State of the Market: Video Surveillance 2012
The video surveillance market in 2012 shows a wide range of growth potential, in part due to disappearing barriers to adoption.
Video surveillance, for all its clear benefits, comes with its equal share of barriers: storage limitations, image quality and resolution demands, price concerns, a painfully absent ease-of-use. There’s a whole list. Still, despite the barriers — the hard disk drive (HDD) shortage caused by the flooding in Thailand, and the remaining effects of the first global recession — IP surges forward and enables new offerings, analytics and the cloud are maturing, and new technologies play perfectly into a receptive small-to-medium business market. 2012 is predicted to be a solid, if not great, year of growth for video, and video remains a strong driver of growth for the security industry as a whole.
A research report from Memoori Business Intelligence Ltd, London, points to video surveillance’s strong presence in the security market. “The world security market has grown by 1.5 percent during the last three years, which is remarkable given the poor economic conditions that have prevailed,” the reports states. “The major contributor has been a 7 percent annual aggregate growth in the video surveillance market.
IMS Research, Wellingborough, England, also expects the global video surveillance equipment market to continue to grow, and, more impressively, it expects network video surveillance sales to grow in excess of 30 percent in 2012.
Video also stood out when the Electronic Security Association (ESA), Irving, Texas, revealed the results of its second annual MegaTrends research report in January. Members were asked what areas they expected to see the most annual revenue growth in during the next four years.
“Video leads the way with almost 9 percent average annual revenue growth projected over the next two years,” reports Merlin Guilbeau, ESA executive director.
One reason for the expected growth is the video surveillance market’s steady dismantling of any barriers that stand in its way, this year more than ever, with positive changes in storage, resolution, ease of use, prices, analytics, and new markets.
“When it comes to video, the barriers have disappeared,” states Jacky Grimm, vice president, Security Solutions and Business Development, Diebold Inc., North Canton, Ohio. “In the past, adoption of new video technology — like IP — was limited due to cost and compatibility issues. Today, the technology is affordable, compatible and offers three distinct advantages: better resolution, flexibility in architecture and edge devices that are becoming much more powerful. As a result, we expect to see continued growth,” Grimm shares.
Edward Wassall, director of IP Product and Business Development, Samsung Techwin America, Ridgefield Park, N.J., says, “As we look at the 2012 security market among a plethora of market predictions, forecasts and top trends for the security industry as a whole, the one constant is the incredible technological advances that we have seen in the past year and which will continue to evolve in 2012.”
While video surveillance may lag behind other industries at times — alright, almost all of the time — it still does eventually take technology advancements from other industries and successfully tailor them to security. Take the evolution of storage for example, which began in the personal computing market and is a critical component of video surveillance today.
The first hard disk drive from IBM in 1956, a five-megabyte drive called Ramac, was the size of two refrigerators with a price tag of $10,000 per megabyte of storage. Today the average price of HDD storage has fallen to a mere $0.05 per gigabyte (GB) in 2011.
Flash forward to 2012. In January, IBM announced that after five years of work, its researchers had broken all conceivable storage barriers, reducing from about one million to 12 the number of atoms required to create a bit of data (eight bits equal one byte, which serves as the starting point for all those megabytes, terabytes, etc).
The concept of unlimited storage and the shrinking prices removes a major barrier for the video surveillance market at a critical time — during the growth of high definition (HD) and megapixel cameras. End users are swiftly transitioning to HD and megapixel; IMS Research forecasts that by 2015 more than 70 percent of network cameras will be megapixel resolution.
That shift is advancing the industry.
“There are three main factors in today’s video surveillance market that drive storage: more cameras, higher resolution cameras and longer retention times. All of these unstoppable growth agents drive massive increases in storage capacity and scaled-out storage is a requirement to meet the needs of these growth factors,” says Lee Caswell, founder and chief strategy officer, Pivot3, Austin, Texas.
In fact, IMS Research also forecasts the surveillance storage market to grow 19 percent over the next four years to $4.7 billion.
Dropping HDD storage costs were a given until last year, when the security industry had to overcome the major hurdle of a HDD shortage caused by the destructive flooding in Thailand from July through October 2011. The Thailand floods made hard drives harder to come by, and prices soared by 50 to 150 percent immediately after the flooding when drive inventory levels plummeted 90 percent in less than a week, according to Kristopher Kubicki, data architect at Dynamite Data.
“The flooding in Thailand harshly affected the global supply chain of hard drives, which has directly impacted the supply of DVRs and NVRs and created dramatic price increases and surcharges. ADI worked very closely with our supplier community to ensure that we would have product available during this challenging time,” says Andy Morra, vice president, marketing, ADI, Melville, N.Y.
Most manufacturers in the security industry, such as Honeywell, have been able to protect costs and keep product available, or, after a short time, lift any surcharges. Still, the lingering shortage helped create an opening for solid state drives (SSDs) that may impact 2012. SSDs are absent traditional HDD’s spinning disks and moveable read/write heads, which theoretically makes SSDs less susceptible to physical shock and allows them to have lower access time and latency and support more cameras.
On the flip side, they’ve always been more expensive per gigabyte than traditional HDDs. But prices are more comparable at the moment until the effects of the Thailand flooding wear off, which could linger through 2013 according to research firm IDC, meaning manufacturers will have to continue to address the issue for some time to come.
Hybrid hard-drive/SSD products also remain a possible solution in 2012.
And then there’s storage in the cloud.
“Cloud storage/archiving will drive revenue provided it is reasonably priced. As more companies are turning to megapixel recording, storage requirements may outpace the technology of the traditional hard drive,” says T.J. Dickson, vice president, Sales and Marketing, Speco Technologies, Amityville, N.Y.
EXPOSING FLAWS THROUGH BETTER IMAGING
At storage’s expense, gone are the days of fuzzy images. HD and megapixel are everywhere, remaining a huge trend in 2012.
“IMS Research reports that megapixel resolution cameras show the most promising growth opportunity through 2015 with a CAGR of 47.9 percent. And, within the megapixel segment, high-definition (HD) compliant cameras with a resolution of 1 to 2 megapixel(s) are predicted to provide the majority of the revenue opportunity from 2012 to 2015. This segment has the highest growth potential, and we are seeing this with increased sales of our 1080p, (2 megapixel) HD cameras,” says Willem Ryan, senior product marketing manager, Bosch Security Systems Inc., Fairport, N.Y.
The industry is responding to an increasing desire for resolution, says Steve Carney, senior product manager of cameras and encoders, at Westford, Mass.-based American Dynamics, part of Tyco Security Products. “While the first VGA (1/3 megapixel) cameras were built into cell phones in 2002, the proliferation of resolution has been non-stop. Today it is more like eight, ten or even twelve megapixels. People expect high resolutions today and that expectation blends into other markets, like security.”
The continuous increase in the deployment of IP and megapixel systems is a significant growth driver in the video market, says Kostas Mellos, sales leader, Video and Transmission, Interlogix, Bradenton, Fla, a part of UTC Climate, Controls & Security, a unit of United Technologies Corp (UTC). “Resolution is getting better and the ability to see in adverse light conditions is improving.”
In addition to driving up storage requirements, high resolution also exposes lens quality in cameras, which is shaping up to be another barrier the video surveillance market is poised to address in 2012.
As Carney describes it, “As resolution climbed up, at first it appeared that cameras were going out of focus more. But they weren’t. The higher resolution just revealed out-of-focus cameras more clearly, bringing the issue to the forefront. This is an area where IP and high definition reveals previous shortcomings.
“I had a director of security tell me his greatest fear was having an event and discovering he had an out-of-focus camera. On the other side, dealers and integrators can’t afford to always be rolling trucks. Auto-focus cameras resolve both concerns. Today, you can remotely access the cameras from anywhere, hit the auto-focus button and immediately solve the problem. We take that one step further and now the camera can detect that it is out of focus itself. An entire scenario that used to cause worry and take time to fix is going away. That is a trend you are going to continue to see,” Carney predicts.
Morra expects to see the same trend — across all areas of video surveillance. “There is an increased demand for solutions that are easy-to-install and operate, like systems that offer auto-configuration and auto-discovery of cameras, or easy-click lenses,” Morra says.
Auto focus is one of many ways manufacturers are attempting to make video simpler in 2012 — for installers and end users — which should stimulate additional growth.
“Today, video needs to be easier for the integrator to install and easier for the end user to use. Installers need to be able to hang cameras quicker and get them up and running. Time is money. There’s also a focus on how simple is it for an operator to get on the system and find the video and immediately know what they are looking at. Simplicity increases customer satisfaction,” says Dave Jackson, senior project manager for video management systems and analytics, at Westford, Mass.-based American Dynamics, part of Tyco Security Products.
The transition is even more critical in relation to IP products; it is a necessary correction to the problem of troublesome IP solutions.
“In the older world of IP products there were a lot of complicated pieces of equipment and software that were tough to install and tough to service. In 2012, it is all about solutions that are easy to install but allow end users to have cutting-edge IP-based devices. Companies do not want something that requires they be an IT expert. They want to turn on the computer and see it without fail every time,” says John Cerasuolo, president, chief operating officer, ADS Security (ADS), Nashville, the No. 24 electronic security firm in the nation according to the SDM 100. ADS, a First Alert Dealer, currently serves more than 70,000 businesses, industrial facilities and residences throughout the southeastern United States.
Simplicity is the key, says Ian Johnston, chief executive officer, Innovative Security Designs. “To break down the complexity of IP, solutions need to be simple to install and manage. In the coming months, you’ll see innovations come to market that specifically address this market need,” Johnston says.
VideoIQ’s chief executive officer, Ed Bednarcik, points out that while education helps manage the more complicated IP installations, not everyone has a lot of time for it.
“Education is important, obviously, but how much time do a lot of these folks have to learn about new stuff? At the end of the day a lot of that responsibility falls on the manufacturers to make those products plug-and-play,” Bednarcik advises.
There nothing more fundamental than “three clicks to live video” — a clear example of the industry’s advance toward “simple.”
“We are focused on driving both ease-of-installation and ease-of-use for all of our IP video products,” says Brandon Reich, director of customer marketing, Honeywell Systems, Louisville, Ky. “Our line of MAXPRO® NVRs enable the installer to set up the system and see live video in just three clicks. MAXPRO NVRs offer all of the advantages of high-definition IP video but are as easy as a DVR to set up and operate—this makes the transition from analog to IP simple and painless. They install much more like analog systems. You plug it in, turn it on, and after you let the easy three-step wizard guide you through the setup process, everything works,” Reich describes.
While IP approaches analog’s ease of use, it also has to finish catching up on price, analog’s biggest ally, says Carney at American Dynamics.
“We’re seeing a heavy increase in IP, but today’s smaller customers that are super price driven will still choose analog. The prices are dropping down, but are not quite there yet. Analog continues to hang on through price challenges,” Carney says.
The barrier will disappear, says Jumbi Edulbehram, vice president will disappear, says business development, Next Level Security Systems, Carlsbad, Calif.
“The prices for IP equipment in general, which were significantly above their analog counterparts two years ago have continued to come down. With more producers coming in from all over the world, prices are really competitive in 2012.”
In addition to analog versus IP pricing, Greg Peratt, national sales director, Video Solutions Integration, Panasonic System Networks Company of America, Secaucus, N.J., sees price playing a role in 2012 across the board.
“2012 is likely to be much more competitive in every area, especially from a pricing standpoint. Aggressive newcomers will try to ‘buy’ business from incumbent market leaders with competitive pricing. However, companies with existing market channels that offer ease of integration will be well positioned to compete. Providers that offer a ‘total solutions approach’ will thrive by simplifying the integration process almost to the point of plug-and-play,” Peratt says.
In that same vein, forget price and look at the solution in 2012, advises Mellos at Interlogix.
“Analog devices, such as cameras, have been produced by a plethora of manufacturers for the last 20-plus years. Proven and reliable technology combined with economies of scale has resulted in very good analog products at more affordable prices. In addition, the megapixel technologies, although maturing at a faster rate than analog, still tend to be on the highend of the pricing spectrum. Although many manufacturers tend to wrap the discussion around analog versus digital, Interlogix produces both technologies and is focused on providing the best solution to meet customer needs,” Mellos says.
Those solutions will require more video to successfully integrate with other systems, as demands from end users for integrated systems will only increase in 2012, Grimm expects.
“The needs of end users will push us to take integration to the next level, marrying elements like alarms or access control with event-driven video, and managing all of the elements remotely. We’ll also continue to find ways to take security beyond risk mitigation and compliance, linking security elements to other business systems throughout an end user’s organization. Historically, the integration of video with access control and other elements of the security program has been left for the enterprise. But we expect to see more of a push for integration within mid-sized to smaller applications. Why? Because for end users of all sizes, the status quo just isn’t enough to justify the investment in security,” Grimm says.
The small- to medium-sized businesses (SMBs) are poised to get a lot of attention in 2012.
“One market that has been unrepresented in the shift to IP-based video has been small- to medium-sized systems. Technology advancements like hosted video, new NAS (network attached storage) devices, and built-in-storage in the cameras in the form of low-cost SD cards have created an offering tailor-made for the SMB customer that will drastically change the market,” says Fredrik Nilsson, general manager, Axis Communications Inc., Chelmsford, Mass.
The SMB market in 2012 is going to be very strong for ADS. “We are really focused on what we think is a part of the market that is underserved — the SMB commercial market. SBMs have the same problems large enterprises have, they just don’t have the staff or budget, so they are very receptive to the new services available to them today,” Cerasuolo says.
Keith Marett, vice president of marketing and communications, Avigilon, expects that the SMBs portion of the video surveillance market will help drive new technology usage in 2012. “Smaller businesses are quicker to adopt new technologies because you are dealing with one owner or manager. They can see a demo and make a decision. Larger organizations can move more slowly, and tend to choose what they already know versus what is necessarily the best technology for their business.”
One of the benefits of IP is its ability to upgrade step-by-step, which caters well to SMBs.
Nilsson says, “With IP you can add one camera at a time if you want to do so. It accommodates an uncertain economy because you don’t have to do a big upgrade; you can do one camera at a time. It is a message that will continue to resonate with end users in 2012.”
Joseph Liguori, executive vice president, Access Control Technologies, Clifton, N.J., explains, “Today video has a deeper return on investment and a lower entry point. Companies can compartmentalize and add one piece at a time, which allows companies to move from small capital investments at the beginning and then grow as needs change.”
Liguori is also president of the board of directors for the next two years for Security-Net, Exton, Pa., a global provider of security integration services currently comprised of 19 independent systems integrators located throughout North America, plus four systems integrators internationally. Liguori indicates the group is optimistic about 2012.
“Lower costs, new technologies and a pent-up demand from the last few years are starting to open opportunities,” he says.
John Romanowich, chief executive officer, SightLogix Inc., has the same opinion. “The economic downturn created a logjam of projects that need to be completed. Assuming continued economic stability, this backlog combined with the very competitive products that have emerged over recent years should act as a catalyst for growth.”
Another catalyst of growth continues to be “the cloud” and video surveillance as a Service (VSaaS), which grew by 20 to 30 percent in 2011.
“We’re at an inflection point in the industry. Cloud technology is more accepted, it is starting to get used and becoming increasingly easier to use. It also is providing more value to the end user and installer alike,” Bednarcik says.
“While security is traditionally very slow to move into new technologies compared to IT, the reduced cost of cloud storage means that many vendors will start thinking through opportunities for offering cloud-based solutions," says Jeff Whitney, vice president, Marketing, Intransa, Cupertino Calif.
Reich says Honeywell will showcase cloud technologies and VSaaS at ISC West. “We will introduce some very exciting cloud technologies at ISC West. We still maintain the core requirements of ease of use and ease of installation, but the cloud gives people the ability to access video anytime and anywhere, with no need for special IT skills or major infrastructure investments. End users can manage ‘from the hip’ rather than be locked to a terminal in some building. You’ll be able to truly take security away from being a tethered service.”
Dan Rinehart, strategic marketing manager, Honeywell Systems, Louisville, Ky., expands on the cloud’s growing value.
“Our dealers and integrators truly understand the concept of recurring monthly revenue (RMR) and how it drives the value of a business. Today they can realize RMR through remote video. Previously, they may have been hesitant to enter this new market because it required investment in equipment for them, but today we’re taking the investment away, taking the complexity away, and allowing them to enter this RMR business model with video.”
In addition to installers seeking RMR, end users are also driving remote video along as they grow aware of the service,” says Cerasuolo. “More importantly, they have already paid for the device that we are going to use to deliver content to them — their computers at home, the smartphone at their hip, their iPad,” Cerasuolo explains.
In addition to owning the devices, end users also are simply better at understanding and using remote access.
“The end user is becoming more technology proficient and is more comfortable utilizing the remote features that today’s systems offer,” confirms Frank Ryan, vice president, Sales, Hikvision, City of Industry, Calif.
“The cloud will also continue to play a bigger part in the market, as it relates to hosted video, remote storage and other technologies. We believe dealers need to be aware that hosted video is a growing trend, and they need to start thinking about what their strategy is going to be as the cloud becomes more prevalent,” advises Tony Sorrentino, president, ScanSource Security, Greenville, S.C.
ADS offers remote services, including a remote video service the company has branded RemoteView®. (Read more in “ADS’ RemoteView®: The Importance of Branding” on page 57.) ADS is in its second full year of offering cloud-based services and has seen tremendous growth. Cerasuolo sees the end users’ growing level of awareness in his company’s success.
“People are getting really comfortable seeing video on devices. It got us over a hurdle. Today when you mention to a customer, ‘We’re going to store your video in the cloud,’ it isn’t a shock. Three years ago, though, it was a little bit out there. Today end users think, ‘Why shouldn’t I be able to look at my fast food store and see my employees?’
Cerasuolo has high expectations for remote video.
“All the technologies that have removed the barriers for remote video are game changers. It is not as big of a deal for larger companies, but for customers like SMB, multi-location customers, it is proving to be a game changer. There is a huge, untapped market for these services. It is not hard to think that every small establishment should have some kind of service, so as the technology continuously improves, costs come down, and more barriers are erased, this is not a market that has an end point,” Cerasuolo predicts.
Markets with major growth potential, promising verticals, disappearing barriers in storage, price and ease of use, along with maturing technologies — it is no wonder that the video surveillance market has such a positive outlook for 2012.