ObjectVideo Company Update and Analysis

This report shares information from a January 2009 interview with ObjectVideo executives. ObjectVideo is a leading intelligent video / video analytics provider.

In 2009, ObjectVideo consists of two major business lines:

• OEM distribution of ObjectVideo software embedded in cameras, encoders and servers for 36 contracted partners
• R&D organization that provides specialized solutions to government and military organizations

ObjectVideo reports that they were cash flow positive in Q4 2008 and expect to be in 2009.

Also as of Q4 2008, David McGuinness is the CEO of ObjectVideo. McGuinness was promoted from the VP of Professional Services. Raul Fernandez, formerly CEO and Chairman, continues in his role as Chairman of ObjectVideo.

In 2009, ObjectVideo is focusing their efforts of on OEM distribution, supporting partners to quickly and more effectively sell products using ObjectVideo analytics. ObjectVideo expects to see multiple partners release support for ObjectVideo running on DVRs of IP Video Surveillance Software using Intel Chips. This would add to their existing and primary distribution through cameras and encoders using TI chips.

While acknowledging the significant global economic issues, ObjectVideo sees the government as a strong customer and believes the large number of partners will help diversify and grow their business.

ObjectVideo's business model has great potential. The fundamental strategy is to provide video analytics to any video surveillance device. The benefit to the video surveilance companies would be access to inexpensive, high-quality video analytics. With numerous partners, Objectvideo would be able to achieve great economies of distribution and marketing. Indeed, this is why the company has explicitly compared its strategy to Intel. Economically, this makes good sense.

Comparison to other OEM Strategies

In video surveillance, Pixim [link no longer available] is a very good example of a company that has a similar business model. Pixim does not sell cameras. They provide chipsets to numerous camera manufacturers who build and sell cameras.

This is working out well for Pixim. They have no direct competitor and while a number of camera manufacturers offer other variants of WDR cameras, only Panasonic's seems to be respected.

By contrast, ObjectVideo has faced many more challenges. While it's been 6 years since they won the prestigious Best in Show at ISC West, it's clearly still a work in progress. There are dozens of analytic companies (I personally get emails from a new one, seemingly once a week). Plus, analytic has met increasing skepticism on performance.

While an OEM strategy has a lot of potential, significant issues exist for OV:

• A very large number of direct competitors
• Challenges on optimizing performance of video analytics

The harder it is to optimize a technology's performance, the more difficult it is to distribute through OEMs. By contrast, Pixim cameras require little if any on-site expertise making it easy to distribute broadly.

On-Board Camera Support

One of ObjectVideo's challenges is limitations on what cameras it can or does support. A number of significant competitors exist in this space. Customers want to use video analytics with existing cameras or with non-OV supported cameras (like Axis or Bosch). The challenge here is how do you use ObjectVideo with those cameras?

Neither Bosch nor Axis cameras support ObjectVideo. Bosch has their own video analytics [link no longer available]. Axis only supports limited video analytics (like VIA:SYS) but not ObjectVideo.

In the last year or so, Agent Vi has gained a lot of interest primarily because it works on Axis cameras. Of course the downside of Agent Vi is the need for server processing. And the risk of VIA:SYS is how well it can perform given the limited resources of analyzing inside an Axis camera.

While I do not believe these alternative solutions will 'beat' OV in terms of performance, their existence clearly constrains the growth and use of OV.

All-in-One Appliances

The other major competitive approach is the all-in-one appliance: a single manufacturer building cameras and encoders, developing their own analytics and bundling them together.  ioimage is certainly the most successful and largest provider using this approach. With its numerous project announcements and widely held reputation for high performance, ioimage has built itself a strong position. Their success and performance is very likely attributable to the benefits of building an all in one appliance.

The downside of such appliances is significant. You have to buy your cameras and encoders from that manufacturer. This is very limiting. To the extent that the other manufacturers can offer comparable analytics, most customers would have strong incentive to shift to them.

ObjectVideo's Positioning

While the OEM strategy has long term potential, ObjectVideo is caught on multiple sides:

• Numerous competitors offer similar video analytics
• Larger manufacturers like Axis and Bosch continue not to support OV
• Video Analytics appliance manufacturers seem to perform better

Recession and Presidential Impact

I think most would agree that the recession is a negative force on video analytics. I tend to think it will be a very negative force, given that video analytics require additional or new budget (harder to obtain in downturns). I also believe that Obama will reduce (or at least slow substantially) governmental spending on defense. While ObjectVideo clearly has strong relationships with the US government, it is conceivable that eventually have an impact on the lucrative R&D projects the company has.

While ObjectVideo's OEM strategy has great potential, significant challenges remain that will deepen in 2009.