Yes Or No? VMS Software Should Be Offered For A Monthly Fee?

One of the traditional barriers that surveillance integrators face when selling to the 'mom and pop' customer is that most of these end users lack the capex to afford the upfront camera licensing and equipment costs.

If VMS providers are trying to capture some of this market, why don't they offer low (or no) money down options, where the end user pays a flat fee per month over a specified length of time?

This flips the script. Capex (which these folks don't have) becomes opex (which they do).

So how come nobody does this? Thoughts?


Poll added:

If they can't afford VMS licensing, how are they going to afford cameras? Why not ask why camera manufacturers don't offer no money down options, too?

I think the better option is for integrators to learn to work with financing companies. It's something I've done in the past and it worked out fairly well in some cases. Not sure if the integrator is still doing it, but there were some systems which wouldn't have otherwise sold, I think.

Back in my integrator days we used to use Marlin Finance out of NJ... I think they are pretty well known. They had(have?) one of those 1-cent buyback things where at the end of the (I think) 5 year finance contract, you could own the stuff for a penny. And there were definitely jobs that we couldn't have gotten without this financing. For the very reasons stated by the OP.

I think the vig was around 35-40 points over that 5 year spread though - kinda steep.

If VMS companies did offer an opex-based payment scheme they would, in essense, become a finance company in addition to the existing software-creating company. Might want to hire a qualified bean counter rather than cross-training a shipping clerk or whomever to captain that ship.

40 per cent? Is the company run by Tony Soprano?

Tony wants 40 points a week... these guys spread out the vig over the 5 yr term. :)

They are floating a collateralized loan on products that will have little to no value (at least possibly, and that's all that matters) at the end of the term. Plus, they loan to smaller, less established businesses. The kind that have difficulty convincing banks to loan them the capital. Kind of between a pawn shop and a bank. ;)

say $10K as a round figure for a pizza joint or ~$230/mo over 5 years. (14K [10k+40pts] / 60) - that's more manageable, and if something fails, you get new stuff. Less risk.

sidebar: I wonder if they employ dvr/nvr repo agents... and if so, how would that work exactly?

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Note that they are a direct-to-end user provider, but isn't this what DTT does for (primarily) restaurants? They add some other stuff like reporting and auditing and package the whole thing into a per month fee with low upfront $$?

I have been financing camera systems since I began in the idustry 10 years ago. Most recently, I've devised a program to make those pesky SSA's become a monthly fee instead of chasing the customer down to renew it every year.

Matt, so you buy the licenses up front and then re-sell / re-structure the cost on an ongoing basis?

Most VMS follow a hybrid CAPEX/OPEX model as they charge ongoing license or maintenance fees every year.

Agreed. Since they already off a hybrid model, why not offer a straight OPEX one? :)

I think this is attractive beyond the reduction in up front cash expense.

The buyer assumes less risk so long as the VMS offers month to month termination. For buyers undecided between two choices, the minimum cash up front approach could often tilt the choice for the month to month option, with the buyer being confident that they could ditch the vms if they did not like it anytime. Reality is most people will stick anyway, so it is likely a win win.

This would eliminate the annual vms support plans / maintenance agreements that so many hate, replaced with a flat fee every month.

People are increasingly used to this approach as more and more web services are bought on a monthly basis (from netflix to CRM, etc.).

One big issue I see is pricing this right. If a VMS license is sold for $50 per camera, I doubt you'd get much interest unless it was $4 per month, or even less.

Also, paying for this is an issue as VMSes generally don't bill end users directly, creating a multi-tier cumbersome structure of use to integrator to manufacturer every month.

Full Disclosure - I work for Eagle Eye Networks, cloud based VMS company - and we charge a monthly fee for our product.

Since this is our business model, take what I say with a grain of salt.

Now that all of the disclosures are out of the way, I will say that for us, this is an effective model. It doesn't work in every instance or for every customer. However, there is a lot of interest and some of our integrators are bundling the cameras, installation service, maintenance and everything else needed into a monthly price for the end use (just to be clear - Eagle Eye only provides the software/cloud service in this arrangement - the integrator is providing the rest of the services and equipment.)

The end users we've spoken to generally like this, because it is a fixed cost for them and they receive consistent service. Many businesses are moving to this model for things like email, phone service, backup/data storage, etc... so buying video surveillance this way is sometimes a natural next step.

That being said, there are still people out there that don't like paying monthly, just like there are people that don't like IP cameras.

A benefit for integrators is that they can get RMR from video, which traditionally hasn't been an option in the past. An important point that was brought up to me from one integrator is that RMR (whether it's from a cloud service or some other source such as financing) increases the value of your business, providing many benefits to the business management/ownership.

My short answer is that yes - it's a good option for many customers - but it's not for everyone or every project.

If the issue is mom-n-pop shops can't afford a system, then this is an case of financing--which many have already addressed in this thread.

If the suggestion is that opex as an alternative to capex, if the customer is smart, they're not going to sign up for a continuous, ongoing operational expense unless there's a legitimate service value they're receiving on a monthly basis. They'll pay every month for electricity forever, but not a monthly fee to use a refrigerator (forever). Businesses lease equipment, but that's a financing option, not a "service" offering.

Customers know the difference between equipment and services. They may be interested in financing equipment (and as others have mentioned, they may buy maintenance) but they're not going to sign up for services unless they see value they cannot otherwise achieve via capex or purchase w/financing.

Another use case that the monthly fee applies to is where the VMS setup is temporary by nature...for example a construction project or local carnival etc.

In these cases the cameras are part of a pool used by the 'temporary installer'...perhaps they are even rented (is renting an IP camera even possible?).

Another VMS I recently checked out does have a monthly fee....for support! The VMS itself is free but you pay for support.

Mike, what is the name of the VMS provider you mention in your post?

Katherine, the free VMS is Azimuth, but they charge $850 per year for support, regardless of how many cameras you have, which is crazy. Even crazier, it is only online or forum support, nothing by phone.