Are You Too Stupid to Buy IP Cameras?

Author: John Honovich, Published on Jan 12, 2009

Why are 4 out of 5 of you still not choosing IP cameras? The IP video vendors keep trying to educate you. Is it that you are clearly that stupid to not get it? Or do you just shut it out?

A Serious Issue

I believe a fundamental cultural and strategic issue is at the heart of this discussion. I think the IP Video industry has fundamentally misinterpreted the real issues involved - it's the lack of business value of IP video, not the transaction cost of getting educated.

The Importance of Education

Anywhere you go in the industry you hear talk about the importance of education. The lack of education is holding IP back. We need to get more people trained. Once they are trained, they will move to IP. Nothing is holding back IP except for awareness.

What They Mean is - You are an Idiot

I talk to executives all the time and there is a clear negative undercurrent to this seemingly positive message.  New entrants, especially IT people, tend to think that  security people are idiots - stupid, lazy people that neither have intelligence nor drive to understand new and better technologies.  I am not saying everyone does and I am not here to call people out. However, I am sure this a very widespread belief that impacts the strategy and marketing of IP video.

A Dangerous Cop-Out

I see two major dangers here:

  • IP video vendors build flawed strategies based on an assumption that makes them feel better but misses the real customer problem.
  • Traditional end users feel mistreated and marginalized, creating more cultural and political problems in migrating to IP video.

The Business Barriers for IP Video

When business make decisions, there are two fundamental economic components: (1) transaction costs and (2) direct costs.  If you are a PC user and you buy a Mac, the cost of the Mac is a direct cost while the cost to learn how to use a Mac is the transaction cost.

Education is a transaction cost. People need to learn about the value and operations of IP Video before buying and deploying it.

Some decisions will not be made when the direct costs are justifiable but the transaction costs are too high. This is when reducing transaction costs (like education) make sense.

The problem is the direct costs of IP are still too high to justify for the majority of users. It does not matter how much you educate them, most rationale buyers cannot make the business case for IP video - period.  

As such, education may be nice but it is not the key to success. We have debated this point extensively both in the IP camera problem discussion and the IP video advantages and disadvantages review. Read those threads for background information.

The Future

The easy victory and dominance of IT is not happening. Even before the global recession, it was clear that convergence was moving at a slower than projected rate. Now, it will take even longer.

While I am not recommend abandoning education, I view 3 key factors that need to be accomplished:

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Small Camera Deployments

While deployments of 4 - 32 cameras may generate small revenue individually, as a total of the overall market, this is very very high. 90% of deployments fit this category in terms of camera count (every bank branch, every specialty shop in malls, small businesses, most apartment buildings, etc.) The revenue percentage is certainly smaller than 90% but it's likely near 50%.

These smaller deployments need:

  • Quick, easy setup of video management systems
  • Inexpensive IP camerass

IP video offerings are weak on both of these counts. IP video surveillance software may scale elegantly but DVR/NVR appliances are critical for keeping cost and complexity low for this market segment. IP cameras may have fancy software and analytics but this is generally not the key selling point.

The best alternatives on both of these counts are coming from Asia (specifically Taiwan, for example NUUO's miniNVRs). If integrators and vendors want to expand into this market, they have to make IP video cheaper and easier.

Existing Deployments

Most organizations have DVRs in place that they depend upon. It is difficult operationally to ask them to simply throw them out or to add in IP on a separate system. For operational reasons, most organizations want a single user interface to manage their video surveillance. Since they generally cannot throw out the DVRs and they do not want to spend hundreds of thousand on PSIM, they have strong incentives to stay with their existing DVRs.

As valuable as IP camera standards are, standards for video management systems (DVRs/NVRs) are critical to break the stranglehold of legacy systems. This is nowhere on the horizon and such a deficiency will be a thorn in the side of IP video vendors for years to come. Short of standards, vendors can try to support legacy DVRs directly. OnSSI's Ocularis claims to support DVRs. If and when they do this will be an interesting approach.

Broader Market

A lot of IP video vendors keep moving up market - embedding storage, adding analytics, adding advanced software features (Axis, Mobotix and IQinVision are good examples of this). This not only overshoots the market, it places them in narrow niches that are going to face severe challenges in a recession.

In general, the market needs cheaper / good enough. As a market, physical security has consistently shown that it can tolerate good enough products. However, it has never shown that it can tolerate high prices.  High prices and lots of features are great for niche products (like IP is today) but will not work for a mass market/mainstream product offering.


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