State of the Market: Video Surveillance 2010
“An undeniable consequence of the recession is customers that are cost conscious and interested in extending the life of existing equipment,” says Mark Wilson, vice president, Marketing, Infinova, Monmouth Junction, N.J. “They do not want to write off capital equipment; they understand that they have areas that need the capabilities of IP, and because of budget pressure they are looking at coexisting systems instead of starting with a whole new system.”
It is a matter of money. As Fredrik Nilsson, general manager, Axis Communications, Chelmsford, Mass., explains, “As in any economy, end users are tracking every dollar. For the most part end users are still very careful with money, and are focused on finding ways to do things more efficiently to fit their budgets. In the past year, people have figured out ways to save money and it will continue in 2010.”
People are also looking for solutions that address their needs, says Elan Moriah, president, Verint Systems Inc., Melville, N.Y. “As long as there is an actual need for a proposed solution, end users will buy,” Moriah says. “They will buy what they really need â€” real, credible and tested solutions that provide real value and return on investment. They won’t open checkbooks anymore for gadgets, nice to have products or unproven technology.”
Jason Oakley, chief executive officer, North American Video, Brick, N.J., points out that the shaky economy and the prevalent cost-cutting mindset is putting more pressure on the industry to prove video’s worth to potential buyers.
“The economy is looking up, but not dramatically so, and capital budgets will remain under extreme pressure. Given the continued uncertainties, customers will continue to be very careful about spending money, which makes it even more important that we present a strong economic case for the benefits of video surveillance,” says Oakley.
The good news is there’s a case to be presented â€” especially with the newest technological advancements. Analytics are helping end users streamline business processes. Hybrid products are allowing end users to selectively upgrade their systems as budgets allow, and new IP advancements are opening up affordable surveillance options for small to mid-sized companies. Combine that with exciting developments in HD and megapixel cameras, managed video as a service (MVaaS), video verification, and more, and video surveillance offers a strong case regarding its value.
SLOW BUT STEADYThe expectations of the dealers, integrators, distributors, manufacturers and analysts that SDM interviewed regarding the state of the video surveillance market in 2010 can best be described as “cautiously optimistic.” Their perception of the market was shared by SDM’s Industry Forecast Study participants. Fifty-nine percent of participants predicted the 2010 video market would have an excellent/very good year (See chart above for complete results). Following the struggles of 2009, there’s no one reason not to expect a much better year in 2010, but there are enough question marks to temper everyone’s optimism.
It stems from the noticeable hit the market took as a whole in 2009. It simply wasn’t a good year. In November 2008, IMS Research forecast that the global analog and network video surveillance markets would grow by 5 percent and 34 percent respectively during 2009. Despite the initial optimism, the recession did impact the market, and the global market for analog video surveillance equipment ended 2009 effectively flat, while the growth rate for global IP video surveillance equipment finished around 15 percent.
Alastair Hayfield, a research manager at IMS Research, does think that 2010 will be better than 2009, making a more positive start for sure.
“While there is still a lot of recovery going on in the market at the moment, things are looking up and the market is finding its feet in 2010,” Hayfield says. “All of the factors that led to the growth the market saw in 2006 and 2007 haven’t gone away. The market is still transitioning to IP; there are still growth opportunities for the analog side of the market; terrorism and crime are still there; governments still want to upgrade solutions and more.”
Nilsson agrees â€” with a catch â€” it is going to take awhile in some verticals. “So far, 2010 looks fairly promising overall, but it will still take a long time to get funding for some specific projects â€” like in retail, for instance,” he says. “For example, store chains that planned expansion went from expanding to closing stores in 2009. Those are the areas it is going to take some time to get back into growth patterns, but the growth will come.” One area that everyone agrees growth will come in 2010 is Internet protocol (IP).
TIPPING THE SCALESEveryone has been watching IP’s climb to match analog sales for some time, and many think 2010 is the year it will “tip the scales” on analog. One key observation is that IP grew even with the recession last year. Gary Wong, author of IMS Research’s recently published report, “The World Market for CCTV and Video Surveillance â€” 2009 edition,” noted in the report that while the recession undoubtedly impacted global video surveillance growth in 2009, the market for IP video surveillance equipment continued to grow strongly. Specifically, while the global market for analog video surveillance equipment was effectively flat in 2009, the growth rate for global IP video surveillance equipment exceeded 15 percent.
Because of the continued growth in a down economy, many integrators who might not have switched their focus to IP yet, did so, according to Nilsson. “Two years ago analog and IP were growing, but last year, with analog in decline, those integrators wanting to grow made the switch over to IP. People always flock around the successful part of the industry,” Nilsson observes. He also points out that while IP did not meet the initial high projections that were made for it in 2009, it was still growing by 15 to 20 percent even in the recession â€” a sign of a very strong interest in IP.
A second key observation is that manufacturers have stripped down IP systems, putting together less expensive, simpler “plug-and-play”-style IP offerings that now fit a whole new market sector â€” the small- to mid-sized business. That’s a profit sweet spot that has the industry’s attention.
“IP technology continues to grow at a faster rate as it migrates into smaller installations and fits into more specialty applications,” explains Sethu Palat, senior product manager for video at ADI, Melville, N.Y. “The technology, scalability and affordability are making IP a more viable option for installations of all sizes. IP video will become critical to mid- and entry-level markets in the coming year. IP market will gain more share as the total cost of ownership (TCO) continues to decline. In the past, the break-even point was in the range of 60+ camera installations, and now it is in the 30+ range. This makes IP solutions even more attractive.”
And that is going to lead to growth for IP.
“Lower total cost of ownership will also drive growth in the IP industry as it shifts down the pyramid and opens up more opportunity in the smaller installations,” says Palat. He also points out that IP will drive industry growth as a whole.
Jay Hauhn, vice president, Technology and Industry Relations, ADT, Boca Raton, Fla., adds that the growth of hybrid DVRs is another indicator that IP is reaching more than early adopters. Hybrid systems are actually helping meet cutomers’ needs who don’t want to leave their old systems behind.
“Many customers want to get into IP, but they don’t have flexibility to make a complete migration,” Wilson says. “That’s when the side-by-side approach really comes into play, allowing them to have the benefits of better forensic evidence â€” yet extend the life of existing analog cameras.”
HD CONTINUES to SPREADIP isn’t the only technology impacting the 2010 video surveillance market. High definition (HD), as it spreads through households in the form of HDTV, is quickly influencing the end users’ mindsets toward HD surveillance opportunities. Everyone’s expecting the technology to have a serious impact on 2010 â€” and many companies are seeing the growth already.
“Now that HDTV video quality is coming down in price we see it becoming an option for many customers,” says David Raske, marketing manager, VideoSurveillance.com LLC, Portland, Ore.
The consumer market offers a glimpse into the growth possible this year with HD. A report by Cable & Telecommunications Association for Marketing (CTAM) in August 2009 showed that while 35 percent of households owned an HDTV in 2008, that number grew to 53 percent in 2009. It will only go up in 2010. That statistic has a direct effect on the surveillance market, because as end users become aware of HD technology in their homes, they expect it â€” and even seek it out â€” in the surveillance video.
“The HDTV concept of higher resolution has finally put the technology into context for the end user,” Nilsson says. “When they are watching sports, they can see the benefit the technology has â€” and in the security sector, people have grasped the concept now as well.”
Robert Gailing, national sales manager, security products, SANYO North America Corporation, Chatsworth, Calif., sees the same thing. “HD will resonate better with people since it is a household term now,” he says.
“The HD resolution is something that analog simply can’t do, and it is a powerful argument for IP. Finally dealers can go back to installations and say, ‘This is a reason to do network video,’” says Tom Galvin, vice president, Product Management, GVI Security, Carrollton, Texas.
One of the drivers of HD’s quick growth in the video surveillance market is its research and development support from the consumer market.
Andre Svorinic, video product marketing manager for ADI in Canada, points out that “Manufacturers have been leveraging the technology from consumer digital cameras, making the megapixel cameras more affordable.”
As Dave Tynan, vice president of global sales and marketing at Avigilon, Vancouver, British Columbia, points out, “HD is the detail you need to provide absolute indisputable evidence. We are finding arenas are interested in HD, theaters that are concerned about liability represented by their clients are interested as well. If there is an incident that occurs where an individual makes a claim against the venue, they can trace every step of that individual and see if there is truth to it.”
Additionally, Tynan points out that HD increases productivity.
“There is precious little capital available, so the users want to maximize productivity with what they buy,” says Tynan. “Rather than just story telling, they are also making technology choices to validate evidence. HD gives them the ability to instantaneously identify the details needed.”
He also points out that capitalizing on HD doesn’t have to mean installing an entirely new system, ditching analog or breaking the bank.
“Many companies come to us or our integrator and tell us that the budget doesn’t allow for going full HD. One solution is to add HD cameras at key points while maximizing the performance of existing analog cameras to build a hybrid system.”
MEETING NEEDSThe popularity of side-by-side technology indicates one thing loud and clear. While end users are aware of the options and features IP brings, they aren’t ready to ditch analog yet. In the end, despite IP’s continued growth in 2010, as Svorinic maintains, analog is not going away any time soon.
“Although growth in the IP market is expected, analog still continues to have a commanding share of the market,” Svorinic says. “In some applications, analog is the best fit and this technology should not be abandoned or overlooked.”
So analog won’t go away because there is a need for it. Similarly, video surveillance won’t stop growing because there is a need for it as wellâ€” and it keeps developing to offer vertical markets solutions. One such vertical market is retail.
“When the recession hit, companies cut back across the board, but they still need loss prevention. Take the retail industry for example. Retail crime grew for the first time in six years, and companies still need security,” says Randy Jones, president, SG Digital, Simi Valley, Calif. Jones refers to the recent annual survey conducted by the University of Florida with a funding grant from ADT Security Services.
The National Retail Security Survey (NRSS) preliminary results showed a real increase in the rate of retail theft for the first time in six years. In 2007, the lowest rate of retail theft in the 18-year history of the survey was reported at a rate of 1.44 percent of overall retail sales. Last year that rate rose to 1.52 percent of sales translating into losses of $36.5 billion.
“Retailers are facing one of the most challenging shoplifting and theft environments in history,” said Jeff Bean, vice president ADT retail sales and operations.
In a press release detailing the NRSS, ADT comments that there are a number of new technologies available to retailers that provide them with increased store intelligence and help them to maximize resources and limit losses. For example, retailers can use video analytics as a very effective tool in the fight against retail theft, and at the same time it can be used for business purposes, studying shopping behaviors and patterns to ultimately help improve overall store operations.
BUSINESS INTELLIGENCERetail isn’t the only vertical market expected to utilize analytics for business purposes. Throughout the industry, business intelligence applications are proving to be a well sought after feature.
“Using surveillance cameras for business intelligence is a solution that is working well in today’s market,” says Nilsson.
In 2010, hosted “Software as a Service” applications will gain ground and continue developing.
Galvin equates the promising SaaS market to where analytics was a few years ago.
“Software as a service and hosting solutions, whether video management or data storage, is a very real, growing part of the market,” says Galvin. “It is one of those things like analytics was five years ago â€” an emerging trend. It will take awhile to become mainstream. There will be early adopters, but there’s still work to be done on the concept.”
“The SaaS model has proven successful for card access, so video is the logical progression,” Hauhn thinks. “Hosted applications reduce capital expenditure requirements, lowering the barrier of entry. This will enable more end users to apply video in applications where it would have otherwise not been within their reach.”
AN EYE ON PRICEGaining a high ROI often starts with the price you pay for the system. It is certainly at the forefront of most end users’ minds.
Gailing lists price wars as a continuing factor in 2010. “One of the biggest factors in the market today is the influx of camera technologies that are at extremely low prices,” he describes. “It confuses the market a lot. I’ve heard stories where dealers have convinced the customer that it is OK to replace the camera every year because it is only $100, but I don’t think cameras are â€” or should be â€” disposable. It is not a positive in the market.”
A study by IMS Research titled “IP Trends in Security: A Survey of Systems Integrators and Installers â€” 2009 Edition” found that support matters as much as price among North American integrators and installers, especially when they are considering IP-based products. It is an observation that many vendors are paying attention to.
STRENGTHENING SUPPORTCompanies across the industry are taking a close look at training to meet the needs of installers and end users alike. Honeywell, for example, is responding to its dealers’ requests to provide training necessary to make the jump from analog to IP.
“Our dealers, many of which are traditional security installers, have specifically asked us to provide training to them that will assist in the transition to IP,” says Eric Zei, director of marketing, Honeywell Video Systems, Louisville, Ky. “We offer resources beyond the product that help our dealers find, win and keep new business. Last year, we invested time to develop one powerful solution called the “Partner Empowerment Program,” which we’ll continue to promote and take on the road in 2010 to share with our dealers across the nation.”
ADI is focusing on its training as well.
“We will promote tools such as project registration programs to help dealers win new business and enhance their margins,” says Palat. “We will continue to offer training opportunities and systems sales support to help bridge the gap for traditional security dealers to get into the IP market, and fully understand how to install a networked surveillance system.”
“Manufacturers have been steadily improving available information and resources for channel partners over the past two years,” notes Raske.
They’ve had to due to the rapidly changing technological requirements of the market.
“The transition from analog video systems to networked IP-based systems has been well under way for several years, but the pace is accelerating,” Oakley points out. “Training is always a big issue and it is especially critical for a market in transition. End users need to be able to depend on their integrators to have a working knowledge of the latest technologies, and to be able to interface knowledgeably with corporate IT professionals who are now part of the integration process.
Johnson Controls, SDM’s 2009 Systems Integrator of the Year, is one of the companies investing in training its staff this upcoming year.
“We do have a formal video program that supports our strategy and right now a key part of it is training. We need every one of our staff to understand video well. With a company-wide training strategy, that is 600 people that we need to establish as experts in IP video. We feel like we already have a strong position, but the path to a stronger position is through training,” says John Fenske, senior marketing manager, Johnson Controls, Milwaukee.
INTREGRATIONSIntegrations are very important to installers in the upcoming year. Full integration keeps installations simple, while partial integration can turn projects into a nightmare in a hurry, and installers are valuing manufacturers that give them the integration they are told they are getting.
“The industry will be placing an increased emphasis on integration in the upcoming year â€” especially installers,” says Dave Hood, vice president and general manager of First Alarm, Aptos, Calif., a First Alert Authorized Professional Dealer. “Compatibility, or what products work with what products and what software works with what products, can be one of the biggest hurdles, and manufacturers need to be held accountable for what they ‘offer.’ Sometimes even when you reach out to individual manufacturers and inquire about their levels of compatibility, you will still have to dig because there are asterisks to interoperability. What does it mean? That the different products really are going to be ‘friends’ right out of the box? Or are we going to have to beat them into submission? It is a big thing, and it is ongoing.
“We end up being an intermediary asking, ‘Could you have your software guy talk to their software guy and make sure that your thing and their thing do that thing?’” says Hood, adding humor to an area of video that can be frustratingly humorless.
Manufacturers are listening, and many of them are willing to admit to the different “levels” of integrations. The burden is on them as to which ones they’ll pursue in 2010 however.
“There are different levels of integration,” acknowledges Zei. “Individual companies choose how they are going to approach it. We have taken the approach that if we do an integration, we want full functionality. We believe that ensuring full functionality is a big piece to the success of our dealers growing their business as well as Honeywell’s quest to meet the needs of today’s open community.”
In pursuit of integrating all the products its dealers need, Honeywell recently announced a new global initiative by forming the Honeywell Open Technology Alliance. The alliance clearly defines the security and IT manufacturers that Honeywell is collaborating with to increase interoperability between third-party IP systems.
VIDEO SERVICESWhile interoperability may or may not be a given, one given for the industry is that the technology will always continue to change. Hood has seen a lot of change during his 20 years in the industry.
He’s participated in the company’s entire 10-year journey toward offering video services.
His company, an early adopter of the technology, offers enhanced security with real time video verification through a service named FIRSTVIEW. The service, offered through the company’s UL and FM listed central station, is designed to increase capture rates, decrease false alarms, allow dispatchers to issue verbal commands to the trespassers via IP voice link, and run analytics.
Looking at the video service First Alarm provides, Hood splits it up into two divisions. “The first way we provide service with video is through ‘traditional’ alarm verification. We describe it as an alarm event or holdup alarm event that triggers viewing video from the scene by an operator. The second distinct way we use video is to actually use the video system as the alarm. It is more of outdoor trespass detection, either combining sensor technology and video or using the video analytics built in the products. In that way, we extend the perimeter of the security system using video to detect crime outside the facilities. This area actually looks to have faster growth than video verification for us in 2010.”
Keith Jentoft, president at Videofied â€” RSI Video Technologies, White Bear Lake, Minn., contends that video verification will continue to grow in 2010 because it has immediate ROI.
“Surveillance is an eye witness to events, and in an economy where ROI is key, it helps to deliver apprehensions through the use of video verification,” Jentoft says. “Instead of just thinking of apprehensions in a recording or a forensic mode, video verification helps catch offenders and get police to the scene faster.”
MAXIMIZING OPPORTUNITYWhen it is all said and done, while the recession will continue to impact the 2010 video surveillance market, it is not an excuse. From IP to HD, from MVaaS to analytics, there are plenty of opportunities for success waiting for companies ready to seize them.
“Someone once told me, ‘It is shame to waste a good recession,’” Moriah comments. “Beyond the humor in that comment, the message is simple: Even in a down market, if you have the right stuff and address your partners’ and customers’ needs in an effective and credible way, you can be successful.”
Move Over IP and Analog?As the debate over IP versus analog continues, there’s a third technology that’s being thrown into the mix â€” HDcctv. HDcctv offers both the simplicity of analog and the high resolution of IP. In the current economy, having a high resolution option for end users that is a cost effective, easy upgrade that doesn’t require eliminating the legacy systems that are already in place is turning some heads. That, and the fact that it doesn’t require extensive training like IP. Some say the technology will become a serious player in the industry â€” even rivaling the projected growth for IP. Others say it’s a niche market that, while useful, won’t ever hit mainstream.
Randy Jones, president of SG Digital, Simi Valley, Calif., has been offering the technology to his integrators since it first came out on the market â€” and he’s convinced the technology is here to stay.
“One of our long-time partners started working on the project, and when we saw what they were doing, and saw the potential, we got behind them,” Jones recounts. “Most people seem disinterested until they see what it really is. The whole principle that any installer is qualified to do this is a beautiful thing. You can’t say the same about IP. And the fact that it uses the existing infrastructure is even better.
“This technology cancels out issues that are still present with IP â€” servers crashing, reboots, and lost data. This is a basic device and it functions more like analog.
“We see it in a few years surpassing IP most definitely,” says Jones. “The main reason is simplicity â€” national installing companies like when something is simple (and more profitable). Plus, as production gets up, it will be cheaper than IP. It is already cheaper than a lot of cameras, and soon it will probably be in line with a standard analog camera.”
Jones’ company is coming out with hybrid DVRs to complement the HDcctv cameras. “Hybrid DVRs allow integrators to leave the old cameras in place and install HD where it is needed most. The technology lets end users bypass investing money into replacing what are otherwise working parts. This lets everyone ease into the high definition market.”