Milestone Essential VMS Version Examined
Milestone's new entry level version announcement [link no longer available] will have a major impact on the VMS market, forcing rivals to match or lose market share and benefiting consumers by lowering prices. The new entry level package, called XProtect Essential [link no longer available], replaces XProtect Basis+ with notably expanded functionality and, most importantly, significantly reduced price. We believe that this will trigger an industry wide reaction over the rest of 2010. While the VMS market is fragmented, Milestone is a relatively large supplier and one that both partners and rivals look to as a benchmark.Inside the premium section, we will explain the following key elements for members:
- What is the existing price structure for VMS offerings in the market?
- How do VMS vendors segment their pricing/product offerings?
- How does Milestone segment their pricing/product offerings?
- How does the pricing and functionality of the new XProtect Essential compare to the previous XProtect Basis+?
- What specific changes should we expect in the industry?
By the end of the year, we believe average entry level open system VMS pricing will drop from its current $100- $125 level to $50 - $75 per channel. Milestone's release of its own entry level offering at $49 MSRP per channel will trigger these changes.
Milestone is likely to benefit from forcing this shift as they have 2 strengths not common in most of their competitors: (1) well established distribution/marketing channel to sell this offering around the world and (2) ability to upsell to their higher-end, more costly packages. Providers that lack both of these elements are likely to be hurt by this change.
At the same time, we see 2 other areas of emerging VMS competition:
- On-line VMS options: There are a growing number of VMS systems that can be bought immediately on-line that are similar or lower in cost to Milestone's offerings. We believe these options will continue to grow in attractiveness as IP video goes mainstream and users want to buy direct.
- High end VMS systems: Milestone's move here does not affect nor improve their positioning in the high end VMS market segment. Competitors will likely stress that they still offer more value for customers needing access control integration, analytics, enterprise management as these features are still provided by Milestone at the same significant premium as it was previously.
Existing Price Structure
From our VMS training, we examine what prices you might pay for various VMS options, including:
- Pricing levels examined
- Software vs appliances
- Free vs Paid
- Licensing options - per channel, per server, per connection, etc.
This is from Spring 2010 and represents the pricing status quo before the Milestone Essential announcement.
Here are a few examples of pricing from VMS vendors around the world. In this list, we use the price of the least expensive offering from each supplier (sometimes this is a 'basic' version, othertimes this is the flat fee for all functionality). All prices are MSRP.
- Axis Camera Station: ~ $125 per channel
- DvTel Solus - $150 - $200 per channel
- Exacq: $150 per channel
- Genetec Standard: ~$170 per channel
- NUUO: ~ $133 per channel
- Milestone XProtect Basis+: ~ $125 per channel
- Milestone XProtect Essential: ~$50 per channel
- Pelco DigitalSentry - $125 - $200 per channel (depends on promotion and use of Pelco cameras)
It is rare for open VMS systems (sold through dealers or distribution) to drop in price below $100. A few exceptions include Luxriot (average MSRP $40 - $100 depending on total channels) and Digifort (average MSRP $45 - $115 though lower price level has severe functional restrictions).
This overview should give you a sense of the significance of the Milestone entry level price drop.
Segmentation of Pricing / Product Offering
In this previous section, we reviewed the low end price offerings for VMS systems. In the VMS market, it is common for pricing to be tiered to offer more advanced functionalities (such as enterprise management, 3rd party system integration, video walls, redundancy, higher channel counts, etc.)
For VMS systems supporting 3rd party cameras, the most common segmentation is into two tiers of product offerings:
- Non-enterprise version (historically $100 - $150)
- Enterprise version (historically $200 - $300)
The main difference between the two is that the enterprise version allows managing users and configurations from multiple servers/recorders in a single client with mass updates across the system.
A number of VMS providers who offer greater amounts of functionality will segment their offerings even further.
For instance, Genetec has 3 tiers of product/pricing: (1) Standard supports up to 50 cameras with an MSRP of approximately $170, (2) Pro supports up to 20 recorders and 100 cameras per recorder with an MSRP of $235, (3) Enterprise supports unlimited cameras and all of Genetec's advanced functionality (redundancy, 3rd party integration, etc.) with an MSRP of $270. For details, review our Genetec test results.
As another example, DvTel has 4 tiers of product/pricing including (1) Solus is a 32 camera stand-alone offering with an MSRP of $150-$200 and 3 tiers of their Lattitude software (with varying functionalities and total cameras supported) but pricing within the $250-$300 MSRP range. For details, review our DvTel test results.
Milestone's Pricing / Product Segmentation
Milestone offers 4 packages or tiers of VMS offerings. They are:
- Essential (formerly Basis+): max cameras: 26; average MSRP per channel: $49
- Professional: max cameras: 64, 3rd party integration, MSRP per channel: $160
- Enterprise: unlimited cameras, centralized management; average MSRP per channel $275
- Corporate: unlimited cameras, integrated centralized management, rules, redundancy, SmartWall: average MSRP per channel: $325
The key differences among the versions are:
- No MSP 3rd party integration [link no longer available] for Essential: If you need analytics or access control integration, etc. you cannot use Essential
- No alarm management for Essential: If you need XProtect Central alarm monitoring add-on you need Professional or higher.
- No enterprise management with Essential or Professional
- Video distribution, advanced rules, redundancy, multi-stream recording: Corporate only
Comparing Essential to Basis+
Essential improves upon Basis+ in a number of critical ways. In addition to dropping price and increasing functionality, it removes restrictions from the previous version (simultaneous connections), enables simpler upgrading to higher end Milestone versions. The list below details some of the specific changes:
- Essential 1.0 replaces Basis+; Basis+ to be discontinued
- Essential 1.0 uses 7.0 'VMS'/management client and SmartClient 5.0; an upgrade over Basis+ which used 6.5 VMS and Version 4 of the Smart Client
- Essential 1.0 has a Base License (supporting 2 cameras) of $99 MSRP with individual camera licenses at $49 MSRP; Basis+ had a Base License (supporting 4 cameras) of $499 MSRP with camera licenses bought in 'packs' of 6, 9, 16 cameras
- Essential supports 5 concurrent connections, Basis+ only supported 1
- Essential will allow purchasing of licenses by single camera increment, Basis required packages of 6,9 or more cameras
- XProtect Professional pricing, positioning and features remain the same
- Professional supports Milestone partner integration (access integration,etc.), Essential does not
- All Milestone offerings including Essential will continue to be sold through the channel only (no online sales)
- Like Basis and Professional, Essential does not require in person training (only Enterprise and Corporate VMS versions do
- Essential 1.0 supports Milestone's PMA (Product Maintenance Agreement)
- Technical support for Essential 1.0 is the same as all other Milestone versions
Industry Changes Expected
Almost all of the 'major' players offering open VMS systems have a minimum price of $100 or more (even for their entry level offerings). With a key competitor such as Milestone dropping their entry level pricing significantly, what will others do?
- Can OnSSI sell essentially the same product with an additional UI for 2-3 times the price?
- Can Axis sell a single camera solution with less functionalities for 2-3 times the price?
- Can Genetec and DvTel have entry level offerings that are more than 3 times the price?
The entry level market is especially price sensitive so it is difficult to argue that customers won't care about paying an extra $500 - $1000 for a 16 camera system.
Equally importantly, because of Milestone's name recognition and marketing channels, it is likely that many customers will learn about and be offered this version. Unlike a new entrant in the market who might have difficulty getting attention, Milestone will not have such problems.
Milestone can likely afford to do this seeing it as an investment in growing its customer base and then upselling customers to Professional, Enterprise or Corporate in the future.
Because of these reasons, we believe that most competitors will reduce their prices significantly. Maybe the larger providers won't match at the $50 level but it's seems clear they cannot have such significant price variations.
The biggest impact may hit the dozens of smaller VMS companies who often base their value proposition on being 'just as good as Milestone but cheaper.' Indeed, we hear that positioning regularly, unrequested from VMS vendors. Even assuming that the functionality is the same, Milestone has eliminated the cheaper criticism for the most common 25 camera and under deal.
People in our industry always talk about consolidation. While we are skeptical in general about such claims, cutting prices like this could really hurt the ability of smaller companies to survive.
Key Areas for Future Competition
On the other hand, we do not believe that Milestone has 'won' or cornered the market. Specifically, there are 2 very important aspects where important competitive positioning remains:
- On-line VMS sales: Milestone, and most VMS vendors, will not sell their software on-line to protect their dealers/integrators. However, this provides an opening for smaller companies to sell directly to end users and non-traditional integrators. On-line sales can reduce marketing costs and greatly simplify distributing software to buyers. At the low end, we see this as the most important long term risk.
- Higher end VMS functionality: Milestone new entry level version does not improve the pricing nor functionality of its higher end versions. At best, it might make it easier to acquire customers and up-sell. However, the jump in pricing from Essential to Milestone's next version (Professional) is quite high (from about $50 to $175 per channel). Competitors may be able to win by providing more functionalities at prices in-between these two points. Equally important, as more VMS systems expand their enterprise management, 3rd party integration, etc. they can compete as superior in price or functionality to Milestone's expensive Enterprise and Corporate versions.