How Strong is the ROI / TCO of IP Video Surveillance?

By: John Honovich, Published on Oct 23, 2008

Many vague vendor claims exist but detailed quantitative evidence is hard to find. While customers are easy on soft ROI / TCO claims in boom times, in the next year they will get much firmer in their demands for significant and quantitative proof.  I am preparing a new report to distribute to end users on the "Real ROI of IP Video Surveillance." This note will lay out the issues and open it to community discussion.

What are proponents claiming?

Proponents certainly talk about ROI. For instance, Dan Dunkel, champion of IP security solutions, states, "It is important to understand that scare tactics are replaced by the benefits of operational efficiencies and ROI models."  Wow - did DVRs sweep the market far faster than IP cameras simply because of scare tactics? Nonethless, with claims of such vigor, I figured that it would be easy to find lots of hard evidence to back the IT / IP claims.

A search for industry articles returns very little: For instance selections like: "CSO Primer to Video Design, Installation, ROI" and a "Experts point to diversified ROI models, need for remote access as key drivers. [link no longer available]" Both offer very little detail and the latter strangely and incorrectly assumes that IP video is needed for remote access (DVRs provide the same benefit).

Then I figured the vendors would have some claims.  

  • I did a site search on Genetec and no results were found for the words TCO or ROI.  
  • OnSSI had a few mentions but the only one in depth was a powerpoint presentation titled, "Why is Everyone Migrating to Intelligent IP Video Surveillance? [link no longer available]" Is this a trick question? The fact is 4 out of 5 people are not migrating to IP video. 
  • Milestone has a white paper called "The Business Case for Networked IP Video Surveillance [link no longer available]" and it claims to make the case for TCO but there are no financial quantifications.
  • Of the companies I examined, Axis certainly offers the most sophisticated and rigorous case in its TCO report [link no longer available].  However, it concludes that IP offers only a 3.4% lower TCO than analog. Plus, they assumed that no coaxial cabling was in place despite the fact that most facilities have coaxial cable in place for existing cameras. If this was factored in, I estimate IP video TCO would be 3-4% higher than analog.

Why it's Important Now?

Two things are changing for IP video:

  1. Historically, IP video has been a niche and at 20% of the market it is still in the distinct minority.  It is imprudent to presume the financial drivers that make IP video attractive in specific applications (like municipial wifi or multi-facility campuses) will immediately carry over to the mass market.  If the business case is weaker so will adoption.
  2. We are entering a severe recession where all expenditures will be examined far closer. The pressure to clearly prove significant financial value will be extremely strong. Most organizations will have to ration capital and will not be able to fund all theoretically valuable projects.  They will need to prioritize across the board and only select the projects that deliver the highest value.  This demands a much different sales and marketing approach than during a boom where money flows easily.

What makes an ROI?

Many vendors simply list their products features and conclude that this equals ROI.  For example, we support analytics, wireless cameras, remote access, third party integration, higher resolution, etc. Ergo, we have a strong ROI.

The ROI of IP Video can only be generated in comparison with its closest alternative - analog cameras plus DVRs.  A true ROI in this case needs to clearly demonstrate how IP video analytics are superior to ones in a DVR, how IP video remote access is superior to using a DVR, how third party integration is superior with IP video over a DVR, how much additional financial value a megapixel camera generated over a 4CIF recorded analog feed etc., etc.  Only the differential counts and it needs to be quantified.

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

Please review my report on how to calculate video surveillance ROIs to examine key factors in developing accurate ROIs.

How Strong Should the ROI / TCO Reduction be?

As a rule of thumb, new technology products that overtake a market need an ROI over 100% (i.e., they payback in less than a year) or a TCO of less than 50%.

Now you may object and say if a stock goes up 15% in a year, that's a great return.  However, new technology projects are much riskier and the transaction costs are much more significant.

Most companies are reluctant (especially in a recession), to green light projects unless the financial returns are immediate.

1 report cite this report:

How Obama Impacts the Security Industry on Nov 04, 2008
The security bubble is burst. With the election of Obama, US demand for security products will drop significantly as subsidies for security...

Related Reports

Cisco Video Surveillance Is Dead, Long Live Cisco Meraki Video Surveillance on Feb 11, 2020
A dozen years ago much of the industry thought that Cisco was destined to dominate video surveillance. They stumbled repeatedly, failing. Now it is...
2020 Camera Book Released on Jan 10, 2020
This is the best, most comprehensive security camera training in the world, based on our unprecedented testing. Now, all IPVM PRO Members can get...
2020 IP Networking Book Released on Jan 06, 2020
The new IP Networking Book 2020 is a 280 page in-depth guide that teaches you how IT and telecom technologies impact modern security systems,...
AI Video Surveillance (Finally) Goes Mainstream In 2020 on Sep 03, 2019
While video surveillance analytics has been promoted, hyped and lamented for nearly 20 years, next year, 2020, will be the year that it finally...
Video Surveillance History on Jul 19, 2019
The video surveillance market has changed significantly since 2000, going from VCRs to an emerging AI cloud era. The goal of this history is to...
'CCTV' Is the Past, Cloud Video Surveillance Is the Future on Jul 08, 2019
A fundamental shift is happening. For decades, video surveillance was overwhelmingly 'closed' and off the Internet. This is changing. More and more...
Manufacturer Favorability Guide 2019 on Jun 12, 2019
The 259 page PDF guide may be downloaded inside by all IPVM members. It includes our manufacturer favorability rankings and individual...
Closed Cloud Cameras Trashed on May 13, 2019
When you buy a camera, do you own it? Not anymore. In the world of closed cloud cameras, you may think you are buying a camera but all you are...
IBM Shuts Down Intelligent Video Analytics on May 02, 2019
Abruptly, IBM has discontinued its Intelligent Video Analytics solution, it confirmed to IPVM. IBM's video analytics have faced recent media...
The Embarrassing Story of ISC West's Best New IP Camera on Apr 24, 2019
A sad but simple situation: Only 2 companies paid SIA the thousands of dollars required to compete for the best new 'cameras IP' The judges...

Most Recent Industry Reports

FLIR New Coronavirus Prioritized Temperature Screening Camera Examined on Apr 03, 2020
FLIR has announced a new series of thermal cameras "prioritized for entities working to mitigate the spread of COVID-19 virus", the A400/A700...
ADI Branch Burglary on Apr 03, 2020
A security systems distributor branch is an odd target for burglary but that happened this week at ADI's Memphis location. Vehicle Smash &...
Hikvision And Dahua Now Blocked From Conforming ONVIF Products on Apr 03, 2020
Dahua and Hikvision, sanctioned for human rights abuses, are now blocked from submitting products for ONVIF conformance, a blow to the mega China...
YCombinator AI Startup Visual One Tested on Apr 02, 2020
Startup Visual One, backed by Silicon Valley's powerful Y Combinator, aims to be "Your 24/7 Watchman" with advanced analytics and object...
Free IPVM Memberships For The Unemployed on Apr 02, 2020
IPVM is giving 3-month free memberships (regular price $99) for the unemployed, no questions asked. To get it, just contact us, your request...
Dahua Faked Coronavirus Camera Marketing on Apr 01, 2020
Dahua has conducted a coronavirus camera global marketing campaign centered around a faked detection. Now, Dahua has expanded this to the USA,...
Video Surveillance Trends 101 on Apr 01, 2020
This report examines major industry factors and how they could impact video surveillance in the next 5 - 10 years. This is part of our Video...
USA's Seek Scan Thermal Temperature System Examined on Apr 01, 2020
This US company, Seek, located down the road from FLIR and founded by former FLIR employees is offering a thermal temperature system for the...
Terrible Convergint Coronavirus Thermal Camera Recommendation on Apr 01, 2020
A week after Convergint disclosed falling revenue, pay and job cuts, Convergint is touting 'extensive research' that is either grossly incompetent...
The IPVM New Products Online Show April 2020 Opens With 40+ Manufacturers on Mar 31, 2020
IPVM is excited to announce the first New Products Online show, with 40+ manufacturers, to be held April 14 to the 16th, free to IPVM members,...