NLSS Competitive Positioning Examined

NLSS is likely the most interesting recent startup in the video surveillance market. The founder's last startup was sold to Cisco. Plus, NLSS has an extremely ambitious and broad product plan covering IP video, analytics, access control, VSaaS, etc.

The big concern many, including myself, have raised since their 2009 launch was whether the company was spread too thin - trying to do too much. In our original report, a skeptical reader's quip summed up this concern, "I would like to see a lens on this box."

Now, in early 2011, NLSS has launched its two initial product lines: a Gateway [link no longer available] (an appliance that records video, does analytics, etc.) and an HD decoder [link no longer available](for video display). Additionally, it's VSaaS offering, called Remote Management Services [link no longer available] is now available.

The key challenge in considering NLSS is that it does not fit into any existing category so it is hard to simply judge it better or worse. NLSS's value depends on what alternative category you contrast it to (VMS software, Hybrid DVR, NVR appliance, Hosted VSaaS, etc.). Inside our Pro report, we are going to contrast it to a number of common alternatives including Milestone Essential, GVI Razberi, 3VR SmartRecorder, Axis AVHS and QNAP/Synology NAS NVRs. This will help show specific strengths and weaknesses.

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Product Overview

While NLSS offers a broad array of security functions, here are the key strengths / differentiators we see:

• 'Plug n Play' Managed Remote Access - not found in almost any mainstream VMS or NVR
• Enterprise Management - built in via their remote management service for all NLSS appliances unlike almost all VMS systems that require their 'enterprise' or premium version
• Integrated access control management - integrates with IP readers or panels, somewhat unique
• Simple pricing, limited product options - only 2 price levels, 'buffet approach' - no licensing needed for cameras or any features

By contrast, the following are the key weaknesses / issues we see for its target market of smaller camera count deployments (32 cameras and under):

• Analog cameras require 3rd party encoders - will be an issue for many small camera count deployments with existing analog infrastructure
• With only 2 price levels, smaller camera count applications and those seeking limited functionalities will find lower value

The two biggest impacts we anticipate from the launch of NLSS are:

• A broadly available managed VSaaS offering: Up until now, managed VSaaS offerings are fairly rare with the largest likely being Envysion. However, Envysion focuses more tightly on a specific market segment (QSR) and largely outside of the traditional security channel. We expect NLSS to raise awareness and interest in choosing managed video surveillance. We think many will find this attractive, especially since market 'leaders' such as Milestone, OnSSI, Genetec, etc, lack this functionality.
• A high quality low cost IP video appliance: Most VMS developers do not offer appliances and those that do (or through Intransa) are generally fairly expensive. That leaves the market with mostly Asian NVR appliances (NAS devices) that have fairly poor software quality and weak market presence in the West. We expect NLSS to be strong alternative for those looking for a turnkey 'next-generation' solution.

Product Details

NLSS offers appliances (bundled hardware and software) that have built in IP video, video analytics and access control functionality). The appliance come in 2 sizes:

• The 'Micro' GW-500 supporting up to 16 IP video feeds and 32 Mb/s throughput MSRPs for $2,495
• The 'Full' GW-3000 supporting up to 32 video feeds and 70 Mb/s throughput MSRPs $4,995

There are no licenses at all. The only additional fee is for is for managed access at $168/year MSRP for the Micro and $216/year for full Gateway. This includes remote access and management capabilities as well as advanced replacement, automatic software updates, off-site configuration/database backup, mobile device access etc.

For video analytics, the appliance offers a variety of common 'flavors' including tripwire and people counting. NLSS is positioning these analytics for internal, non-alarm use. NLSS includes a reporting tool for business intelligence purposes.

For access control, NLSS integrates with HID Edge readers, Mercury panels and certain IP locksets. Centralized management of users and credentials will be administered by the NLSS 'cloud' / central service.

For management / viewing, a few key points to note:

• The UI is all web based - no thick client
• The UI uses flash extensively, helping cross browser compatability (vs ActiveX); since Flash is not supported on Apple iOS, NLSS reports they will release an iOS application later in 2011
• The NLSS Gateway transcodes video to optimize the remote viewing experience
• In addition to common VMS UI features, the interface including mapping and multi-site event/alarm monitoring

The product will be sold through the traditional security channel with a traditional security discount model. Additionally, the UI can be skinned for dealer's branding.

Competitive Analysis

NAS NVRs

NAS NVRs like Synology and QNAP have been a common choice for users wanting a turn key recorder for using IP cameras. QNAP and Synology offer a variety of model  (e.g. 4, 8, 12, 16 channel as well as 1, 2, 4, drive bays etc.). Given that NLSS only has two models, when cameras counts are close to the max (16 or 32), the cost competitiveness will be close). However, when an user want 4, 8 or 20 cameras, the NAS NVRs are likely to offer a significant cost advantage ($1,000 or under for 8 channel NAS NVRs are common).

NAS NVR's major advantage is built in storage redundancy. While NLSS only supports a single built in hard drive (plus external storage), NAS NVRs offer RAID and relatively easily swappable drives.

However, NLSS will mostly like differentiate itself through superior software and the integrated remote management capabilties. The knock on NAS NVRs is that the software tends to be an after-thought and relatively simplistic. Additionally, none of the NASes offer a managed VSaaS option.

Milestone Essential / Entry Level VMS

Entry level VMS systems are a common choice today for small camera count IP video systems. As a comparison we choose Milestone Essential because Milestone is frequently used and it is relatively cheap.

Here are the cost drivers for Milestone Essential:

• $49 MSRP per channel license (up to 26  cameras)
• Workstation/Server hardware (est. $800 for a PC for 16 channels or $1500 for 26 channels)
• Lower camera counts (e.g. 4 channels) potentially re-purpose existing hardware
• Requires installation/configuration costs, and specifying appropriate equipment

Contrasting a 16 channel system, the Milestone solution is similar in price to slightly cheaper. Assume roughly $800 for a PC and roughly $800 ($50x16) for 16 channel licenses - a system total of $1,600. Additionally, add in the cost of setup / configuration. By contrast, the NLSS system, after dealer discount, maybe in the low $2,000s.

*Note for the additional RMS licensing the NLSS comes to roughly $160/channel ([$2495x0.7 + $168x5]/16) over a 5 year term compared to the $90 per channel of Milestone Essential. The RMS is the NLSS 'managed' service that provides additional multi-site remote access/management features etc.

In lower camera count scenarios, Milestone Essential has a steep price advantage. Assuming a $500 PC and Milestone licenses cost $200, the total cost is $700. Since the smallest NLSS offering is the Micro, the price remains at $2495 MSRP.

Advantages of an NLSS Gateway vs. Milestone Essential:

• Similarly priced for higher camera counts, while providing greater feature set
• Easier deployment and lower integration costs
• Enterprise management features
• Hosted video access and system management
• Built-in video analytics
• Built-in access control

Advantages of a Milestone Essential vs. NLSS Gateway:

• Significantly better pricing for lower camera counts
• Piece-meal/low-cost (MSRP $49/ch.) licensing
• Can use existing hardware, virtualization, etc. for reduced CAPEX

AVHS Hosted/Managed

At low camera counts both AVHS and NLSS are extremely uneconomical (>$1,000 per channel) solutions. At higher camera counts the NLSS option is significantly more cost effective than AVHS because of their exorbitant monthly cost.

Here are the cost drivers for AVHS:

• Purchase/cost of camera(s) - Axis only (higher priced vs. broader market)
• Recurring 'hosted' fee of roughly $30/channel
• Purchase of NAS for 'managed' video solution (MSRP $360, 500GB)
• NAS 'Managed' service fee of $5/month/NAS
• 'IT' type discount structure

Let's look at a cost comparison between NLSS and a 'hosted' AVHS for a low camera count deployment (e.g. 2 cameras). Both options will require up-front costs for cameras and we will assume costs will cancel out despite Axis' generally higher pricing. The AVHS over a 5 year term (assume $30/month/camera 'hosted' fee) will cost $3,600 (2x$30x60) or $1,800 per channel. On the NLSS side, over a 5 year term with 'managed' services, cost will be ($2,495x0.7 + $168x5) $2,600 or $1,300 per channel. Up-front costs for AVHS is mainly camera costs while those for the NLSS is camera cost + $1,750 for the appliance.

Let's now contrast this with a comparison between NLSS and a 'managed' AVHS (w/ NAS) for a larger camera count (e.g. 16 channels) deployment. We'll assume equal costs for cameras (e.g. 16x$500 or $8,000). Over a 5 year term the AVHS system costs $19,825 ([$20x16 + $5x1]x60 + $360x0.9) or roughly $1,240 per channel. In contrast, the NLSS 5 year cost works out to $2,600 ($2,495x0.7 + $168x5) or $160/channel. Up-front cost differential is roughly $2,000 more for NLSS (including cameras, ~$10,000 for NLSS vs. ~$8,000 for AVHS)

Advantages of an NLSS Gateway versus AVHS:

• Wider 3rd Party camera support; better price/performance options
• No WAN bandwidth limitations; recording is local
• Appliance determines number of cameras, resolution, frame-rate, quality etc., not WAN bandwidth
• Built-in analytics
• Built-in access control
• More robust UI or operator/administrator features (e.g., 2x2 live/playback, mapping, advanced searches, event/alarm monitoring, HD virtual matrix etc.)

Advantages of an AVHS versus NLSS Gateway:

• Minimal on-site footprint/provisioning
• No major CAPEX for an appliance

GVI Razberi

The GVI Razberi is likely the closest comparison to NLSS. Like NLSS, the Razberi is positioned to be a turn key IP video solution. The Razberi is an NVR appliance with an integrated 8 port PoE switch, 2TB of storage and an MSRP of $4,800 USD. GVI has been aggressively marketing this to traditional security dealer as a simplified way to deploy IP.

Given Razberi's current relatively high pricing, we except NLSS to compete strongly here. A key differentiator is likely to be the plug n play remote access which plays well to installers/users wanting to avoid technical complexitys.

3VR SmartRecorder

For our final comparison, we look at 3VR. A significant portion of NLSS's marketing efforts has been toward retail and banking plus NLSS's analytics look to be best positioned for these indoor, statistically focused use cases. This approach draws an interesting contrast to 3VR.

The two most important factors that 3VR (and other traditional appliance manufacturers have) is (1) integrated analog encoding (i.e., Hybrid DVRs) and (2) build on PoS and ATM integration. Since so much of retail is dominated by existing analog camera deployments, Hybrid DVRs provide a simpler and cheaper way to migrate than NVRs (like NLSS) plus stand alone encoder appliances. Secondly, many retailers and banks require PoS and/or ATM integration.

On the plus side for NLSS, the incorporation of managed VSaaS, is likely to be a major attraction, especially for smaller to medium size retailers who want the flexibility of easier access (as Envysion is showing in the QSR market). Additionally, the inclusion of analytics and access control (essentially for free) could also be quite appealing.