Can Milestone's NVR Appliances Compete?By: John Honovich, Published on Mar 06, 2011
Surprisingly, Milestone is entering the hardware business. After years of warning the industry about the dangers of proprietary jail and emphasizing how it does not compete with its partners, Milestone will begin selling NVR appliances. In this note, we examine the move's competitive positioning and market impact.
The first phase of Milestone NVRs will consist of 2 NVR appliances: an 8 and 16 channel PC from HP (HP Z200), running Milestone Essential. The MSRP of the appliances is projected at $2,999 for the 8 channel, 1TB unit and $3,999 for the 16 channel, 2TB unit. The appliance provides support for a fixed number of channels and do not require the traditional DLK licensing process. The appliance will be optimized for running Milestone Essential, eliminating setup time and potentially improving performance. Finally, by using HP, Milestone can take advantage of common HP benefits - large scale, name brand hardware, rapid replacement, etc.
Important limitations to consider in analyzing the competitive positioning:
- Only supports Milestone Essential, no support for higher end Milestone VMS versions eliminating access control integration, video analytics use, enterprise management, etc.
- No integrated video encoder / capture cards: if existing analog cameras are to be used, a separate encoder appliance will be required
- No pricing discounts for using less channels than the appliance provides, i.e., the price is the same for using 6 or 8 cameras, etc.
- Separate PoE switch required for powering cameras
Contrast to Software Only Milestone Essential
The first and most basic comparison is to simply buy Milestone Essential VMS software and set it up on a COTS PC. Building it oneself will certainly be significantly cheaper. Given Essential costs $49 per channel, a comparable 8 channel self-built system will likely run $1,200 to $1,500 ($400 for the 8 channel licenses and $800 to $1,110 for a PC including setup). For a comparable 16 channel self-built system, the cost will run likely $1,900 to $2,200 ($800 for the 16 channel licenses and $1,110 - $1,400 for a PC including setup). The cost savings are even greater if an installation requires less than 8 or 16 channels as the exact number of licenses can be purchased with the software option rather than the hardware one.
Contrast to Competitor's NVR Appliances
Almost every VMS software provider now offers NVR appliance options so a wealth of potential options exist. Let's start with Genetec as they are Milestone's most direct competitor.
In 2010, Genetec introduced the SV-16, a micro form factor PC designed to run Genetec's Omnicast VMS. The pricing is segmented into the hardware costs (about $1700 MSRP) and the software licensing costs (ranges from $120 to $250+ depending on the VMS verion). Compared to Milestone's NVR appliance pricing and features, Genetec's will be moderately higher (a few hundred for the 8 channel version, a thousand or more for the 16 channel version). However, relative to Milestone, Genetec's main tactical advantage is allowing support for any of their VMS versions.
In the US, Exacq is a common alternative for VMS software and NVR appliances. The closest comparable is the Exacq EL-Mini which is a small form factor NVR appliance with a single drive bay supporting up to 24 IP cameras. An 8 channel 1TB Exacq EL-Mini has an MSRP of $3,025 while a 16 channel 2T Exacq EL-Mini has an MSRP of $4,575. While the pricing is similar, this offers Exacq's 'full' VMS version supporting 3rd party integration, enterprise management, etc. Exacq notes that an upcoming entry level VMS version will provide significantly lower prices with comparable functionality to Milestone's Essential NVRs.
On the low end, the key direct competitors are NVR NAS providers (QNAP and Synology being the two most commonly cited providers). The two core advantages for NVR NAS is (1) low price and (2) storage management. 8 channel NAS NVRs under $1,000 and 16 channel NAS NVRs under $2,000 are common. Additionally, a core feature of nearly every NAS appliance offered is storage redundancy (RAID 1, 5, 6, etc.) and multiple accessible drive bays (offering easy drive replacement). By contrast, the key downside will be the poorer quality of the software provided by these companies.
At least initially, we anticipate the market impact of the new NVR appliances to be minimal. Given the limited options for the appliance (restriction on VMS versions, no integrated analog encoding), we expect a limited market for the offering. Additionally, since Milestone integrators can almost certainly build a Milestone Essential COTS systems for significantly less than the appliance price, we expect demand to be low.
The two key immediate benefits we anticipate is expansion for the low end of installers and users. As Milestone continues its quest to build the industry's most enormous channel base, many of the dealers will have difficulty using software only VMS systems. This appliance makes it easier for those dealers to take advantage of the Milestone brand without having sufficient IT skills to deploy a software only system. Additionally, if these appliances are available for sale online (like Milestone Essential VMS licenses are), this could help expand Milestone sales to users who want to do it themselves.
Going forward, what will be most interesting is how far Milestone goes with their appliance. Is this a 'one off' low end offering or is it the start of a full line of Milestone NVR appliances? We cannot tell and we would suspect that this is a debate within Milestone currently.
Milestone Strategy / Partner Impact
Finally, this is interesting because it represents such a sharp departure from Milestone's historic marketing position and philosophy.
While Milestone marketed strongly for the 'freedom' to choose your own hardware, it is becoming increasingly clear that the 'market' is demanding NVR appliances as an option. Especially as IP cameras expand to the broader market, more users want simpler, more turnkey choices. While we do not see appliances replacing software only, having appliance options will become increasingly important.
Milestone will now be competing with some of its hardware partners - most notably JVC and Intransa.
For a number of years JVC has been offering 9 and 16 channel Milestone NVR appliances. From what we can tell, success has been limited. We suspect that JVC's relatively low profile and the fact that a 3rd party was selling it limited appeal. The Milestone NVR will likely be far more attractive with the key JVC benefit being the support for Milestone Enterprise VMS version.
Intransa has focused on developing itself as the NVR appliance provider for the VMS software market, including Milestone, Genetec and many other VMS providers. With Milestone limiting its appliances to 16 channels and Essential only, this is unlikely to have a significant practical impact on Intransa. Most Intransa deals with Milestone are for greater camera countrs and higher end VMS versions. However, if Milestone eventually expands their appliance offering, we think Intransa would have great difficulty competing.
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