The game changer in the physical security industry is still IP driven, not just across video but now into access control and intruder alarms. The industry is fast moving to an all IP business, which has vastly improved and extended the value propositions for end users.
Security companies that have grasped this opportunity and can demonstrate how improved ROI can be achieved through making businesses and institutions operate more efficiently are growing fast and profitably. IoT is now at the top of the hype curve and it will take at least five years before it reaches the slope of enlightenment, according to Gartner. When it does, analog systems will suffer a rapid decline.
This message has been well-received across the full strata of security manufacturers and it is noticeable that those companies that selected to go down the IP route are now part of a group of trusted leader companies. Equally as important is the fact that they have delivered the IP message at all levels in the decision making chain, both direct with the customer and the distribution chain. They have developed business models that are working well, meeting head on economic austerity and reduced investment budgets and winning a bigger share for the security business.
There are several factors that need to be addressed when security product manufacturers establish their business model, which we discuss fully in our recent research. These factors include:
Manufacturers Need to Adapt to the New Channels of Distribution
Channels of distribution are changing and IP networking manufacturers need to review how they work the routes to market and form partnerships with installers/systems integrators, as well as specialist distributors that design and supply equipment packages that will properly interface.
IP networking products cannot be sold as “boxes” which have historically been the format for analog products. A key finding from a recent research report showed that almost 80 percent of North American systems installers required better training from their suppliers of IP-based video surveillance products and simple interface tools to join their products together.
Product Focus – Package Solutions – Back to Product Focus with ONVIF
The traditional business model in the video surveillance market was built around manufactures specializing on one particular product such as cameras, VMS, DVRs and NVRs. These products had to work together to make up a system and this was achieved partly through alliance between the many different manufacturers and VMS providers. For the most part, this process worked.
However, the systems integrators/installers often found this a time consuming and difficult task. To overcome this during last six years, many manufacturers have gradually increased their product range and have joined the various horizontal layers together. This model has worked well for them and is common practice for all the major video surveillance equipment manufactures.
The ONVIF open standard will, in time, negate this model. This does not mean that the leaders here are going to go back and refocus on their best option from which they started. But they will progressively meet more competition from new entrants that focus on one product area developing more innovative and lower cost products that meet the ONVIF standard.
The present leaders of the video surveillance industry will not want to carry their business model to the ultimate of becoming the new major conglomerate suppliers of tomorrow.
Conglomerates, which have been a much criticized group, register modest on the innovation scale and are losing market share, but they remain profitable. Extensive heritage estates have been their salvation and they are concerned about open systems.
Provided ONVIF continues to improve their standard and police its rules, then plug-and-play becomes a reality and the strategy of product focus will not suffer the limitations and constraints that it has today.
The Impact of IoT on the Physical Security Business
The definition of the Internet of Things (IoT) is the interconnection of uniquely identifiable embedded computing devices within the existing internet infrastructure without requiring human-to-human or human-to-computer interaction.
Typically, IoT is expected to offer advanced connectivity of devices, systems, and services that goes beyond machine-to-machine communications (M2M) and covers a variety of protocols, domains, and applications The interconnection of these embedded devices (including smart objects), is expected to usher in automation in nearly all fields without the need for human intervention.
All three sectors of the physical security industry are now committed to using IP networking, with video surveillance almost accounting for 50 percent of its revenue across the world, so the industry is well placed to play a significant role in IoT.
It is already taking an active part in the Building Internet of Things (BIoT) where video is regularly connected and converged with other building services and a number of smart city/safe city projects around the world. But the move to connecting all sensors and devices on a single platform in a building or municipal environment will take some years to be realized because of inertia and the need to improve the networking technology to handle vast quantities of data to and from millions of sensors and devices. The BIoT is covered in greater detail in our recent report here.
IP sensors lay at the heart of IoT as they sense and communicate the data needed to allow other devices to automatically make evaluations and take the necessary actions. Network cameras and video will be one of the most important sensors within the IoT because its data is so valuable to many other sensors and devices.
This is particularly true in non-domestic buildings where there are so many different building services that currently work within their own silo but have intelligence within their component sensors that, if connected to devices and sensors in other building services, could improve performance and reduce the cost of hardware and software.
The major benefit will come not from more data, but its analysis; so that the performance of the building and the enterprise within will operate more efficiently.
In a recent presentation, “The Internet of Everything” at ISC West 2014, Bill Gerhardt, Cisco director of engineering for the IoT (Internet of Things) business unit, claimed there are five components necessary for networks to benefit from the IoT. They are: cross function convergence; resilience at scale; security; distributed intelligence; and cloud management.
He said security was the single most critical element among those five. He further detailed six additional characteristics: interoperability among disparate systems; data sharing among departments; common infrastructure investments; standardization of interfaces where possible; adaptability to new technologies; and rapid deployment of resources.
The physical security industry is already playing a significant role in the development of IoT/BIoT and will continue to grow this aspect of its business seemingly without causing any major disruption for some years. How it will impact in the long term when everything is connected to one platform remains to be seen, but that is some way off. The message is loud and clear – security products that can’t connect to an IP network will die an earlier death.
Security-as-a-Service is Growing and Will Have an Impact on Conventional Practices
Rather than selling their products for cash up front, more and more security companies seem willing to invest the necessary money themselves in the manufacture, installation and operation of their security products, and then charge their customers over time for what they call “Security-as-a-Service,” which is essentially an RMR business model.
Security-as-a-Service, which is often shortened to “SaaS,” has become attractive to many customers – both government and commercial – because budgets are invariably tight and upfront funds are frequently hard to find; because the expense of continuously upgrading the underlying technologies remains the responsibility of the vendor, rather than the customer and because the complexity of operating some of these security systems is best left in the hands of the companies that have conceived, designed and developed them. While we have not measured it, there is a growing trend towards SaaS.
VSaaS and Software-as-a-Service opens up new opportunities for manufacturers, but it could also disrupt the market. If the market goes for a full paid service for VSaaS, these companies will make the decision on the purchase of hardware and software and they will exercise their buying power and only deliver their own products which could have a significant impact on the channels of distribution.