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

Author: 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." 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?" 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" 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.  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 Video Surveillance News In Your Inbox
Get Video Surveillance News In Your Inbox

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.

If you accept this, then where are these powerful, immediate quantifiable financial returns in IP video?

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...

Most Recent Industry Reports

Honeywell Sues Alarm.com For Violating Anti-Trust Laws on Feb 24, 2017
Is Alarm.com about to dominate the smart home software market? That is what Honeywell alleges in its new lawsuit, first reported by...
Axis: "Everything is IP" - False on Feb 24, 2017
Axis is congratulating itself, with executive Fredrick Nilsson declaring: "Now the conversion is all done and everything is IP and analog is...
Advertising Like Avigilon at the ISC West Airport on Feb 24, 2017
Avigilon has grabbed a lot of attention over the last few years advertising at the Las Vegas airport when attendees fly in. But how does that...
Artificial Intelligence Robot Assistant (ACTi) on Feb 23, 2017
Has artificial intelligence come to the video surveillance industry? ACTi has released 'SARA' which it bills as an 'AI assistant that brings...
Cutting Costs 70% Using Milestone With HD Analog on Feb 23, 2017
HD analog and enterprise VMSes are often thought of as being on opposite sides of the spectrum, with HD analog best for small jobs due to its low...
Dahua 4K HD Analog Cameras Announced on Feb 23, 2017
HD analog has been gaining popularity (even if Axis hopes otherwise). Last year, HD analog's max resolution doubled from 1080p to 4MP (see our 4MP...
Uniview (UNV) IP Cameras Tested on Feb 22, 2017
"We're #3," in China says Uniview (UNV). While the company significantly trails Hikvision and Dahua in total sales, one notable difference is that...
Glass Doors and Access Control Tutorial on Feb 22, 2017
The biggest challenge for many access control systems are glass doors. Here's what happens when a maglock is improperly installed to an existing...
Exacq Favorability Results on Feb 22, 2017
For years, Exacq has been one of the most frequently favored VMSes in IPVM integrator statistics (e.g., see Favorite VMS Manufacturers...
The Hot RMR Company - Electric Guard Dog on Feb 22, 2017
The financiers at the Barnes Buchanan conference praised a company named 'Electric Guard Dog'. While the name sounds fairly low tech, the money and...

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