Why Cisco Video Surveillance has Struggled

Author: John Honovich, Published on Feb 28, 2009
Despite the great hype for Cisco's entrance into video surveillance, Cisco has not demonstrated significant success in the market. They have won only a limited number of projects and many, if not most, of those are tied to larger Cisco deployments.
Cisco Will Not Exhibit At ISC West
Every significant video surveillance manufacturer will be exhibiting at ISC West in April. Cisco, who made $8 Billion in profits last year, will not be exhibiting at ISC West because of "limited marketing dollars." Ironically, 2 years ago Cisco was the keynote speaker at this conference championing the power of convergence and disruptive technology for video surveillance. [I spoke with Cisco. While they are not exhibiting they noted that they will be speaking and presenting in other activities at ISC West.]
What's Happening with Cisco?
Cisco is losing momentum because it lacks a compelling video surveillance offering. In 2006 and 2007, Cisco was marketing heavy and lots of people were anxious, hopeful or fearful about Cisco in video surveillance. Many of us pointed out that Cisco didn't really have much substance in video surveillance. The answer was always "give them time, they will improve."
In the last 3 years, Cisco's offering has become apparent. They have 2 cameras, a DVR/NVR plug-in for their routers that has very limited appeal, an antiquated and overly complex VMS and high-quality encoders. It has left even optimists for Cisco, like Steve Hunt, hoping that "Cisco is buckling down and coming up with some excellent innovations for us and will unveil them later this year." You can hope but only for so long.
Why This is Important
Understanding why this is happening is critical because (1) this demonstrates key factors in winning in video surveillance and because (2) Cisco's struggles show the problems that IT in general has with overtaking the physical security market.
My research indicates that Cisco is changing its strategy and market focus in video surveillance. Indeed, Cisco is likely to become a much smaller force in video surveillance but more focused on segments where it has strength.

Not Exhibiting is a Costly Tactical Error

The impact of not exhibiting at ISC West is significant:

  • Many articles questioning Cisco's commitment
  • Hundreds of attendees (including end users) asking and talking about why Cisco is not exhibiting
  • Dozens/hundreds of IT integrators will be at ISC West (its the biggest and best trade show for video surveillance technology). Those IT integrators will spend more time with Cisco's competitors.
  • Competitors will stress this to their end users and integrators, hammering home Cisco's lack of commitment.

Assuming Cisco really wants to succeed in this market, it's just not worth the hundred or two hundred thousand saved to not exhibit. 

Perhaps Cisco is having so little success with traditional video surveillance integrators and end users, that the cost truly is unjustifiable. This is possible but, if true, would be a hugely negative statement about their ability to win in video surveillance.

Some suggest that Cisco is doing this because they want to focus on their core market of CTOs/IT departments. Perhaps this is true. If it is, they should be like Norbain and clearly explain this rationale. As of now, the stated reason is simply lack of funds - which most readers will take to mean lack of commitment.

Faulty Assumptions Made by IT Companies

Cisco shares and exemplifies mistaken assumptions made by IT companies coming into video surveillance. Specifically:

  • That IT/Security Convergence is happening very rapidly
  • That end users would be willing to spend lots more money for video surveillance from IT companies
  • That video surveillance projects could be closed quickly

Most IT companies I talked to assumed that convergence would be some sort of blitzkrieg but it has turned out to be more like Afghanistan. For instance, in 2007 Cisco's emerging technology CTO claimed that by 2010, IP cameras would be 50% of the market. IP cameras will be lucky to be 30% of the market by the end of next year. And this economic meltdown is slowing down convergence even more.

The notion that IT could come in and wipe out traditional security companies is demonstrably false. The most successful IT companies in the business (like Axis) have taken more than a decade of hard consistent work to get to where they are today. No big IT company (IBM, HP, EMC, etc.) has been able to crack video surveillance.

Central to this problem is the faulty assumption that end users would pay far more for video surveillance solutions if big IT companies provide them. This has failed as a general strategy. While these companies won a handful of deals like this, it has not been possible to get hundreds or thousands of projects per month to pay such premiums. 

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Buyers in video surveillance are fairly tight in spending because the amount of value generation from video surveillance is limited. And to the extent you can improve the value of video surveillance from making it accessible over networks, stored in hard drives or analyzed by computers, traditional video surveillance companies already do this fairly well - leaving little competitive advantage for incumbent IT companies.

Finally, as a tactical matter, IT companies have been shocked about the length of physical security sales cycles. I was amused a few weeks ago when a speaker on Cisco's webinar expressed surprise about how a video surveillance project took years to get approved. This is common in physical security. It makes penetrating new markets take far longer and requires a far less aggressive and costly sales process.

Cisco's Biggest Mistake

Buying Broadware was Cisco's biggest mistake. It's an antiquated and overly complex architecture that was not considered a top product before Cisco bought it. The general reaction even then was 'Why did they choose this company?" Now that Cisco's mystique in video surveillance is diminishing, they are left with a core product that's not compelling.

This, of course, would have been significantly different if they would have bought Genetec, Milestone or even March Networks - companies that had optimized solutions for the mass market of professional video surveillance users.

How Cisco's Video Surveillance Strategy is Evolving

Over the last few months, the emphasis within Cisco video surveillance has shifted from broad marketing to the Cisco Open Platform for Security and Safety (COPSS). To learn more, the best resource is a recent SecurityInfoWatch seminar sponsored by Cisco. Also, watch a case study from the Auckland airport.

The goal of COPSS is to optimize security operations for large-scale, mission critical users that need to quickly and accurately respond to threats by using a variety of integrated systems. To do this, Cisco will emphasize the use of its own video surveillance, access control, communications system (IPICS), IP telephony and networking equipment plus some third party offerings.

The value proposition will be that only a company with Cisco's breadth and technical sophistication can pull off such a complicated project. Because Cisco has so many of these security products internally, it can ensure maximum interoperability and optimization.

I think Cisco is going to be strong in this market segment. It plays well to their product strengths and their ability to integrate. Plus, customers in this segment have the means and willingness to spend top dollar. The only strange thing is the use of the term 'open platform' which is Orwellian marketing. In this plan, the key value of buying Cisco video surveillance is not because it's the best choice in the market but because Cisco can guarantee the tightest integration between Cisco video surveillance and Cisco access control, Cisco communication systems, Cisco networking products, etc.

Where to Expect Cisco to Impact Video Surveillance

Big institutions that have their own large-scale security forces will be most attracted to this solution. Good fits are therefore municipalities, military, airports and universities. Bad fits would be banks, retailers, utilities, most corporations and SMB. This strategy places Cisco at the top 5% or 10% of the market. If you are an end user or a competitor in this space, Cisco is clearly worth evaluating and tracking.

Cisco's impact in video surveillance will be as a niche player - like a stronger ICX. Unless Cisco buys mainstream companies in video surveillance, expect Cisco to stay in this position.

If they do carry through with this approach, I think it will be profitable for Cisco and healthy for the video surveillance industry. In the last 3 years, as they tried to figure out their place in the market, Cisco has been disruptive (in a negative way) for all involved (themselves included). By focusing on the COPSS solution, this is likely to be a significant improvement.

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