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

Dahua Intrusion Analytics And VMD Tested on May 21, 2018
Dahua ships basic analytics on practically all their cameras, ranging from low cost to high end. To see how these analytics work in real world...
Exacq Improving Technical Support, Responding To Integrator Complaints on May 21, 2018
Exacq had been a long-term favorite of integrators, but since their 2014 Tyco acquisition, Exacq has fallen in IPVM integrator studies (though...
Best Manufacturer Technical Support 2018 on May 21, 2018
While 5 manufacturers made the worst technical support 2018 list, only 3 stood out as providing the best technical support to 190+ integrators in...
Stealth / UCIT - Remote Video Monitoring Provider Profile on May 18, 2018
Can 2 remote video monitoring companies, Stealth Monitoring from the US and UCIT from Canada combine to impact the market and compete in a changing...
Cybersecurity for IP Video Surveillance Guide on May 18, 2018
Keeping surveillance networks secure can be a daunting task, but there are several methods that can greatly reduce risk, especially when used in...
Forced Entry / Duress Access Tutorial on May 17, 2018
Even though access control normally keeps people safe, tragedies have revealed a significant issue. If users are forced to unlock doors for...
ADT Stock Drops 50% Since IPO on May 17, 2018
It has been a brutal 4 months for ADT. They first expected to IPO at ~$18. They IPOed at $14, dropping immediately to $12.39 And now, not even...
Dahua 12MP Fisheye Camera Tested (NK8BR4) on May 16, 2018
Continuing our coverage of 12MP sensor fisheye cameras, we bought and tested the Dahua NK8BR4, examining: Default vs. Optimized...
Worst Manufacturer Technical Support 2018 on May 16, 2018
5 manufacturers stood out as providing the worst technical support to 190+ integrators in new IPVM results. These integrators answered: In the...
Installing Cameras in Plenums Tutorial on May 15, 2018
There is often confusion about plenum ceilings, with misinformation about what is required when running cables through them and mounting cameras...

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