Credit Crisis Will Accelerate Convergence

Author: John Honovich, Published on Oct 20, 2008

As we brace ourselves for the credit crisis and the shakeout in the security industry caused by the acceptance of IP CCTV, it is important that we create a system around us that will stand up to this.

We are seeing that the channels are converging from separate Security and IT tracks into one unified track. This includes value-add distributors, broad line box movers, integrators, and resellers are consolidating to a security/IT channel. We see this happening because the technology is advancing enough to enable the end-user demand.

The days of a proprietary vertical solution are numbered because of IT involvement. There is also talk about business optimization or video enabling as I like to call it. IT departments involvement is forcing this transition to open platforms running on IT infrastructures with security being provided as a service for different verticals. This type of converged behavior obviously has consequences for large vendor companies and the channel structure.

THE CREDIT CRUNCH WILL ACCELERATE THIS!

How does this affect distribution channels?
Probably not a lot unless the bottom falls totally out of the economy. Right now we have what I like to call value-add distributors and broad line box movers the first sell on value of solutions and the latter essentially sell by sheer volume and being a single point of purchase. I do not see any of these going away anytime soon. However, I expect to see strong growth in value-add distribution, as the converged security industry is going to need specialized trained support for both pre-sales and post-sales along with demo labs. This is the type of value-add that will bring distribution to the forefront as a business partner and secure them increased growth in security products. The main reason for this is that IP CCTV still is a very technical and high touch sell.

How does it affect Value-add Resellers (VARs) and System Integrators/Installers?
We are going to see a different dynamic because VARs specialize in IT and Integrators specialize in security. The dynamics are different because their knowledge is derived from years of hands-on/in-the-field work, making them very specialized in their respective fields.

Security System Integrators are traditionally trained on vendors' proprietary solutions. At the other end of the spectrum, we have the IT people who are well trained and very knowledgeable on open IT standards and maneuvering an ecosystem of best of breed technology to deploy optimal and future proof solutions.

Traditional security channels have knowledge about security and camera placement, for example, while the IT side obviously has IT-based knowledge. Both of them lack knowledge in each other's trades. They will need to acquire these capabilities by hiring, training or partnering and learning from each other to bring the ultimate value to their end-users.

The credit crunch will accelerate this trend – not only because we will see vertical markets that freeze over but because IP CCTV brings better ROI and TCO to the end user and they will be demanding this in a financially difficult period.

How does it affect Traditional Security Manufacturer Reps?
This particular part of traditional security channel might take one of the biggest hits from convergence and the credit crunch to their traditional work. I would describe a Traditional Rep firm as an agent who works for a number of vendors and has a line-card of several tools for a particular region. These reps by nature have an agenda to promote the line-card they have been able to amass. This in turn seems to be orthogonal to the sales activity of an open and agnostic technology platform. As I mentioned earlier, the end-users' demand is pushing the technology because of better ROI and TCO, so traditional manufacture rep firms simply cannot practice their trade in a traditional way. To fit the market need I see rep firms working on a deal-by-deal or VAR-by-VAR case giving the end-user the ultimate freedom to choose what they see as an open and best-of-breed solution.

How does Milestone view the future?
Milestone believes there needs to be broad distribution with an open platform available to all verticals. The difference is that the value-add does not necessarily come from the Video Management Software (VMS) companies but rather from the best-of-breed components that the platform enables. From the VMS side there will need to be adequate training and a certification process in place to bring value to the end user. If you look at the total value of a solution, it is important to note that the software portion is rarely over 10% of the total cost of an installation, leaving roughly 90% of the solution cost on the hardware side. From an economic standpoint, it does not make sense to try to save money on the software side, only to be locked into a proprietary solution by a single vendor.

So, what is your go-to-market strategy in a "shakeout" and "converging" market? As I see it, the future is bright for those partnering to deliver open, best-in-class solutions. Distribution will also need to be tiered, creating an equal playing field for channel partners and allowing end users to choose best of breed components.

Eric Fullerton is the Chief Sales and Marketing Officer at Milestone Systems.

[Editor's Note: This report is adapted from Milestone's blogs and forums site. The site feature blogs from the entire Milestone management team and publicly viewable forums.]

Related Reports

How Integrators Use IPVM on May 24, 2017
150 integrators explained how they use IPVM and how it helps them stay informed and improve their business.  The 4 main uses integrators cited for...
Avigilon New COO James Henderson Profile on May 23, 2017
It has been nearly 2 years since the infamous Bryan Schmode 'resigned' as Avigilon COO. Now, Avigilon once again has a COO, promoting James...
Remote Video Monitoring Providers Directory on May 21, 2017
Remote video monitoring can help integrators generate RMR plus end users lower their security costs and/or improve response to critical...
Forget The Backdoor, "ALL HIKVISION PRODUCTS" On Sale on May 18, 2017
Less than 2 weeks after the Hikvision Backdoor was confirmed, Hikvision has launched a sale "ON ALL HIKVISION PRODUCTS". In this note, we examine...
ShotSpotter To IPO, Facing Low Revenue and Losses on May 17, 2017
A rare event for North American security manufacturers is upcoming. ShotSpotter is planning to IPO on the NASDAQ, aiming to raise $34.5...
FLIR Is Giving Away $3,000 Demo Kits on May 17, 2017
Everybody likes free stuff, and FLIR is using that concept to attract dealers by giving them $3,000 worth of demo gear for attending a...
ADI's 'Elves' Selling Direct on Amazon on May 15, 2017
Buy from Amazon, get delivery from ADI. What? Recently, we bought a part from Amazon and the shipment came from ADI. We dug into the...
Selling and Valuing Security Integrators on May 12, 2017
This ia a tutorial in how to (1) determine your security integrator's value and (2) to sell your security integrator. If you own an integrator,...
Panoramic Camera Usage Rising 2017 on May 08, 2017
Panoramic camera usage (including fisheye and multi-imagers) continue to rise rapidly. However, the race to the bottom is hindering even stronger...
Code Blue Emergency Communications Profile on May 05, 2017
Code Blue is a US-based manufacturer of emergency call stations, call boxes, and incident management software. Over time, the company has shifted...

Most Recent Industry Reports

Milestone Entry Level Mobile Password Vulnerability Disclosed on May 24, 2017
While many manufacturers have only addressed cybersecurity vulnerabilities after public disclosures were made (or threatened), Milestone has...
How Integrators Use IPVM on May 24, 2017
150 integrators explained how they use IPVM and how it helps them stay informed and improve their business.  The 4 main uses integrators cited for...
Alarm Supervision Guide on May 24, 2017
Burglar alarms can constantly monitor the health of attached circuits, sensors, and devices to ensure that they remain operational. This is known...
Arlo Go Cellular Cloud Camera Tested on May 23, 2017
Totally wireless surveillance cameras are growing but almost all typically depend on a hub and local Internet access. However, many outdoor...
Avigilon New COO James Henderson Profile on May 23, 2017
It has been nearly 2 years since the infamous Bryan Schmode 'resigned' as Avigilon COO. Now, Avigilon once again has a COO, promoting James...
Hikvision Marketer Caught Spamming, Fails at Coverup, Fired on May 23, 2017
A Hikvision marketing employee was caught by IPCamTalk trying to surreptitiously disparage IPVM and IPCamTalk. This is an outgrowth of Hikvision's...
Aura's 'Invisible Ripple' Next Gen Intrusion Detection Tested on May 23, 2017
Aura Home is a startup intrusion detection system, but it claims new, high-tech sensing that monitors the 'invisible ripples' movement creates,...
Pelco Shutting Down Clovis Line, Laying Off 200 on May 22, 2017
Pelco's Clovis facility once turned out some of the industry's most popular products. Now, the facility is mostly building "obsolete" equipment,...
IP Camera - 15 Year Shootout on May 22, 2017
How far have IP cameras come? We bought and tested 4 cameras across the past 15 years to understand how much and where performance has...
Remote Video Monitoring Providers Directory on May 21, 2017
Remote video monitoring can help integrators generate RMR plus end users lower their security costs and/or improve response to critical...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact