How Weak is VSaaS Growth?

By: John Honovich, Published on Mar 18, 2012

The Next Big Thing - For the past few years, VSaaS has worn this mantle. Does it deserve it? Hype took off in 2008 and four years later, numerous providers emerged and market awareness soared. Now, we are at a point where real growth must be delivered. [Update: And things just got even worse - new section covering the impact of Axis Camera Companion]

Despite the hype, growth in VSaaS sales appears modest. Our VSaaS deployment statistics show limited adoption and muted integrator expectations. IMS's 2012 VSaaS report estimates 25% year over year growth in 2011 and doubling of the market in the next 3 years. Doubling might sound impressive but over a 3 year period that is a CAGR of just 26%.

Growing 26% a year in an early stage market is weak. By comparison, that is a similar pace to IP camera growth today, a technology available for 15 years, and significantly lower than megapixel cameras, the biggest growth driver in the overall surveillance market. Small early markets that have real appeal grow much faster than 26%. Growing fast when a market is young and small is easy. Not doing so is a major red flag.

The real issue is VSaaS has not firmly established its competitive value proposition. Users still struggle to understand why it offers more than mainstream options - and it has nothing to do with 'education'. The ROI remains weak and the feature sets remain rudimentary. Fast growth with such major barriers is simply impossible.

The new defensive position does little to help. Axis's rejoinder is that VSaaS faces the same criticisms that IP cameras had. Just like 'they' were wrong about IP cameras, they will be wrong about VSaaS. Perhaps, yet the analogy's fatal flaw is timing. Who doubts the cloud is the future? The only question is how long it takes. It took IP cameras over a decade to enter the mainstream. If it takes VSaaS a similar span, we are looking at 2020 and beyond. 

The real question for buyers, suppliers and integators is how strong VSaaS will be over the next few years, not the next decades. And to that question, the answer is pessimistic.

Just Got Worse

Anytime the #1 proponent and supplier of a market releases a rival offering in a competing category, things are bad. Axis generated the lion's share of VSaaS attention while establishing dozens of VSaaS partnerships around the world. Unfortunately, Axis Camera Companion undermines the core of the VSaaS business case, exposing VSaaS's weak underbelly. Both eliminate onsite servers yet Camera Companion does it for free while AVHS costs thousands of dollars for even a small 4 camera system. Niches remain for VSaaS, including super easy remote access and management of multiple sites but that is a far smaller part of the market than those who want an inexpensive small camera count, single site systems. This move, likely to be replicated by others, is an important sign of VSaaS's achille heel.

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