of consumer electronic equipment to be able to satisfy the consumer's requirements.
However, while you could argue semantics all day, one of the main issues slowing the adoption of a digital lifestyle is incompatible technologies and it is mainly the CE industry which needs to adopt common standards. The IT industry is far more accustomed to being standards driven, whereas the CE industry has sold many of its products based on proprietary technology.
Given the current market duality, product marketing manager for Toshiba Australia (ISD), Matt Codrington, said it was important vendors complied with industry standards.
"New technologies must be future proof as well as retro proof to work with current legacy investment devices in the home," he said. "Consumers expect simplicity, easy setup and use, value, affordability and flexibility without compromise.
"There are a number of opportunities available to resellers who are willing to provide and assist consumers with a larger range of options: offer services to help customers integrate devices in the home; offer a complete solution for their customer, and encourage repeat business; and branch into non-traditional areas such as Pro-AV resellers selling PC technology."
Indeed, integrating devices in the home will become even easier once interoperatibility issues are addressed. On the standards front, inroads are being made. Last June, the Digital Living Network Alliance (DLNA) released its Home Networked Device Interoperability Guidelines.
The group, which now has more than 190 member companies from the IT and consumer electronics industries, spent a year putting together the guidelines, which define the design principles necessary to move content from one consumer electronics, personal computer or mobile product to another in a wired or wireless home network.
With the guidelines now ratified and accepted, CE companies are embracing the concept of the networked digital home and by the end of this year consumers will be offered a plethora of networkable devices from TV's and projectors to DVD recorders, Hi-Fi speakers and portable media players.
In 2006, they will also be offered games consoles that are true home entertainment centres up to 10 times more powerful than the most powerful desktop PC currently available.
Blending two worlds
The convergence of IT and CE products has already begun.
CE companies are appointing managers with IT knowledge to guide them on their convergence roadmap and traditional Pro-AV companies such as Bang & Olufsen (B&O) are dedicating full-time resources with the responsibility of building relationships with architects and developers.
B&O general manager, Bevan van Blerk, said the company hoped to expand its market by educating the building industry about its products and how they can be integrated into new homes.
Country manager for Linksys, Graeme Reardon, said: "With convergence you have two channels coming from different backgrounds. In the AV space there are quite high margins whereas in the IT space margins are considerably lower. You need to have people in the AV space trained in wireless and Ethernet standards. But generally they have not had anything to do with networking in the past so there's a need for training.
"By the same token in the IT space a lot of people have no idea about audio and video codecs, so there is an educational need for both sections of the industry and, at this stage, there are a few very specialised resellers who can overlap into both areas well."
Linksys may provide those specialist resellers with added opportunities if and when it decides on a local release of the Windows Media Center Extender it has been working to develop with Microsoft in the US. The extender enables users to get the benefits of the Media Center PC in different parts of the house over a wired or wireless network without the need for multiple PCs.
It has a 10/100 Ethernet port as well as IEEE 802.11a, b and g wireless built into it and while local testing is underway there's no word yet on a release of the product. However, Reardon said Linksys was in the early stages of working with CE manufacturers to network a range of CE devices.
He had spoken locally with Samsung and NEC about some of their future products.
"Down the track we may see a slot in a TV which you can put different types of adaptors into - whether they are wired or wireless. It is certainly something that some manufacturers are looking into."
While lack of standards can be a major problem, too many standards can be just as confusing for consumers. For example, there are currently three ratified standards in the wireless market place, one that is yet to reach draft form and another about to hit the market.
The original 802.11b Wi-Fi standard is the most common. However, according to Reardon it 'just doesn't cut it' when it comes to streaming high quality video. The best for that job is also the least popular, 802.11a which has a top transfer rate of 54Mbps and operates on the interference free 5GHz band.
Recently, a few vendors - including Belkin - released products called pre-N based on the yet to be drafted and ratified 802.11n standard, and Linksys plans to launch a multiple input, multiple output (MIMO) product. Both Pre-N and MIMO are promoted as having twice the transfer rate of a and g; however, any standard that has not been ratified faces potential compatibility issues in future if the standard is changed before ratification.
It is no wonder, therefore, that Reardon and others think there are some areas where education may not be enough for resellers and they would be better outsourcing the integration of products to the small number of specialists who are making every post a winner as convergence become reality.
"While the Ethernet standard has been around for some time the wireless landscape has been changing so dramatically over the past few years it is probably better to be outsourced," Reardon said. "Similarly with some of the video applications, being able to deliver DVD or near DVD quality video is not something you can pick up in a relatively short time."
Few products have benefited from convergence as much as projectors and companies such as InFocus are enjoying strong growth as a traditional IT product - the humble data projector - gets tweaked into a prized centrepiece for a home theatre.
InFocus country manager for A/NZ, Lee Whincup, said uniform standards were crucial and, like others, InFocus was playing a key role in helping formulate industry wide standards.
Things such as the DLNA's Home Network guidelines had a particular significance for InFocus which had a growing range of wireless networkable projectors, and had plans to release models that would take video feed over Ethernet which provides superior quality.
A foot in both camps
While InFocus has seen its product converge to take in both channels, major consumer electronics vendors like Samsung have had a foot in both the CE and IT camps for some time and for a long time they were treated as separate entities.
However, with convergence that has changed. Samsung recently appointed John Fragiadakis to the new role of AV technical marketing manager.
Coming from an IT background he's working with a company's AV channel while liaising with the IT division to make convergence as smooth as possible.
"I'm telling our guys to watch the IT market because it has a basis for running and fitting standards in the marketplace," Fragiadakis said. "Even internally I am talking more and more to our IT people with regard to products because they have the distribution channels that are putting together the media centers which are connecting plasma and LCD panels, home theatres and other products through one box.
"We are seeing distributors who we have not dealt with through the CE channel in the past coming to us and saying 'we're interested in home theatre, some of your plasmas and some of your LCD TVs'," Fragiadakis said. "We have an LCD television which uses 802.11b Wi-Fi and to me that is a positive step in a convergence product. When we first showcased it to the market it was the IT channel that was interested because it could be hooked up to a wireless network.
"And while the industry will see heaps more CE products moving to wireless in the future, there are still some issues such as noise and interference from other devices in the home," he said. "It will be interesting to see what the wireless industry comes up with to sort out the problems but once they do you will really see the IT and AV industries embrace each other."