Desperate Moves: AVHS and HDcctvBy: John Honovich, Published on Sep 11, 2011
In the last year, quite a number of incumbent security providers have launched VSaaS using Axis's AVHS service or HDcctv cameras and recorders. Rationally, this is bizarre. The business case is weak and the products are far from being competitive with mainstream (analog or IP) options. So why is this happening?
Recently, I was speaking with an executive at a company rolling out an AVHS VSaaS service and we were discussing my concerns. He bluntly responded that this is a really difficult market and that he needs to do something to increase revenues. Then it hit me that this was basically a poorly though out, desperate move.
Many incumbents are in tough positions: While IP is growing, it is cannibalizing existing analog sales. Worse, much of IP's growth is going to outsiders so it is likely a net negative for incumbents.
However, rolling out AVHS or HDcctv stinks of desperation. Neither has much chance of short term major revenue boost or long term major market success. Let's examine each one:
AVHS's channel model dooms it. While most successful SaaS providers develop and sell their services direct to end users, Axis's model continues to grow more complex. For example:
- Axis sells AVHS software
- EMC hosts the AVHS software and storage
- National integrator buys this service from EMC
- Regional dealer or integrator buys the service from national integrator
- End user buys from regional dealer or integrator
This is a highly inefficient model that drives up cost and abandons one of the key value drivers of SaaS - the ability to use the Internet to cut out the middleman. Of course, it should be no surprise that AVHS partner end user pricing continues to be uncompetitive.
The second related problem for AVHS is lack of product development, made far worse by these layers of re-sellers and partners. Today, AVHS, compared to even Chinese DVRs, is essentially a toy - lacking dozens of fundamental features expected for years by surveillance customers. Axis seemingly expects partners/resellers to do their own development to rectify AVHS's shortcoming. Instead, we continuously see the same service with simply different logos. Of course, this should not be surprising as almost none of these partners have real software development teams (note: the one IT guy who writes excel scripts does not count).
VSaaS can ultimately be very successful but the current Axis model cannot. For instance, Axis could combine their AVHS powered IP cameras and AVHS enabled on-site iomega NASes, sell it from their own site and offer a free plan for using local NAS recording. This would be extremely attractive and spur selling far more Axis devices than the convoluted current channel model. Of course, the downside is that integrators and partners will revolt (as if Axis's current buy anywhere approach is not disliked enough).
Axis will go direct or others will do so. Either way, the winners in the VSaaS market will cut out the middlemen and maximize their product development without having to cut in numerous levels of partners.
HDcctv has many problems and barriers.
The most fundamental challenge is HDcctv's lack of interoperability with any existing system - DVR, NVR, VMS, etc. You want to use HDcctv, you have to change recording platforms. Huge barrier. Anytime you have a new product category that requires this, best case scenario is a long slow march, most likely scenario is collapse. This pattern is common and has equally impacted analytics and IP cameras. For more on this read our note on "Fundamental Barriers to Surveillance Innovation".
The upside of HDcctv is (1) no camera network configuration and (2) reuse of existing cabling (maybe/sometimes). These are certainly attractive. The big question is what are the downsides? Unfortunately, they are many:
- Inflexible camera choice: One cannot mix and match analog and HDcctv inputs. For example, if you buy a 10 port DVR that has 8 analog and 2 HDcctv ports, you have to buy another recorder if you want to have more than 2 HDcctv cameras.
- High pricing: HDcctv spokespeople continue to shift back the date when pricing will be competitive with IP cameras. Back in 2009, it was immediately, now it is sometime in the next few years.
- Limited product availability, looming incompatibility among HDcctv / HD SDI products, no powerful leader, negative promotional campaigns, conflict of interest, etc. All this has been most recently addressed in our September 2011 HDcctv update.
We do believe that HDcctv (or at least HD SDI) can establish a niche position in the market. However, there are simply too many structural problems for it to become a major force in the surveillance market.
The best analogy for these two efforts is what happened with video analytics and ObjectVideo's partner program 6 - 8 years ago. Like analytics, VSaaS is now considered the next big thing and, understandably people do not want to be left out. Even worse, with deteriorating economic conditions, the urgency of 'doing something' increases. However, a careful consideration of the issues each of these offerings face should dissuade reasonable people from wasting their energy on such efforts.
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