In the last year, IP cameras have made great strides and while there are still important barriers that constrain broader use, problems are dimishing.

Last year, we examined the top 5 problems of IP cameras. In it, we cited: (1) IP cameras being too expensive, (2) storage too expensive, (3) smart cameras not widely available, (4) limited DVR support and (5) lack of integrator training. Major progress has been made on 3 of these 5 items. However, the economic meltdown has generated a new problem.

IP Cameras Too Expensive

In the last year, there has been a massive increase of IP and megapixel products in the marketplace (see our trends analysis and ISC West new product review for details).  The price premium over analog still exists. However, with lower cost IP cameras becoming more generally accepted, the premium over analog is significantly lower. While this is not good for Axis and other premium products, it has delivered dramatic growth to companies like ACTi and Arecont who focus on inexpensive IP and megapixel cameras.

Storage Too Expensive

Last year, we looked at the promise of megapixel but noted the problem with massive storage costs. At that time, the first H.264 multi-megapixel cameras were announced (Arecont) but none had yet been delivered in production. A year later, not only is Arecont shipping H.264 multi-megapixel products but so too does Axis, Basler, Cisco, March Networks, Pelco and Sanyo (to name a few). While there are still concerns with how much efficiency is gained and what side effects exist (see our test results from Arecont H.264 and Axis H.264 cameras), there is no doubt that H.264 multi-megapixel is here and that it will continue to gain ground.

Indeed, megapixel is the hottest market segment in the industry.

Smart Camera Infancy

Clearly, little progress here. If video analytics could be broadly and cost-effectively deployed on IP cameras, this would be a major driver in a shift to IP. Unfortunately, there's been few developments on this front and a general stagnation of the video analytics market.

Limited DVR Support

DVR support has exploded with nearly every major DVR supplier releasing hybird DVRs or adding IP support to their existing DVRs (see the hybrid DVR trends analysis for details).

Not only that, software only providers are making it easier to deploy their software by pre-loading it onto NVRs (see Intransa's NVR appliance partnership with Genetec, Milestone, OnSSI, etc.)

Neither are perfect and there are still limitations with many hybrid DVRs. However, both of these moves help make migrating to IP cheaper and less complicated.

Lack of Integrator Training

Certainly, more and more integrators are receiving training with manufacturers expanding classes and programs. On the other hand, there has not been any real breakthrough. At best, it's steady progress. 

One negative force is cut backs on training expenses as integrators attempt to reduce costs in the declining global economy of the last 12 months.

New Problem - Recession and the "New Normal"

The biggest new problem IP faces is the recession forcing cut backs on new deployments and less money for upgrades. Specifically, new construction has been a 'sweet spot' for IP cameras because of the advantages of not having to be compatible with existing analog systems. In stronger economic conditions, organizations could more easily justify a forklift upgrade - undoutedbly many are now being forced to be more economical and tactial in their upgrades.

This has been reflected in the revenue numbers. While analog CCTV companies had weak growth before the recession (generally 0-10%), their growth rates have mostly remained in that zone. By contrast, IP camera companies have generally seen their growth rate drop dramatically from 30%-50% to half those rates. Still faster than analog, of course, but a smaller gap than before. For IP to 'take over' quickly, it needs a dramatic increase in growth rate of 30% or more.

Plus 'green shoots' or not, most reasonable people believe that global economic growth rates are unlikely to return soon to that of the middle of the decade. Lower economic growth will drag IP growth and incent retaining the status quo - that is, analog CCTV.

Conclusion

While problems remain, the gap is closing. Last year, we claimed that 3 factors had to be met for IP cameras to be selected by the majority of customers:

• Standard Definition IP Camera only costs $100 more than equivalent Analog Cameras
• Megapixel cameras support H.264 and H.264 has no serious side effects on client or servers
• Smart Cameras are widely available and the analytics work reliably