3vNet Gears For Next Generation With New Engineering Staff, Fewer Dealers

Anderson acquired Colorado vNet -- a home automation company whose control products combine lighting, climate, security, closed circuit TV, weather and distributed home entertainment -- in April along with a group of custom electronics industry veterans (CED April 26 p2). No major changes in product direction are expected in the near future, Anderson said. “As of today, we don’t see ourselves abandoning any current categories,” he said, “and I don’t see us expanding terribly into new categories, either.” Anderson wants to focus on what the company has been doing “and do it a lot better."

For the near term, 3vNet will work on building out its engineering department, beefing up customer support and working on certification and training to support dealers and homeowners, Anderson said. “Close to 20 people” will be on the engineering staff by end of summer working on new products, Anderson said. The enlarged engineering staff will represent “significantly more” engineering resources than the vNet brand has had dedicated to it in the past three years, since Russound purchased the company, Anderson said. Engineering will be allocated 80 percent to software and 20 percent to hardware “because we're living in a software world,” he said.

Manufacturing will now be done off-shore, Anderson said, which is a change from the past when it was handled both in Colorado and at Russound facilities in New Hampshire. “We want people that have facilities for testing to do that,” he said, as part of an effort to implement new and more thorough test plans. The company will do “a lot more quality control” than in the past, he said.

A future focus will be on wireless control solutions due to a still-soft new construction market that Anderson doesn’t see changing appreciably for the next five years “at least.” A lot of the current product line relies on a wiring infrastructure so “we have to provide better systems, products and tools for dealers” to supply to existing homes, he said. That strategy encompasses existing and new wireless options, he said.

A new philosophy at 3vNet will be to make the product architecture “a lot more open,” Anderson said, comparing it to previous proprietary products that wouldn’t control products from third-party systems. Currently, “we don’t have the tools for dealers that have the ability to write drivers for third-party products,” he said, and a considerable portion of resources going forward “will be dedicated to doing just that,” he said. As a company, 3vNet wants “to play well with everybody,” he said, saying the closed architecture hurt the company in the past. A Colorado vNet system couldn’t work with, a Lutron lighting system, for example, he noted. Systems from “the gorillas in our industry -- Control4, Crestron -- allow you to use whatever you want to use, and that’s important,” he said. The ability to integrate systems is becoming more important as dealers become more sophisticated with technology and software, Anderson said.

Under the new regime, 3vNet “will never promise vaporware,” Anderson said, citing a common practice among technology companies in the custom electronics field. “More than half of the products you see at CEDIA Expo every year won’t ship for at least a year,” but 3vNet, as part of its effort to renew faith with dealers and re-establish trust, won’t do that, he said. “When we have a product that’s in the warehouse and ready to ship, then we'll tell people about it,” he said.

3vNet is relocating staff from its New Hampshire and Colorado locations to the main office in Orlando, Fla., which handles sales, administration and engineering design. Anderson said. Eventually, no one will remain at the Colorado location when the relocation is complete in a “year or so,” Anderson said.

The next couple of years will be “interesting” for the custom electronics industry as Goliath companies including AT&T, Comcast and Verizon -- “who are already in the home” -- begin to roll out home control products, Anderson said. Like other CEDIA-rooted manufacturers, 3vNet is taking the stance that the entrance of the telcos and cable companies “and their huge marketing budgets” will create awareness for home automation overall. Home automation still only has 5 percent penetration in U.S. households, Anderson noted. “They're going to be our market makers,” he said, predicting that customers will buy into their home control solutions for six months to a year and then “be looking around for something better.”

Regarding pricing in the face of competition from Comcast, AT&T and security company ADT, Anderson noted that 3vNet won’t have the economies of scale that the large companies have. Margins at 3vNet need to be the same as what it perceives its competitors to be -- including Control4, Savant and Crestron -- “so our margins will stay in that ballpark,” he said. But the company will change the way it purchases parts and works with contract manufacturers, he said, which will result in “pretty significant savings” that it will “be able to pass on.” The new pricing program is “considerably more rational than what we had in the past,” he said. Some products in the portfolio are “half the cost of what they were last week,” while others have gone up, he said. The result is a more cost-effective, more competitive total system, he said.

The 3vNet distribution base will shrink “considerably,” Anderson said, as the company looks for dealers who “understand networking thoroughly, have a level of technical confidence” and can troubleshoot networking and control issues. The end-user experience is “dependent on the competency of the dealer” so the company will work to ensure the dealer base fits that mold, he said. Currently, several thousand dealers are “on the books” though not all are active, he said, with maybe as few as 10 percent who buy regularly. For many of those, 3vNet is “an afterthought” product that they don’t support, Anderson said. “We'd like to have 200 dealers who see us as a significant portion of their business,” he said.