In this installment of they Eye on Hosted Video column, Fredrik Nilsson (left) interviews EMC's Patrick Snow (center) and Siemens' Phil Atteberry (right) about business trends for hosted surveillance.
It's a popular opinion that the physical security industry on the whole is slow to adapt to new technologies. There is really no other industry out there where 75 percent of video installations are still based on analog technology. When you're tasked with keeping safety and order, it's understandable to use what you know and trust, but the tides are turning in many ways.
As a technology pioneer in IP video surveillance, Axis Communications (my employer) has been talking about the value of hosted video technology for a few years. As with all new technologies in conservative markets, it takes time before real-world adoption happens. Much of that has to do with the need for education regarding misconceptions associated with hosted video (see my earlier article on the top 10 myths), but maybe more important is the partnerships that must be forged behind the scenes to make hosted video a viable option.
I recently sat down with two leading hosted security services influencers to talk about the hosted video landscape in the real world -- beyond the hypothetical cloud talk that security practitioners and integrators have heard for years. Joining me for the discussion were Phil Atteberry, director and segment head of the Managed Security Services group at Siemens Industry Inc., and Patrick Snow, director of cloud security solutions at EMC.
Siemens is a well-known global systems integrator and Phil Atteberry leads the U.S. market focused on delivering remote managed solutions; those solutions range from hosting access control and video platforms to even remotely managing complete security systems. Their solutions help customers eliminate much of the upfront capital expenses typically incurred with in-house solutions.
EMC is a world renowned IT company focused on data storage and logical security solutions. Pat Snow's group works closely with on-site Iomega Network Attached Storage (NAS) devices and systems integrators to provide a powerful and redundant cloud storage offering. Both on-site and cloud storage is provided to the end user through EMC's integrator partners.
I'd like to share our discussion with you, and I hope you enjoy the following presentation of perspectives of these two industry leaders.
Nilsson: The more progressive physical security players -- from vendors, to storage providers, to next-generation integrators -- have been talking about hosted video for the past few years now, but not many real-world cases can be cited. Why are we seeing this changing in 2011, and how has hosted video evolved recently to become a legitimate video surveillance option?
Atteberry: Hosted video has moved from an expensive novelty to a value-based solution. The key difference from the past is how hosted solutions better fit the needs of the customer by utilizing the value of a centralized software solution with customized delivery models via onsite and hosted storage solutions.
Snow: Yes, the delivery model is there, but what's equally as important is that a large percentage of the market now has access to affordable bandwidth required for hosted video solutions. The ISPs (Internet Service Providers) continue to strengthen their networks. This, combined with the emergence of H.264 allows end users to stream higher quality video. In addition, cloud technologies have rapidly evolved over the past few years due to larger IT and consumer investments and, as a result, these technologies are more generally accepted.
Nilsson: That still may sound like the same old "the technology is ready" story that we've been hearing for the last couple of years. But I think the underlying reason that the hosted video puzzle is now complete is that that the different technology and integration pieces needed have come together through partnerships. Let's explain the stakeholder landscape today.
Atteberry: The video hosting supplier, integrator and end users are the key stakeholders in hosted video. The video hosting provider (VHP) provides software development expertise and the technology behind the hosted capabilities. The integrator, also known as the video service provider (VSP), is responsible for understanding the technology and delivering customized solutions. When they work together, both the providers and the end users share benefits.
Nilsson: What kind of benefits?
Atteberry: Both the video hosting provider and the integrator benefit by providing a solution that meets the end user's business and security needs -- i.e. they have a successful business model. The end user benefits by having the capability to centrally manage their entire video system as well as utilize cost-saving, remote services from the integrator.
Snow: We like to look at the integrators generally as the service provider. They sell, install and service the product to the end user. In some cases the hosting provider and service provider could be the same company, or the hosting provider could be an unseen force. As Phil alluded to, the major benefit to both these provider roles is increased RMR (recurring monthly revenue). RMR provides a buffer to revenue when the economy slows and is therefore coveted by the hosting provider and service provider alike. RMR models benefit the end user as well because they can transition from a CAPEX model (capital expenditures) to OPEX model (operational expenditures) and reduce the total cost of ownership.
Nilsson: Are the cost savings benefits the only reasons more security personal and business owners are considering hosted video?
Snow: Saying "cost savings" may be a bit of an oversimplification. Specifically, there are four reasons why end users are considering and turning to hosted video. One is to move capital expenses into operational expenses -- allowing end users to better budget their expenses. The second reason is to reduce the total cost of ownership; the third reason is to increase flexibility and elasticity with an ability to add or subtract additional cameras without additional hardware. Finally, the fourth reason is to create the ability to change surveillance requirements without having to replace installed systems.
If new laws or regulations require additional camera coverage or retention times, hosted video solutions can easily adapt to these changing requirements usually within hours and without the requirement for new hardware.
Atteberry: Another driving force that is not often discussed is the lack of IT resources for small to medium-sized businesses, as well as the need to access and manage multiple, geographically dispersed locations. This solution eliminates a lot of the capital costs and provides a consistent application for their security protocols across multiple locations.
Nilsson: Yes, often people don't immediately consider lack of resources as a function of cost, but streamlining operations through outsourcing certainly is a way to improve the budget sheet. Are there specific vertical markets that contact you more frequently, or is hosted video interest typically tied to company size as Phil mentioned?
Atteberry: The application of hosted video crosses multiple vertical markets as more of a horizontal offering. We witnessed early adoption by the retail market when hosted video was in its infancy, but today it has spanned many verticals including manufacturing and higher education to name a few. It has the ability to bring considerable value to small and medium businesses, as well as large enterprise class customers.
Snow: The core market is smaller camera counts -- between 4 and 10 as the cap today. Businesses where smaller camera counts are required and there are a number of sites geographically dispersed are ideal candidates. Those are your franchises, gas stations, banks, et cetera. There is also the use case for larger deployments where only a few of the cameras are hosted, such as for remote or home offices, or covert cameras.
Nilsson: So we can probably agree that many of the initial customers of hosted video will be business owners -- not security directors. What should these end users be aware of that might not be a second-nature question?
Atteberry: I would say that the key to a successful implementation is ensuring that all of the end users' business needs have been identified up front and verify that a hosted video solution is the right answer for them. They need to understand and communicate their business goals and budgetary requirements. This allows the provider to conduct a thorough review, including equipment and technical requirements of network infrastructure to ensure the proper devices are in place.
Snow: Bandwidth requirements are certainly something to be aware of. End users must be able to get appropriate, affordable bandwidth in order to take advantage of hosted video solutions. Additionally end users should make sure that the video hosting provider is properly securing their data. Standards such as SAS70 or ISO 27001 should be considered for their hosted video, however, the support levels, pricing and capabilities need to be considered as well.
Nilsson: You just brought up one key term: pricing. What types of pricing models are providers implementing today? How is this different than a traditional surveillance system?
Atteberry: Pricing models for hosted service tend to vary based on resolution and frames per second coupled with the length of storage for their video. Ultimately, a true solutions provider offers a hosted video solution to the customer as a sound financial business decision, turning upfront capital costs into ongoing operating expenses.
Snow: There are two types of pricing models that are being offered today. The first is a pay-for-use model where the end user pays for the storage they use on a gigabyte-per-month basis, plus a transfer fee (bandwidth). This is how traditional cloud storage services are sold.
Another alternative, which we believe is the better option, is fixed price per month, per camera. This allows the customer to know exactly how much their solution will cost per month and also allows for an easier way to compensate sales. There would be levels of pricing to cover the variety of requirements such as resolutions, frame rates, and retention times; however, this differs dramatically from traditional deployments which are usually based on hardware sales only.
Nilsson: I believe that once end users understand what hosted video solution entails and are comfortable with the pricing model, that we'll see an uptick in adoption. The technology is there, and the comfort level on the whole is getting close. That said, what do you think hosted video will look like in five years?
Snow: Bandwidth will continue to become more readily available and affordable allowing more and more users to benefit from hosted video solutions. The overall cost of cloud storage will continue to fall meaning the total cost of ownership will also continue to fall. The combination of the two will allow for more and more end users to be eligible for hosted video services. There will also be the increase in advanced services provided by hosted video providers such as video analytics, POS integrations and access control integrations.
Atteberry: Following Pat's last point, I foresee that hosted video will be combined with other technologies that are traditionally implemented through onsite servers and panels. This integration will give customers greater access to complex applications and sophisticated technologies, such as command and control or mass notification, all through a hosted environment.
Nilsson: Those are good insights, thank you. Do you have any final thoughts about the hosted video decision-making process?
Atteberry: Technology improvements in the world of physical security are enabling end users to have more advanced security, while lowering their overall cost. Hosted video applications are a great example of how companies are leveraging these improvements in technology to provide end users with the best solutions that meet their needs.
Snow: Clearly technology is changing the way we provide answers to everyday needs. Video surveillance hosting is only in its infancy and will continue to grow and become more and more viable for more and more end users. In the future, we will be surprised by the number of use cases that will emerge as hosted video solutions begin to deploy in larger and larger numbers. This will cause the industry to innovate at a much faster and larger scale than ever before.
About the author: Fredrik Nilsson is General Manager of the Americas for Axis Communications and author of the book Intelligent Network Video. He is a regular expert contributor on topics of networked video surveillance systems and cameras.