Cisco Surveillance Strategy Shift

Where is Cisco going in the physical security market? In this note, we provide answers both to their overall strategy and to their specific announcements at the ASIS 2011 show.

Cisco held a major presentation this morning. Here is a slide from the presentation overviewing the general strategic shift:

The Cisco announcement we believe has the greatest potential impact on the surveillance marketing is Cisco's opening of their MediaNet platform to 3rd party surveillance manufacturers (like camera and VMS suppliers).

For background on Cisco's physical security products, make sure to read:

• Cisco's VMS System Reviewed
• Cisco's IPICS Security Communication System Reviewed
• Cisco's MediaNet for IP Surveillance Reviewed
• The core driver for the physical security business unit is generating sales for network infrastructure products. Physical security, by itself, would not be a high priority. However, video surveillance's ability to drive networking demand and network sales is seen as very valuable.
• For every $1 in surveillance sales, Cisco estimates ~$5 in total network infrastructure sales (switches, routers, firewalls, etc.). To Cisco, the lion share of the opportunity is what delivers the video, not the video camera itself.
• Cisco has learned that its best opportunities within physical security are in very large scale projects (e.g., tens to hundreds of thousands of cameras). Normal size surveillance deployments (dozens or hundreds of cameras) are far less attractive to Cisco.
• Overall cost cutting across Cisco in the last year has further emphasized the need to focus on very large scale opportunities where Cisco's sales team can generate the highest returns.
• Cisco has found that in very large scale surveillance projects, the deciding criteria tends to be more on the ability to deliver massive systems (scaling, managing, ensuring QoS) and less on matching specific surveillance feature sets (WDR capabilities, camera form factor, PTZ prioritization, etc.)

This is a fundamentally different approach to the surveillance industry than pretty much anyone else (analog incumbent or IP video provider). Here are the key issues we see here:

• Cisco is not prioritizing the development of a broad nor deep product portfolio. They have only a few IP cameras and a VMS that has numerous limitations. While they periodically release improvements, it does not come close to the rate of Milestone, Axis, Genetec, Sony, etc., etc. Because of that, it is very unlikely that they can be strong in the mid market of the video surveillance space or with 'regular' security integrators where differentiations on low level feature sets are key.
• Very large scale buyers who choose Cisco are likely forgoing importance surveillance features that could undermine their experience. While Cisco acknowledged partnering with various surveillance specific manufacturers, it seemed clear to us that the focus was maximizing overall Cisco product sales. We feel that this is likely at the expense of the end user whose image quality or video management capabilities may lag industry specific leaders.
• On the other hand, for very large scale projects, turning over a functional system is a major risk, especially if the network is to handle a variety of applications. This aspect is where we see Cisco's greatest competitive advantage. It is certainly debatable how much of this risk is FUD generated by Cisco to sell their products versus actual technical and operational risk. Nonetheless, given Cisco's strong position in very large scale networks, this is as advantage they certainly possess.

For years, significant discussion has existed among the surveillance industry about what Cisco would actually do to or in the surveillance industry. As the years passed, their path is crystalizing. Cisco is not going to become a mass market surveillance products provider (short of a radical change in strategy). It is not simply that Cisco needs more time to build a 'regular' surveillance products portfolio, they are just not motivated to do so. The opportunity / threat for Cisco is for very large sale projects. While they are very few in number, they are large in total revenue, especially as they drive networking product sales.

Opening MediaNet for Third Parties

Of Cisco's 4 new physical security announcements, the one we think has the most potential disruptive impact is opening of MediaNet to third party vendors. MediaNet aims to reduce the complexity and risk of deploying networks using video, one of the most common challenges in large scale IP video surveillance deployments. Until now, MediaNet was only available with Cisco's very limited number of IP cameras and their own VMS system (see our review of Cisco MediaNet). Now, Cisco plans to allow other IP camera manufacturers and VMS suppliers to integrate with MediaNet.

As part of the announcement, Cisco disclosed VideoIQ, a company they invested in, as already joining the program. It is possible that companies like Axis or Genetec could join in the future but no other companies besides VideoIQ were announced today.

What's In It for Cisco?

Cisco's primary driver is selling network infrastructure (routers, switches, etc.). MediaNet is a competitive advantage for its products and only available on Cisco networking devices. To the extent that users find value in MediaNet, the greater likelihood of selling more Cisco networking products.

Cisco generates far more revenue in a surveillance deployment from the sales of networking products than from cameras so if they can expand network sales, even without camera ones, it is still attractive.

What's In It for Other Surveillance Manufacturers?

The two strongest potential drivers are:

• Accessing deals that Cisco may control or shape because they are the incumbent network products supplier.
• Leveraging MediaNet to make it easier and less risky to deploy large numbers of IP cameras across a network.

Practical Impact

We see three major questions on the impact of this approach:

• Implementing: How 'open' will Cisco truly be? What level of support will they provide? How hard will it be for 3rd parties to implement? 
• Choosing: How motivated will other manufacturers be to implement MediaNet? Cisco is motivated to sell their own NVR and IP cameras. Other manufacturers may be reluctant to use an 'open' interface that hooks into a rival's platform.
• Value: How valuable will MediaNet prove to be? How much can it reduce implementation costs or probability of network video problems?

Given Cisco's rocky path in the surveillance market over the last 5 years, while we think it is worth tracking, we definitely want to see how much actual progress this initiative makes. 2 years ago, the big news was the Cisco / Pelco partnership and that has not had much of a practical impact. Will this be any different?