The video surveillance industry has seen strong, sustained growth over the past decade due primarily to the continued adoption of high resolution IP cameras in greater and greater numbers; however, the mood of the market has become increasingly dreary of late as the trend of hardware commoditization has begun to eat into the profit margins of vendors and systems integrators alike. While many companies have begun slashing prices to stay competitive, the fact remains that trying to compete on price alone is simply not a viable, long-term strategy for organizations that want to experience growth or even remain relevant. The question then becomes how can a company differentiate itself and create value for customers beyond mere cost considerations?
According to Tim Palmquist, vice president for the Americas at Milestone Systems, one of the biggest reasons why the “race to the bottom” has been able to gain a foothold in the surveillance industry is due to complacency and a desire to continue with business as usual. Speaking to a crowd of attendees at the annual Milestone Integration Platform Symposium (MIPS) held this week in San Antonio, Texas, Palmquist compared current state of the industry to the now infamous episode of the TV show “Happy Days” in which Henry Winkler’s character, the “Fonz,” jumps over a shark while water skiing. The phrase, “jump the shark,” has subsequently become synonymous with things that have lost their authenticity and Palmquist believes this could be applied to some video surveillance firms.
“Have you noticed, in our industry, some of the conversations that are going on and some of the words and phrases that are being used? The landscape in which we’re operating has shifted a little bit, there’s a new dynamic afoot,” Palmquist says. “Some would even say, ‘well, the glory days of IP video are coming to an end.’ Has our industry jumped the shark?”
To the contrary, Kenneth Hune Petersen, chief sales and marketing officer for Milestone, feels the industry hasn’t lost its way, but rather innovation has become stagnant.
“We have to decide whether we want to stay in the past or whether we want to jump on the train that takes us into the future,” Petersen says. “We must not forget all of the things we can do because not everybody lives and breathes security like we do every, single day.”
Petersen says the key for those who want to succeed in the market given its changing dynamics is working with partners that are focused on driving industry innovation forward. He added that Milestone, which already boasts more than 150 software integrations, support for over 6,000 cameras and deployments in over 150,000 surveillance installations around the globe, is committed to doing just that for its community of resellers and technology partners.
“We’ve defined a vision, a vision for our community. We want to be a part of every surveillance installation in the world through video technology,” he says.
In addition to the traditional pipeline model of driving revenue in the surveillance industry, which consists of a vendor making a product, which is then sold through the channel and eventually ends up a customer’s site, Petersen said Milestone will continue to foster its platform-based approach which will give third-party developers an opportunity to create new applications and capabilities on a common platform similar to what Apple and Google did for the smartphone market with their iOS and Android operating systems respectively.
“Apple added new functionality to mobile devices beyond simply making a phone call. You can now take a picture with your phone, book an appointment, surf the internet – you can do everything with your phone,” he says. “We can do the same in the security market… and with a platform we can move up to a different league and move beyond security. We can capture an enormous market if we do this right and the good thing is we’re actually already doing it.”
A prime example of this untapped market potential for video is in the digital billboards space. According to Petersen, General Motors is currently leveraging Milestone’s VMS in conjunction with several other software solutions to analyze vehicles as they travel down the road to be able to deliver targeted ads to drivers as they approach these billboards.
“This has nothing to do with security,” Petersen says. “We’re already doing [these non-security applications]; we just need the platform to do it.”
Bjorn Skou Eilertsen, Milestone’s chief technology officer, said the problem with a product-based approach is that customers will always be confined by the imagination of a single company, whereas in a platform-based approach, there is an entire eco-system of companies working to develop new and innovative solutions.
“That’s the essence of moving from a product notion to a platform notion – to engage the insights and the wisdom of the full community and in order to do that, it doesn’t work to just have products from distribution to resellers to end customers,” Eilertsen explains.
Despite the prognostications of doom and gloom by some within the industry as consolidation and commoditization continue to accelerate, Palmquist says it’s not the glory days that are over but rather the “days of easy money” that are coming to an end.
“When we’ve worked in an industry that has seen so much growth and innovation over these many years as IP has eclipsed analog and changed the landscape, all kinds of great stuff has come to market, new players have become relevant, and new brands have been built. Along with that, some perfectly average products have come to market as well as some below average products and even those products have still been able to make a profit for their companies,” Palmquist says. “Even some business strategies that haven’t been fully baked have paid off because it’s a growth industry right? All of these companies and all of these products have been able to enjoy a profitable existence together, but as the market begins to slow, even a bit, it gets a little bit more complicated for the not so good products, the not so well-baked strategies and the no so smart go-to-market strategy.”
To continue to grow and expand the IP video industry, Palmquist says that companies will have to change the way they interact with customers.
“We have to help them gain access to these things that we know exist but are otherwise hidden away in the community. There is fantastic innovation that exists out there and as we change the user experience, we get an entirely new growth effect,” Palmquist says. “We are in this evolution from products to platforms. Platforms are powerful. Products can be fleeting. If your product is not a platform you need to attach it to one. If you're messaging to the marketplace is about products, features and price, you need to change that message to platforms and solutions and value.”
