Milestone's Unprecedented Support ChargesBy John Honovich, Published Mar 11, 2012, 08:00pm EDT
Following 2 years of unprecedented licensing price drops, Milestone is now implementing unprecedented support call charges and restrictions on upgrades. While support policies tend to be an afterthought, Milestone's groundbreaking approach will have a major impact on their competitive positioning. In this note, we examine the details of what Milestone is doing and how we believe this will decrease their competitive value for small to mid size projects but increase Milestone's poor profitability.
[UPDATE: For clarification and new details, see our Milestone Support Plan Take 2.]
Key details of the program include:
- Integrators will now have to buy tickets for technical support. Online self help and calls for help buying or downloading software will remain free. Also, if an issue turns out to be a Milestone bug, the call will be free. Otherwise, a paid ticket is required.
- A ticket will cost $110 each and is for a specific occurrence, whether the call takes 5 or 50 minutes. Tickets can be bought on demand with a credit card. Alternatively, integrators can buy packs of tickets for a significant discount. However, tickets from packs not used by the end of the year will be lost.
- No end users will be able to get Milestone technical support.
- Device packs will now only be available to those with current Milestone versions or a paid support plan. Previously, even without paying for support, users could upgrade to the most recent packs. Device packs are important to support new cameras.
- Milestone is temporarily running a "PMA Amnesty Promotion [link no longer available]" that allows users without a current support plan to buy one without penalties or backdating. When this promotion terminates, users without a plan will need to pay full upgrade cost if they want access to current device packs or software versions.
Milestone sent us the following statement on why they were doing this:
“Milestone Support will offer more flexibility than the current ‘one size fits all’ approach, since our partners have different size and complexity of solutions and installations for varying customer needs. Our partners are asking for a higher level of service and we intend to deliver. The goal is not to make Support a profit center but to optimize the resources on all sides while further educating partners and customers, which is beneficial for everyone and increases expertise for the industry in general. Partners should take ownership of their installations, especially when the problems are related to the network or hardware choices, not our software.”
"Partners who use Milestone Support as intended (to support our software) will have no additional cost and in fact will receive better/faster response with the option to only pay for what is needed, when it is needed. Partners who use Milestone resources to troubleshoot non-Milestone issues should pay more. This approach defines reasonable and appropriate business parameters."
Integrators at Fault
The rationale for this change is integrators unfairly burdening Milestone, a theme expressed by many manufacturers. This is clear in Milestone's statements about integrators 'taking ownership' of their own problems and not using 'Milestone resources to troubleshoot non-Milestone issues'. Numerous manufacturers have made similar complaints as we reviewed in Manufacturer's #1 Compaint: Integrator Errors.
However, Milestone is the only VMS manufacturer to implement support policies to counteract this. As such, integrators have come to expect manufacturers to support them even in gray areas and, routinely, when integrators do not fully understand how to use the company's product. This places Milestone's new policy in unchartered territory that violates expectations and industry norms about support.
The counterpoint of integrator error will be manufacturer damages. Now that Milestone is explicitly demanding payment for troubleshooting other's 'issues', it will be interesting to see if integrators submit bills for damages caused by Milestone bugs. This too was a major point of contention in a recent IPVM member debate [link no longer available]. If Milestone wants to get paid when their partners make mistakes, will they pay up when they make mistakes?
Headaches for Integrators
Overall, we see this as causing a lot of headaches for integrators:
- Avoiding support calls - Since support calls are now so expensive, integrators will be motivated to research on their own and conduct trial and error experiments. An issue that might take 5 minutes on the phone with a manufacturer might now take an hour of experimentation. This will increase overall costs for the integrator.
- Grey area on support calls - Many times integrators will call support for features that work strangely or counterintuitively. For instance, we recently had a call with Milestone support about integrating an Arecont camera. It turns out that while Arecont defaults to no username and password, Milestone will not connect to the camera unless you create one on the camera. A reasonable person could see this as a bug or at least a design flaw but Milestone may not. It took 3 minutes on the phone with support to resolve. If an integrator needs to pay $110 for this, we doubt they will be happy.
- Hidden problems with device packs - Now that device packs are restricted to those with current Milestone versions or a software upgrade plan, issues are likely to occur with camera support. An older device pack may not support new cameras even from an existing manufacturer (e.g., generic driver, via ONVIF, etc.). For instance, the 20MP Arecont required updates to handling streaming settings that differ from traditional Arecont cameras. The customer may be unhappily surprised when their new cameras do not work with their existing Milestone system. As such, paying for the ongoing support plan now becomes more critical.
Decreases Value for Small to Mid Size Customers
We see the biggest impact of these changes falling on smaller end users and less frequent users of Milestone:
- In our experience, smaller systems make a disproportionate number of support calls than larger ones (e.g., a 160 camera system might be 10x greater than a 16 camera one but likely will only call support 2 or 3 times as much). This is because certain fundamental / fixed issues come up regardless of size. For example, a 12 camera Essential system may cost ~$600 for licenses but add in just 3 phone calls and the total cost increases over 50%. Additionally, tighter restrictions on software upgrades will make paying ongoing support fees more necessary. This could increase costs by another 50% over a 3-5 year period.
- Likewise, integrators who less frequently use a VMS, typically have a higher ratio of calls as they have less experience in the line. We think this will discourage those integrators from selling Milestone.
Increases Appeal to 'Loyal' Milestone Integrators
On the plus side, these support changes will likely help and reward 'loyal' integrators who regularly lead with Milestone. For these integrators, the relative number of support calls will be low and the cost can be minimized by buying packs of tickets. Equally important, the higher costs for rivals getting started or 'dabbling' in Milestone will weed out competition. Not too long ago, Milestone regularly bragged on Twitter about signing up every trunk slammer and locksmith with a pulse. To the contrary, we think these moves will thin the herd.
Projection - Profits Up, Revenue Growth Down
Milestone will likely help their profitability at the expense of their revenue growth. Milestone's historic profitability has been weak and their focus seems to be rapid growth. By drastically slashing prices more than 50% on their low end lines, we suspect this further hurt profitability. Now, Milestone will likely reduce their support costs significantly while generating a new revenue source to offset the low initial software license fees. Nonetheless, this weakens the value proposition in their core small to mid size market. It is inevitable as the added fees and the headaches this unprecedented program cause will make using Milestone more costly. The net result with slow overall revenue growth.
Last year Milestone proclaimed that they sought global VMS domination and that they wanted to be the Microsoft of VMS. On the one hand, they are emulating Microsoft with steep charges for phone technical support. On the other hand, increasing costs like this in a competitive and fractured space like VMS software does nothing to help increase market share.
The Market Impact
Clearly, we think this is going to have a big impact on the market:
- Less Attractive: The competitive position of Milestone's VMS, especially in their core small to mid size market, will suffer.
- Competitive Attacks: Since the program is unprecedented and violates industry norms, expect competitors to attack these fees repeatedly and publicly.
- Will They Modify?: It will be interesting to see if Milestone modifies this plan as we suspect it will bring them as much headaches as they deliver to their 'partners'.
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