Hong Kong: AV at a crossroad Features 11/10/2019 Hong Kong finds itself at a crossroads, caught between a swirl of influences. Hurrairah bin Sohail speaks with consultants and integrators to try and ascertain what the future holds.Zane Au, principal at Shen Milsom & Wilke [SM&W] and its director of Asia operations, says: "In more than one way, you can argue that Hong Kong has always been and will always be ‘chaotic’. Things evolve so quickly here and sometimes it is hard to find a discernible, obvious trend for Hong Kong. Trends arise and disappear in the span of two to three years. The AV market in Hong Kong evolves very quickly and it is somewhat difficult to generalise.” Ian D. Harris, global technology consultant and president of ihD, gives a snapshot of Hong Kong’s AV market at present: “The market is positive, and clients well-informed. Financial times are limiting the quantity of projects, with various potential clients waiting for go-ahead for their projects. The defining characteristics are more investment banking, law office projects than hospitality, although the Disney and Ocean Park Theme Parks have work ongoing, and a few hotels are also being developed.” Molly Chow, executive director at Vega Global Hong Kong, says: “Being a metropolitan and financial hub for APAC, we are pleased to see that the AV market in Hong Kong is growing year by year. However, it is also a fact that the market is quite polarised. Some customers know well the relationship between price and quality and they are willing to invest in reliable brands and solutions. But due to our proximity to China, a lot of customers are easily exposed to those China-made AV solutions with similar functionality but lower price and quality. When taking budget into consideration, it is also a common phenomenon that some customers will ask about the premium price of those branded solutions and request for low cost solution but at the same quality level.” Hong Kong is known as a financial hub which means that the corporate sector has always proven to be fertile ground for the AV industry and this is a statement that is in line with Harris’ and Chow’s views. However, the rise of Shanghai as a location for Fortune 500 companies has seen the sands shift. New suits Au from SM&W says: “There are still corporate clients in Hong Kong but they are changing. Over the last three to four years, we have started to see a lot more Chinese companies replace the Fortune 500 companies in Hong Kong’s central business district. So, there are still opportunities in the Hong Kong corporate sector, but it is not the same clients that you had a few years ago.” Chow from Vega Hong Kong sheds light on how the integrator tackles the corporate sector: “We can further refine the definition of corporate sector into large corporation, Multi-National Corporation (MNC), Financial Services Industry (FSI) and Small and Medium Enterprise (SME). Large corporation, MNC and FSI belong to the customer groups that believe in price-quality relationship, and they are willing to invest on the latest AV/IT technology in order to keep and maintain the highest quality of communications with others. Thus, it is no doubt that their projects are usually bigger in size and play a significant role for the AV industry in Hong Kong.” However, when it comes to the corporate sector, it seems like Hong Kong finds itself at a crossroads. Au from SM&W explains: “Ownership of corporate AV projects in Hong Kong, like in any major city around the world, can be by any one of the company’s many departments: real estate development, facility/technology management, finance/operations and the list goes on. Then the decision maker could be someone sitting in their office in Hong Kong, New York or London or even Beijing now. With so many variables, this is a major consideration for integrators. Because if the buying decisions are made overseas, then global alliances like GPA and PSNI will become much more relevant. That is a big impact to a local integrator’s equipment sourcing strategy as well as the overall business model.” He continues: “At the same time, there are more and more Chinese corporate clients, including many state-owned enterprises, setting up offices in Hong Kong as a platform to serve the two-way objective ‘Gateway to China, Springboard to the World’. They invariably will bring a new set of user requirements that Hong Kong integrators have to learn to deal with on every project. Contrary to what many people may think, Chinese corporates are actually very receptive to AV/IT convergence ideas. In the last two decades, China has leapfrogged most of the world in terms of mobile and e-commerce adoption. They certainly are not shy to implement AV solutions that run on IT transport or outright an IP network. Moving on, we just have to figure out how to craft a cross-border cloud-based solutions and ensure it is accessible by the HQ in Beijing.” Au from SM&W talks about how the other AV market sectors are experiencing the same technology trends: “With the West Kowloon Cultural District projects, and the other cultural centre projects that Hong Kong government is running, there are quite a number of large-venue projects going on in Hong Kong. These large venues certainly benefit from AV/IT convergence and especially AV over IP implementation as that allows faster deployment and easier ongoing operations and maintenance. Similarly, other public sector AV project realms including healthcare, higher education and research and development campuses are also quickly converging onto IT transport and service delivery with both on-premise and cloud-based solutions.” With Au’s comments in mind, it is no surprise to see integrators diversifying. Patrick Leung, marketing manager at Audio Systems Consulting Asia (ASCL), talks about how the integrator has an expanded portfolio: “The corporate market represents less than 10% of our business. Besides the corporate market, the education market and hospitality market are also trending. Universities and vocational institutions are heavily demanding reliable AV solutions for their lectures and studies. Moreover, they are also frequently looking for collaborative learning solutions to facilitate the students to improve their studying pleasure and interests.” Harry Lam, CEO of Media-Go, says: “The Hong Kong government has put a lot of resources towards infrastructure projects like the construction of the three-runway system [3RS] for Hong Kong airport, Guangzhou- Shenzhen-Hong Kong Express Rail Link and the Hong Kong- Zhuhai-Macao Bridge. The government will be heavily investing in infrastructure over the next four years with projects in various market segments. Besides the 3RS, for example, there are housing developments, the Central Kowloon Route and the large-scale hospital development plans. All of the above projects have a great demand for AV systems.” Risk and reward With regards to technology, Au from SM&W believes that the next big opportunity is AV over IP. He says: “AV over IP, which is the prevailing global trend, is going to take over the market. Here in Hong Kong we are not short of technology vendors that can support it. Putting aside all the political complications, Chinese network equipment manufacturers can certainly support 10Gb deployments and deliver AV over IP as well as any other market options. AV over IP is really suited to the Hong Kong market. When it comes to corporate clients, ‘multi-purpose’ is a demand that is very commonly put forward. So, AV over IP with its associated flexibility is certainly a great step forward for the AV industry.” Lam from Media-Go adds: “We have found that the corporate clients request more AV over IP systems. It’s because of the rise of collaboration, communication, knowledge-sharing and dissemination that has shaped the vision of the clients. There are more devices in the workplace than ever before. Laptops, tablets, smartphones, and of course the AV equipment that is now connected to the network. Leaders of these organisations rely on professional audiovisual service providers as they strive to offer efficient communications, and develop a workforce that is satisfied with the technologies offered by their employer. This means more clients find that various different AV technology would increase both their efficiency.” Leung from ASCL says: “AV over IP is being adopted by the Hong Kong market not only the corporate clients, but also churches and educational clients. They have found that it is easier for structural cabling design and future expansion. Also, AV over IP is more mature nowadays and they are confident in their ability to operate a system completely via data network. Since everything is going over IP, it is also a benefit to system integrators for maintenance and to diagnose the system from a remote venue.” Chow from Vega details: “The major impact comes from the change of skill sets. Salesmen and technicians need to acquire new knowledge on network, security as well as cloud platform to adapt to the market change. Therefore, training is highly demanded by the practitioners. At the same time, it is evident that more and more AV companies, including Vega, set up an IT division in parallel with a division so as to deal with the forthcoming challenge.” Like every tech development, the convergence of AV and IT presents risks and rewards. Au details: “When you are fitting out a new corporate office, 50% or maybe an even higher percentage of the AV budget is spent on standardised, network equipment. Integrators just have to learn how to deal with these new economic realities.” Harris from ihD says: “It [AV over IP] has been great. Adding IT to our AV work has improved our outlook for AV consultancy. Clients are mostly unaware of this, but we introduce and educate them in it, and its advantages, as well as improved security.” With regards to the possibility for increased competition from IT contractors that AV over IP might enable, Harris says: “IT contractors generally are totally inexperienced with the many difficult aspects of AV. They are good at cabling and installing, but the whole world of audio, video, AV control, etc. is far beyond them. Conversely, learning and becoming an expert in IT matters is simple, and easily accommodated by the AV design and install communities. The IT and AV business isn’t really converging, just that AV does more work using IT. Structured cabling etc. remain in the hands of the specialist IT companies.”