Milestone Seeks Global VMS Market Dominance

Author: John Honovich, Published on Oct 30, 2011

In a recent interview, Milestone Systems declared that they will reach an astounding and unprecedented 80-90% global market share and become the 'Microsoft of VMS.' In this note, we analyze why Milestone cannot achieve such market share yet why this reveals important tactical aspects of Milestone's go to market approach. Plus, we look at how comparing themselves to Microsoft runs counter to their historic identity and could increase industry ill will towards them.

Key Claims Reviewed

In the interview, Milestone's CEO made a number of important and detailed claims:

  • "I think we will be able to achieve 50-60 per cent [market share] organically with the model we are using right now. The remaining part will have to be acquired. Then we have to refine the organic growth model and apply that to the acquisitions,in order to achieve 80-90 per cent total market share"
  • Milestone estimates their market share "somewhere between 20-25 per cent and we are growing faster than the market every day, gaining market share all the time." We asked Milestone for clarification on this as it is substantially higher than other statistics we have seen. They noted that the market share includes OEM sales and a blend of revenue / licenses sold. Also, of course, this is for the open VMS software category, not for enterprise DVRs, NVRs, storage systems, etc.
  • "We have been enjoying an average growth rate of 41 percent since we started the company and I expect that level to be sustained for the foreseeable future."
  • "With a 41 percent growth rate, revenues will triple every three years. In a few years, we will become a 100-150 million euro revenue company." Note: 2010 revenue was ~30 Million Euros.
  • In 3-5 years, Milestone claims they will be twice the size than the number 2 player. We believe this is a reference to Genetec.

Why Milestone Cannot Achieve Such Market Share

Three main reasons exist why Milestone cannot achieve such share:

  • Lack of differentiation or market power
  • Difficulty of sustaining long-term growth
  • Unrealistic to acquire competitors for 1/3rd of the market

Milestone is a very well organized sales and marketing organization that is clearly building a global infrastructure. Unfortunately, for Milestone, that is not sufficient to reach the near monopolistic share they seek.

Lack of Differentiation or Market Power

Typically, when companies achieve this, it is because they control a key resource (e.g., Microsoft and the desktop OS) or deliver a solution that cannot be replicated (e.g., Apple and iTunes/iPod). Milestone meets neither of these criteria.

With Microsoft, if you did not choose their OS, you were blocked from using and or accessing critical applications. With Milestone, that is not the case. There are many other products that do fundamentally the same thing and are not blocked by not being from a single manufacturer.

With Apple, the iTunes/iPod experience was so much better than anything else, that there was little other choice for digital music. While Milestone is a solid company, it's offering is not so incredibly unique that it is the only realistic choice (and, for that matter, nor is any other VMS).

Get Video Surveillance News In Your Inbox
Get Video Surveillance News In Your Inbox

Difficulty in Sustaining Long Term Growth

In the best case scenario, accepting Milestone's own current market share estimate, we estimate that Milestone would have to grow at their historical 41% rate for the next 7 years while the VMS market as a whole averaged a far lower 25% rate (i.e., Milestone has to grow at 60% faster rate the market average for most of this decade).

Here's what it looks like in a simple spreadsheet we created:

Growing that much faster than the overall market is hard for any company, especially for a company that is 13 years old and already has a sizeable market presence.

Market Fragmentation

The surveillance industry has almost no 80-90% market share players (at least not in any mainstream categories). "Leaders" with 20-30% market share is impressive. The big reason is the fractured channel across countries and the world. Getting to such large market shares means displacing dozens of entrenched market competitors throughout the world - Bosch, Honeywell, Pelco, UTC, Tyco, etc. What makes Milestone so incredibly compelling that they can overcome all of this? We do not see a plausible story for this.

Unrealistic Acquisitions

Milestone is depending on acquiring rival VMS companies and expanding them to capture 1/3rd of the overall global VMS market. Assuming that Milestone gets funding for this (they obviously do not have the cash today), operationally, we think it will be difficult for them to manage numerous VMS lines. They already have 6 lines today that cover everything from free to very large scale systems. What value would additional VMSes bring to Milestone? In the interview, Milestone's CEO notes that they 'might become more aggressive, and acquire a local player in a certain region.' Can Milestone afford and would their rivals like Digifort in Brazil or Axxonsoft in Russia, agree to such offers?

Much more likely is that incumbent video surveillance manufacturers acquire Milestone's VMS competitors, leverage their own existing sales channels and become an increasing threat to Milestone's continued market share expansion.

Low Profits

Milestone historically has low profits and, as they acknowledged to us this summer, that is by design. The question, then, becomes: How long can they continue to operate in such a low profit environment? Related, how much does this low profit tactic contribute to their market growth rate? Microsoft and Apple are far different than Milestone in a very important attribute - they print money. Eventually, Milestone will need to show that it can be very profitable as well.

Key Takeaways from Milestone's Ambitions

At some level, really thinking that any VMS company, even Milestone, can achieve 80-90% market share is silly. We might as well analyze the probability of Milestone's CEO becoming the King of Denmark.

That noted, Milestone clearly is revealing its priorities. Integrators and competitors should clearly take head. Milestone could have emphasized that its focus was creating great products (the 'Steve Jobs' approach) or targeting the high end (the 'BMW' approach) or even solving a certain problem for a certain market (focusing on education, retail, etc.).

Goal #1 for Milestone is quite clear - maximize market share. When you look at their actions over the last 2 years, especially the steep price drops at the entry level, this makes a lot more sense.

Putting Competitors Out of Business

Unsaid, but inherent in any plan to get to 80-90% market share, is putting their competitors out of business. Milestone will have to suck all the oxygen out of the VMS market to do this. One way to accomplish this is to keep dropping prices until your competitors can no longer cover their fixed costs. At that point, they are forced to either exit or sell at rockbottom prices.

Mimicing Leading VMS Product Offerings

Companies that are focused on increasing market share through expanded channel distribution have product development as a secondary priority. To that end, we expect Milestone to continue to mimic features that other VMSes already have. For example, each release of Milestone Corporate basically consists of features that Genetec released the year before. On the positive side, a company that is great at sales and marketing that can effectively mimic technology leaders is in a good position to grow. However, competitors can seek at least temporary advantages by focusing on building great products.

Dangers of Comparing Oneself to Microsoft

While Microsoft is clearly a symbol of a financially successful, powerful company and might be a useful analogy for private discussions with investors, this is a poor and dangerous comparison for use within the video surveillance community. 

Microsoft is typically feared and/ or hated within the technology community for their heavy-handed ways of dealing with partners and potential rivals. Indeed, Microsoft is frequently called the Evil Empire for just this reason (actually referenced in the Wikipedia page for the term Evil Empire). Milestone's CEO might as well said his role model is Darth Vader.

This is particularly out of place as Milestone has taken great pains to be very conciliatory and non-confrontational (i.e., the anti BRS Labs). Milestone always talks about being an open company who wants to partner with seemingly everyone. Saying that they want to be the 'Microsoft of VMS' runs against all of their historical messaging.

Conclusion

Putting aside their unrealistic market share targets, we think Milestone's claims show that they will focus on maximize market share by strengthening their global sales and market organization around the world, dropping prices to punish competitors and mimicing feature sets to pace current VMS technology offerings.

UPDATE 2014

Though Milestone' market share remained roughly the same, they were able to be acquired by Canon in 2014.

1 report cite this report:

Milestone 'Free' Takeover of OnSSI Accounts on Oct 02, 2015
It's getting nasty. Last month, we reported how Milestone and OnSSI were breaking up. September 30th was the last day OnSSI sold any Milestone...
Comments : PRO Members only. Login. or Join.

Related Reports

Milestone Disrupts Milestone With Arcules on Nov 19, 2018
Milestone is now competing against... Milestone's own spinout Arcules. New IPVM testing shows that Arcules has incorporated a substantial amount...
Arcules Cloud VMS Tested on Nov 19, 2018
Arcules is a big bet, or as they describe themselves a 'bold company', spun out and backed by Milestone and Canon.  But how good is Arcules cloud...
ASIS Offering Custom Research For Manufacturers on Nov 15, 2018
Manufacturers often want to know what industry people think about trends and, in particular, the segments and product they offer.  ASIS and its...
Magos Radar Company Profile on Nov 12, 2018
Magos America General Manager Yaron Zussman admits when he first came across Magos, he asked himself: "What's innovative about radar?" Be that as...
Axis 2N Intercom Tested on Nov 08, 2018
Axis expanded its video intercom business buying Czech-based 2N in 2016. Despite competing against owner Axis' intercoms, 2N recently registered as...
Ubiquiti Protect Video Surveillance Profile on Nov 07, 2018
Ubiquiti has now been in the video surveillance market for 7 years (see our first coverage back in 2011). In that time, the company's revenue has...
Dahua Dual Imager Dome Camera Tested (HDBW4231FN-E2-M) on Nov 07, 2018
Dahua has introduced a dual-imager dome model, the HDBW4231FN-E2-M, with two independently positionable sensors including integrated IR, not found...
Avigilon Opens Up Analytics And Cameras on Nov 06, 2018
Avigilon is opening up. The company historically famous for advocating its own end-to-end solutions and making it harder for 3rd parties to...
Worst Products on Nov 03, 2018
Security integrators periodically report on their favorite and worst products to IPVM. These are known integrators who IPVM pays to answer surveys....
Unisight Company Profile on Nov 01, 2018
Hikvision's largest US OEM, LTS has started to carry Unisight, whose products (shown below) look a lot like Hikvision's rival Dahua: Who is...

Most Recent Industry Reports

Milestone Disrupts Milestone With Arcules on Nov 19, 2018
Milestone is now competing against... Milestone's own spinout Arcules New IPVM testing shows that Arcules has incorporated a substantial amount of...
Pressure Mounts Against Dahua and Hikvision Xinjiang Business on Nov 19, 2018
Pressure is mounting against Hikvision, Dahua, and other companies operating in Xinjiang as an international outcry brews against the Chinese...
Arcules Cloud VMS Tested on Nov 19, 2018
Arcules is a big bet, or as they describe themselves a 'bold company', spun out and backed by Milestone and Canon.  But how good is Arcules cloud...
'Sticker' Surveillance Camera Developed (CSEM Witness) on Nov 16, 2018
The Swiss Center for Electronics and Microtechnology (CSEM) has announced what it calls the: world’s first fully autonomous camera that can be...
ISC East 2018 Mini-Show Final Report on Nov 16, 2018
This is our second (updated) and final show report from ISC East. ISC East, by its own admission, is not a national or international show, billed...
Facial Detection Tested on Nov 16, 2018
Facial detection and recognition are increasingly offered by video surveillance manufacturers. Facial detection detects faces in an image/video...
Throughtek P2P/Cloud Solution Profile on Nov 15, 2018
Many IoT manufacturers either do not have the capabilities or the interest to develop their own cloud management software for their devices....
ASIS Offering Custom Research For Manufacturers on Nov 15, 2018
Manufacturers often want to know what industry people think about trends and, in particular, the segments and product they offer.  ASIS and its...
Hikvision Silent on "Bad Architectural Practices" Cybersecurity Report on Nov 14, 2018
A 'significant vulnerability was found in Hikvision cameras' by VDOO, a startup cybersecurity specialist. Hikvision has fixed the specific...
French Government Threatens School with $1.7M Fine For “Excessive Video Surveillance” on Nov 14, 2018
The French government has notified a high-profile Paris coding academy that it risks a fine of up to 1.5 million euros (about $1.7m) if it...

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