Why Are There So Many Damn Manufacturers?

Hi John

I agree. I also believe Integrators are obviously looking for the best margin and try to differentiate from competition with some original solution, especially for small systems (<16 IP cameras)

Leading manufacturers provide most of the time less than 20% gross margin (during quotations difficult to keep more than 5%, like for Cisco …..) All prices can be compared on the Net, so every time Integrators can find a new small “me too” brand they try to integrate it or…to source and brand it when they have some sales potential. It does explain in Europe we have more than 20 purely artificial flavor brands which are sub productions from some Tw , Cn or Kr manufacturers met during an international Cctv exhibition. Obviously till Onvif 2.0 isn’t well integrated everywhere it causes major installation, Integration and maintenance issues especially when integrated with other systems.

What’s funny is that with Onvif 2.0 and latest version , you will be able to use more “unknown” brands than before, because they will be recognized by major Vms editors as major cam brands are.

Back in 1981 I visited the Akihabara district in Tokyo. I was absolutely dumbfounded by the diversity in product offerings. Where I had seen a few models of microwave ovens in the US (for instance), there were literally hundreds of models on display. So why the profusion? It seems inbuilt to the engineering spirit to try almost endless variations on a theme.

No offering is perfect and no standard truly complete. A previous commenter postulated that even weak standards fertilize smaller competitors.

All of the previous commenters had good specific points but I think this "search for the holy grail" is a deep-rooted almost genetic drive that flowers (particularly with creative types) in relatively free societies and is not really subject to details of market opportunities.

John , you cant' compare very high tech technologies, I mean Core switches for operators requiring very high level trained engineers with smal 100 to 1000 camera euro devices. The Market entry level cost for bowser is very high, but it's very easy I presume to launch a new unknown name from Chinea or Korea and say I'm 30% cheaper but I'm also compatible with Milestone, Genetec... If tomorrow you dont' care your camera brand because all brands react the same way on a technical point of view ....the market will remain fragmented.

But The metoo brands without any "Plus " product and not price competitive will surely die because there is no place for it, (I have few brands in mind..) as you need a mid term maintenance policy that some new players can't offer from China without local infrastructures, inventory and investments. This local presence costs and eliminate too small brands.

When you do large video surveillance installations you need to provide anticipated RMA procedures, sometimes in direct, not through your distri partners to shorten delays (SOny, Axis are doing it) . That's a key argument for most large accounts. According to me, it will kill the small and too new players when the market will become more mature, which is probably next 5 years milestones: 100% IP , Onvif 2.0, getting more trained and aware of potential issues, improve preventive maintenance ...

Surveillance is a 'fringe' product for most of the world. Unlike search engines or soda pop, where the market is consolidated because of brand exposure and refined personal taste, surveillance equipment is still the 'wild west'.

Is that due toindustry sophistication? Heck no. It's because in the jumbled up and busy head of most end users, they simply haven't had the chance to learn who the 'big' names are, so they take what they frantically search off the internet or what brand that 'strange electronics/computer dude' deep in the Rolodex recommends.

We (IPVM membership) have a tilted viewpoint on this, because:

a) We're better informed than most about the market/positioning/products

b) We CARE to know (either because of obligation or interest), and it is important to us that we do.

Talk to 'average Joe' small businessman, and he knows nothing about video surveillance beyond needing cameras and some kind of recorder (maybe). Ask that same guy 'iPhone or Android?' and you're likely to get an earful. Personal preference is king in surveillance, because there is minimal personal risk in expressing it professionally.

I hate to say this, but maybe the security marketers suck. They devote so much effort to such a small audience, the larger population is missed.

Maybe Avigilon isn't so crazy advertising in WIRED magazine, after all:

The security market appears to be undergoing a technology refresh with the whole IP thing in the last few years. This reminds me a lot of the early PC days in the mid-80's. You had tons of companies competing, lots of "Store Brands", multiple OEM's of the same thing sold under different names and so forth. If anyone remembers "Computer Shopper" it was a monthly catalog of hundreds of pages of nothing but PC gear, now I'm not even sure it's still published.

I think over time we'll see some big names emerge, and a lot of smaller ones drop out as things standardize around various brands, formats (resolution/aspect ratio), and feature sets.

I also agree with John's assement that many integrators try to differentiate themselves from their local competitors by carrying unique products. That will continue to prevent massive market share grabs and a consolidation down to just 3 or 4 main brands, but we'll see a lot of the non differentiated lines fade away.

The role of end users is important here as well. It's not simply that integrators are pushing lots of random and/or relabeled offerings, it's that end users are buying them.

What, if anything, will make end users push back? Will the Internet make them be more informed? Will IT buyers of surveillance be more selective than security / facility buyers of surveillance?

To the original question of why so many Manufacturers, I think it's because the barriers to entry are fairly low and companies thinks they may have a pre-made market with their existing customer base

In the example of Cisco, they assumed since they sold networking to so many customers, it would be a very easy to move to IP video relying on nothing but the Cisco name. GE did the same thing back in the 90s (Kalatel acquisition) and it was moderately successful.

Going back to my integrator days, I have another good example. A very significant end user I had in the 90's who was buying fire safes from a very good manufacturer of fire safes. Once DVRs started to replace VCRs this company decided to build DVRs. This one significant end user was enough to propel that business line forward. As a DVR the product made a great doorstop. But we sold and supported the product best we could, even though we strongly advised against it. Eventually it was replaced by the end user but not until thousands of the units had rolled out

I love this subject, it's one I expound on regularly and have a few ideas but no concrete answers (sorry!). Firstly there appears to be no real barriers to enter this market as a manufacturer - as long as you pass CE/FCC you can make a camera and sell it globally, so that's attractive to a couple of thousand guys in Shenzen... and everyone that then OEMs it. Secondly I think there is a level of ignorance about the value of the market globally, OK there are numbers published but how accurate are they? Is this a $14Billion opportunity or $40Billion and is that an end user valuation including install etc? Then there is optimism about the achievable market share as mentioned previously - who sets out to achieve a 0.01% market share?

The technology sector comparison I sometimes use is business telephone systems - nearly every SME upwards has one but how many manufacturers are there? 20 -50 is my estimate and how much is that sector worth (164million IP telephones sold in 2010 for example), is the technology so advanced that only a few companies can make phones, are the end users driving product development? I don't think so. Here too we have installers and integrators, how do they differentiate when all their competitors have access to the same equipment - service and price as usual.

It amazes me how competitive our industry is; how massively contested it is. Life might be easier if we didn't have to compete with so many other developers, manufacturers and OEM companies, but it is driving the technology forward faster and making it more affordable, so the End User is gaining in that respect. Will it change any time soon? No.

For an industry to consolidate, there has to be perceived economy of scale to make the consolidation attractive from a profit standpoint. In other words, one company with a large enough sales quantity can lower their margins so that they make less per unit (increasing competitiveness) but sell enough units to make up the difference.

I don't see that happening in this industry yet because it's too fragmented. But I'm pretty sure it will happen eventually.