Hikvision Launches American Enterprise Expansion

Author: John Honovich, Published on Jan 22, 2016

Hikvision has done well becoming the most common camera choice for American SMB customers but the company is still a minor player in the enterprise. However, a few months ago, Hikvision Hired a former Pelco / G4S Exec to change that. Now he has begun to build a sizable team prepared for rapid expansion and planned domination of the enterprise.

In this note, we overview Hikvision's approach, look at their chances for success and examine the key challenges they will face.

Expansion

Sam Belbina is building a large team, fast, with reports of 20 - 40 recent hires. For a sales organization just dedicated to the enterprise, in addition to the 150+ existing Hikvision North American employees, this is a significant push that is quite uncommon for the video surveillance industry.

The hires appear generally to be seasoned industry veterans who have worked previously at direct Hikvision competitors.

We estimate annual costs of such a team to be in the $5 - $10 million range, factoring in direct employee costs, traveling, events, etc. This is a sizable investment.

Enterprise Hikvision Advantages

In China, Hikvision is the largest enterprise provider, with a who's who of major cities, transportation, police and corporate customers. Not only do they have a track record but they have products built for the enterprise market.

Plus, a large experienced American enterprise team means they can spend significant time with the dozens of key consultants and hundreds of largest end users with projects underway.

Finally, like their SMB / ADI approach, Hikvision is willing to drop costs to record lows. Indeed, Hikvision will be even tougher in the enterprise market, where enterprise focused manufacturers historically have faced less competition and demands for absolute rock bottom pricing.

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Challenges and Barriers

Hikvision faces general challenges and specific issues related to their ownership.

In general, enterprise customers, and the specifiers they use, tend to be fairly conservative and less interested in maximizing low price than the mass market. Brands they know and trust with products that have worked well before on previous large projects are favored. Taking a chance of a product they have not used before is a risk since it could undermine the specifier's reputation or the end user's future job prospects. For however big Hikvision is, Hikvision is still a relatively unknown and untried offering for the enterprise American market.

An equally big issue will be Hikvision itself, e.g., Hikvision's Chinese government ownership, their Communist Party control, and their poor cyber security track record. In the SMB, price and tech support generally rule. Who makes the product or what security risk they pose is typically irrelevant. This is not the case in the enterprise. Many enterprise customers are government organizations or have funding or oversight of their security systems from the government, so the ownership and affiliation of the manufacturer will engender significant more scrutiny. In particular, and even with private enterprises, the fear of cyber hacking is very high, especially given the attacks on US corporations over the past few years. The combination of Hikvision's cyber issues and Government ownership places significant risk on the enterprise specifier and buyer that is going to be very hard to explain anyway in case of problems.

Lastly, but tactically important, enterprise projects often take a long time to close (a year or multiple years is fairly typical), so Hikvision will need to have patience. They might win quickly some through sheer willingness to drop price but, even if everything goes perfect, it will take time to build a business that justifies the team size.

Outlook for Hikvision Enterprise

Ultimately, Hikvision corporate is going to be disappointed with the results as their ambitions do not match the realities of selling up-market in the US market. However, Hikvision's willingness to drop price to radically new lows and the large experienced team they have built will disrupt the existing enterprise market. While we think most will reject Hikvision and the enterprise team will struggle to meet Hikvision corporate's expectations, they will start to become one of the more notable players so long as they continue their high sales expenditures with radically low pricing.

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Comments (31)

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While we think most will reject Hikvision and the enterprise team will struggle to meet Hikvision corporate's expectations, ....

Why do you say that? What responses have you seen in the NA market that would lead to this conclusion?

My experience dealing with A&Es and enterprise customers historically, as I explained in the section proceeding that comment.

Let me ask you: what do you think will motivate enterprise customers and A&E to use Hikvision? Price? Other?

A couple of years ago I gave a presentation to users group of insurance company facilities directors from around the country.

In my slides I touched on the scale of both Hikvision and Dahua and their role as leading OEM players at that time. It was interesting that this part of my talk generated a significant amount of Q&A. It seemed like I was giving insight that was news to a group of people that care a lot about cyber security a great deal. I would expect that to still be a key area of concern for large scale users.

Don't they need to hit the beaches with an Enterprise VMS to have any chance?

Axis is the biggest enterprise surveillance camera seller in America but almost none of those users are using Axis VMS.

My gut feel is that an enterprise VMS would make things more difficult as it would undermine partnerships / cross selling (i.e., your reference to Milestone Names Hikvision 'Elite Partner'). On the other, maybe Hikvision goes full tilt with free enterprise 5200 VMS software and $50 IP cameras, daring enterprise customers to refuse such a deal. We'll see but the 5200 is not released yet in the US...

In China, Hikvision is the largest enterprise provider, with a who's who of major cities, transportation, police and corporate customers. Not only do they have a track record but they have products built for the enterprise market.

So what VMS is currently being used with these large scale Chinese Hikvision installations?

I believe, typically, their own. Looking at their Chinese website, they have the:

I am not sure which one is used where or most often inside China but Hikvision has a quite a number of options. Also, to be clear, I am not suggesting they will bring those offerings to North America, but my point is that Hikvision does have enterprise track record / products.

Not sure if Hik qualifies for the Buy American act which is standard on all federal projects so they could almost certainly never win there.

That's interesting, they have a US Army contract...

With regards to Buy Ameritcan, Axis and others rotinely get around the requirements by installing pre-assembed camera modules snap them into the housings and shove them in boxes at locations within the US and are therefore "assembled in the USA". Hikvision could easily do the same.

Axis and others rotinely get around "Buy American" requirements by installing pre-assembed camera modules snap them into the housings and shove them in boxes at locations within the US and are therefore "assembled in the USA".

Are you sure about that? "Assembled in the USA" would not seem to meet the criteria of the Buy American Act.

Essentially, the Buy American Act attempts to protect domestic labor by providing a required preference for American goods in direct government purchases. In determining what are American goods, the place of mining, production, or manufacture is controlling. The nationality of the contractor is not considered when determining if a product is of domestic origin.

Manufactured articles are considered domestic if they have been manufactured in the United States from components, “substantially all” of which have been mined, produced, or manufactured in the United States.

I think they will clean up in the education market. That sector has typically low funding, so the bigger the bang for the buck will make it a go to offering.

Jeremy, that's a good point about education. Hikvision's OEMs already do well in education. Now it will be interesting to see how Hikvision competes against their OEMs here (i.e., can Hikvision's extra discounts overcome concerns about Hikvision even though Hikvision and their OEMs are selling the same product?).

John

Thanks for publishing this, I agree with your assessment on the enterprise challenges for Hikvision, but I think with education and clear communication on who these guys are and the lack of plans to support the customer at this price point, the SMB will think twice before embracing this invasion into the US Market.

With over 5000 systems installed for SMB/Franchisees in North America, we consistently hear the desire for relational service and support. I agree that some are all about the price, but many in this segment are looking for a product that offers a good value equation and a strong ROI.

John, Thanks for your leadership in our industry

Best Regards

Mark Nazarenus

President - ITech Digital

Mark,

Thanks for your feedback.

"With over 5000 systems installed for SMB/Franchisees in North America, we consistently hear the desire for relational service and support."

To play devil's advocate on 'service and support', Hikvision has hired dozens of experienced American sales and support people. Those people are the face of Hikvision in North America, not Mao or Xi Jinping. I think it's entirely possible that to the end user, Hikvision, in person, will act as American as 'apple pie.'

I believe that the cyber security issues as pointed out by IPVM in the past will be their biggest challenge. Security breaches and compromised credit card information have been huge concerns for the past decade and this seems to be growing to be a larger issue every year. Yes, there are many steps that can and should be taken to minimize the risk of a breach but in an enterprise environment is it really worth the potential risk to such large clients?

The K-12 market segment seems like a natural fit. The relatively low risks involved in a breach along with the drive for low cost products may work to Hik's advantage.

I think a lot of people over estimate the care factor for Hikvision's past breaches and let's face it, a significant portion of responsibility for the breach came via using default login details.

There are plenty of companies who will have little to no idea as to how surveillance works or it's vulnerabilities or otherwise.

As an example, one of the largest supermarket chains in my country insists on DVRs because they believe them to be more reliable than an NVR based purely on a trial having an NVR failure. The corporate decision was that if this could happen to an NVR, then we can't risk it. And as such, they have DVR's in their supermarkets which number almost 800 nationally.

I did this type of marketing back in the 70's and 80's. The reason is patriotism and unions. Pure politics is the issue. In the government sections it will be easy for "HIk" to see the projects and try to make sure they can get on the bid but when the company is like Apple or Microsoft puts out to bid, they can follow any rules. So it will make it really hard for HIK to penetrate this market.

Again China is a world competitor for the USA so this will transcend price and channel loyalty. The more they hit at this market the more entrenched other players will become. Mabey we will see chip set bring made here or even help by the american govt.

JMO

For anyone who didn't see this story on 60 Minutes - here's a report on the level and depths of corporate espionage conducted by the Chinese Govt : http://www.cbsnews.com/news/60-minutes-great-brain-robbery-china-cyber-espionage/

Aside from the obvious Security holes in their products, does anyone for a moment think they wouldn't try to exploit video for any type of advantage they could gleen?

And this is different from the US Government, British Government, German Government, Israeli Government, Australian Government ..... and so on ad nauseum how?

The US government conducts corporate espionage?

Governments spy, yes for political reasons but that's different from what 60 Minutes is claiming in that China is spying for the benefits of its corporations (which of course they own / control hundreds of).

Even this negative article on the US from the Intercept draws that distinction.

Because we're not in China? - at least I'm not, Comrade

I'll gladly cheer the day our Govt. "Intelligence" Agencies do anything to help American Business, but I'm not holding my breath

I'll gladly cheer the day our Govt. "Intelligence" Agencies do anything to help American Business, but I'm not holding my breath.

  1. Espionage if done correctly, is secret
  2. We certainly have the capability
  3. Ethical considerations don't seem to be a sticking point for the intelligence community

Therefore, no news is good news.

I think they will be moderately successful in this endeavor. They are building quite a team of seasoned individuals to pursue the Enterprise level market and national accounts. They have the finances, talent, and product that should do well in these markets, but it will take time and effort. Right now, they are building the boat while they are sailing it.

Full disclosure, I interviewed and was offered one of these positions at Hikvision. While the salary & bonus compensation plan was excellent, the rest of the benefit package was lacking for me, which was why I ultimately declined. The health plan was expensive and not available for the first 3 months of employment, there was no life insurance, and 401K was not available for another year. As they continue add more employees in the US, this will likely change. In hidsight, I may have made a mistake in declining.

As their VMS and other upline products eventually roll out in the USA market in the near future, in my opinion they are poised to repeat their success in the Enterprise market as they have had in the SMB market. It will take a lot of work on their part, but I believe that they have the leadership and resources to accomplish their goals, despite the negative commentary and attitudes.

Sound quality at an excellent price point is always a good selling point.

7, thanks for the feedback on the Hikvision job offer. It is interesting (and consistent with what we have heard) to see that Hikvision pays well. That's an exception from what we have seen from Chinese companies (e.g., Dahua) and shows that they understand and are willing to make the large investment.

"Sound quality at an excellent price point is always a good selling point."

That's true. I just wonder how long Hikvision can keep this up. We've heard from numerous sources close to the company that Hikvision corporate is not satisfied with NA's performance, even though Hikvision's growth in NA is phenomenal (from our perspective). So we'll see but I don't envy Hikvision NA employees trying to sell to US government entities.

I think HikVision will help clean up and out some of the minor players in the VMS market, shake up the little guys that live on license fees by sending out a product without the outrageous 'per camera' license fees. Betting against a company with 3,500 R & D engineers is questionable. Their list of products they manufacturer is very extensive compared to many of the 'leading' companies out there today.

I would not bet against them just yet.

"Betting against a company with 3,500 R & D engineers is questionable."

They say they have 5,000+ though engineering, unlike ditch digging is not primarily a function of bodies.

"shake up the little guys that live on license fees by sending out a product without the outrageous 'per camera' license fees."

But Hikvision's VMS offered in the US has very few features compared to what 'little guys' like Genetec do. Maybe Hikvision has a honeypot of world beating advanced features in China that they are going to roll out into the US but unless and until that is the case, people who value advanced features are going to pay those fees.

How many customers ask you for the features you are describing? Or do you just get them with the package and pay for it in license fees, need it or not?

We have rolled out many VMS packages both ways and in house we were talking and came to the conclusion that very few customers have actually requested features outside of the basic stuff.

Go figure?

Marty, I do not know who you sell to, so I cannot comment or speculate on what your customers want.

However, compare Hikvision's 4200 to 'little guy' VMSes like Genetec:

  • extensive 3rd party camera support
  • extensive access control, intrusion, PoS integration
  • server redundancy
  • network video wall
  • 3rd party analytics
  • LPR tight integration
  • multi-camera export / stand alone player
  • searching for events across multiple cameras
  • streaming video from smart phones
  • all of Genetec's enterprise cloud / VMS offerings
  • various management and reporting features, federation, etc.

That's just off the top of my head, in a few minutes. You can also see the new Milestone 2016 feature list for other examples of enterprise features the 4200 lacks.

Large organizations don't consistently pick Genetec (or Milestone, etc.) because they are stupid. There are many real features that regularly make those VMSes worth it to those customers with the needs and appreciation of the differences.

Similar to what the security industry did in the 70's,80's , thats what it will do to the camera market

It will separate the high end from the low end , dump a lot of products on the market place , drive the price s lower , profits lower ,small amount of small company's out of the market, and then massive layoffs of all the good employees who built the giant.

History repeats itself , when we dont pay attention to the tactics at hand and whats really trying to be accomplished.

I see a great opportunity early on in the shuffle , but like every giant after the rest of the giants fail , them they come in to collect the remnants , sell offs, market failures.

Just business tactics , like others there will be fail outs

Right in line with gov. policys of china

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