Cost-effective surveillance gear unlocks new realm of high-margin integration

The increased sophistication and decreasing prices of IP-based camera technology, coupled with the proliferation of high-speed Internet connections

Ed Castillo, sales representative for All Things Digital, a pure-play parts dealer in Miami, can attest to the booming surveillance market, but at the same time has witnessed the commoditization of its hardware firsthand. In just the last year alone, Castillo has seen a 50 percent uptick in sales of IP surveillance cameras. But for All Things Digital, which performs no installations or ongoing services, margins barely hover over 15 percent on sales of hardware, peripherals, PCI connectors and software. So All Things Digital makes up for slim margins by being a volume dealer of orders ranging from $35 all the way to $25,000, depending on the size of the surveillance deployment, said Castillo, who on some days fills 50 orders.

But custom integrators like Kowalski discourage customers from being enticed by the rock-bottom surveillance hardware peddled by direct sellers like All Things Digital. "Some customers will show us things they've seen pitched in Internet pop-up windows, like the Xcam2 for $79.95, and I tell them it's junk," says Kowalski. "All of our jobs are custom. We order every camera with a specific lens. Whether it's color, black and white, high-resolution or fish-eye, each lens is chosen for the location."

Kowalski says flexible hardware from vendors such as Axis Communications foster such customization, but it's the integration of the custom solution that brings home the bacon.

Then there's the upsell potential for installing internal DVR recording systems in the house or using outsourced services such as Marietta, Ga.-based Video Save, an ASP for Internet-enabled live video surveillance monitoring and archiving. For a monthly charge, Video Save will record 14 days of video from each surveillance camera, archive it out of state via the Internet, and then if the house burns down, video records are safely tucked away, and can be sent to the police as evidence.

These remote video storage services are particularly useful for protecting home and small business customers in case of robbery. "A jeweler came to us once and said that a robber had come in, and took his jewels and the surveillance tape, so he had nothing to show the police," recalls Carson .

Not everyone agrees that the current market for home surveillance is a hot property. "I don't think it's taking off that fast," said Paul Bodell, vice president of business development at IQinVision, Santa Ana Heights, Calif., which manufactures and markets high performance network cameras for the industrial and surveillance markets. "Home surveillance still has a few years to mature."

But Smart Home's Ken Fairbanks sees any hiccup in the growth of the home surveillance space as merely a pattern in the market's rapid evolution. "I think we are seeing the market grow, and it's changing and evolving," he says. "The increased use of cameras is happening, and IP cameras are coming down in price. So with that you are starting to see different service providers offering incremental services. And that's the challenge."