The Problem of Buying from Big Companies

Author: John Honovich, Published on Sep 21, 2008

Big companies like GE, Tyco, Bosch, Cisco and Honeywell make a broad range of mostly mediocre, overpriced video surveillance products that take advantage of customer's lack of information. While they are powerful today, the rise of the Internet is slowly but surely eliminating their main advantage.

Their historic success is based on the difficulty customers had in determining the best products.  Big companies 'solved' this problem by building large channel sales systems that 'educated' customers on why their products were best.  In practice, they mainly leveraged expensive sales force to wine, dine and mislead customers.  In the absence of better information sources, these companies slugged it out against one another, all using similar tactics.  The results were high prices to cover expensive direct sales costs and minimal incentive to build high quality products.

Innovative startups would emerge but eventually would have to sell to the big conglomerates. The innovative startup, despite superior products, lacked the sales channel to reach and convince customers of their superior products.  This was the most efficient outcome but only because the costs of customers finding the superior new product was too high -- a truly unfortunate circumstance for customers and society.


The Internet is Destroying the Traditional Sales Channel

As customers find more information and more objective information on-line, the value of the traditional sales channel declines.  10 years ago, the amout of information on products was pitiful.  There is far more today, including reviews and online purchasing options.  Over the next 10 years, the quality and amount of information will continue to rise as the costs of distributing information falls and the usage of the Internet expands.

As customers can learn directly and easily determine the best products and the best pricing, the value of sales channels decreases.  This is a powerful and general trend not unique to video surveillance products.  As this alternative matures, the 'educational' value of large companies engaging in self-promotion will decrease.  Unfortunately for those companies sales costs will actually increase as it will be harder to overcome this trend.  The resulting combination undermines the core value of the big conglomerates, placing them at high risk for failure.


Two Practical Examples

Axis: Axis' business model scares incumbents far more than Axis' technology. While big companies can easily buy out technology, they are not sure how to respond to Axis mass distribution sales model.  It's the most common concern I hear from big manufacturers and integrators.  The ease of buying Axis' products over the Internet radically expands the reach of their products. However, it severly undermines the profits and the structure of traditional distribution.

These big conglomerates depend on controlling sales through their channels.  Axis' explosive growth, done by violating this structure, makes acquisition by the big conglomerates far less attractive to Axis. Simulaneously, Axis' cost structure is far more efficient than their larger competitors.

Axis business model is a template for future video surveillance companies to increase customer value, cut costs and escape the grasp of traditional conglomerates.

IP Video Market Info: Imagine if you could research and identify the best products for your needs without being dependent on sales people and manufacturers.  Historically, this was impossible.  It's not ready today but it's clear that this is the future.

IP video Market Info started as a personal endeavor to help myself better understand the best products.  However, I am realizing that there is a deep need for such help.  Take a recent note I received: "Trying to weed through all of the different manufacturers out there to figure out what each company has to offer and who the market leaders are is a daunting task and your site has drastically shortened the learning curve in relation to IP video."

The site needs to get far better and I am not claiming that this site be the one to solve it.  Nonetheless, it is abundantly clear to me that honest problem solving information over the Internet is the future.  This future will cripple the sales channels that drive the success of big conglomerates.

It's going to take time.  How long, I do not know - maybe as short as 5 years or as long as 10 for clear sign of the fall of these conglomerates. The Internet promises to help you identify the best products for your needs at significantly lower costs by eliminating the waste and corruption of traditional channels. 

Such value makes the transition inevitable - the only questions are when and how.

2 reports cite this report:

How to Cut Costs Using the Internet on Jan 03, 2009
The recession is forcing broad reductions. Worse, the era of excess consumer spending is over. In response, most business around the world, whether...
Eliminate Sales and Marketing on Sep 30, 2008
10-20% of all spending on video surveillance goes to sales and marketing costs yet customers find great difficulty determining the best solution...

Related Reports on Sales

Importance of Sales To Integrators - Statistics on Jun 23, 2017
One of the top trends in the industry over the past few years has been the rise of across-the-board sales (e.g.: Hikvision Sales, Dahua Sale,...
Resolver / PPM 2000 Incident Management Platform Profile on Jun 20, 2017
You might have seen the company whose employees wear hockey jerseys at trade shows and wondered "what do they do?" PPM 2000 has been active in...
Dahua Demotes USA CEO on Jun 19, 2017
Dahua has demoted their USA CEO Tim Wang. Inside this note, we examine the move, Dahua's challenges and what lies ahead for the...
Panasonic Sells VSaaS Company To Eagle Eye (Cameramanager) on Jun 15, 2017
While many VSaaS companies might hope for one acquisition, Cameramanager has managed to get acquired twice. First they were acquired by Panasonic,...
NLSS / ATV Partnership Examined on Jun 13, 2017
NLSS has been one of the most ambitious security / surveillance startups. After selling his last startup, Sypixx, to Cisco, Pete...
Non-Competes Divide Integrators on Jun 12, 2017
Non-competes are controversial legal agreements that prohibit parties (typically employees) from working in a similar role or trade of their...
Manufacturer Revenue Directory on Jun 05, 2017
This report contains data on the revenue of 32 security manufacturers, trend analysis of whether they are gaining or losing ground and commentary...
Honeywell Owned Dragonfly Tested on Jun 02, 2017
In 2016, Honeywell acquired RSI / Videofied for $123 million. Honeywell is marketing their DragonFly offering as "DIY for Our Dealers with an RMR...
Most Disrespected Manufacturer Competitors on Jun 01, 2017
Manufacturers told IPVM what competitor they most disrespected. There was one overwhelming selection that manufacturers felt was harming the...
Chinese Direct Disruptor Reolink Tested on May 31, 2017
Another Chinese disruptor, Reolink, is gaining attention. This one is selling direct from its own website, with fulfillment by Amazon. And a...

Most Recent Industry Reports

Importance of Sales To Integrators - Statistics on Jun 23, 2017
One of the top trends in the industry over the past few years has been the rise of across-the-board sales (e.g.: Hikvision Sales, Dahua Sale,...
Deep Learning Surveillance Startups Deep Problem on Jun 23, 2017
The undeniably good news for the video surveillance market is that we are seeing the rise of more startups than in many years. The cause of this...
Avigilon Announces RADAR-Based Presence Detector on Jun 22, 2017
RADAR is gaining momentum within physical security. Two months after Axis announced a network radar detector, Avigilon has announced a RADAR-Based...
Covert Cloud Camera Service Launching (KJB) on Jun 22, 2017
Cloud IP cameras, for consumers, has become increasingly commonplace. However, covert cameras, lag there, with few options. Now, North America's...
Manufacturers Shipping Unlicensed H.265 Products on Jun 22, 2017
While H.265 support in video surveillance is growing, IPVM's research shows that most surveillance manufacturers are shipping H.265 products with...
Uniview Low-Cost Bullet PTZ Tested on Jun 21, 2017
Uniview is offering a HD zoom bullet camera, the IPC742SR9-PZ30-32G, with an integrated pan / tilt positioner, for the price of a low-cost...
QSR Video Surveillance Best Practices on Jun 21, 2017
Fast food restaurants or QSRs (quick service restaurants), are frequent victims of crime and fraud. Because they are open late, deal with cash, and...
45 Drives 'Lowest Cost' Enterprise Storage Company Profile on Jun 21, 2017
45 Drives claims the "lowest cost per Hard Drive Slot in the industry." But who or what is '45 Drives'? What started as a product design to...
No Hack, Still Liable, Court Finds ADT on Jun 20, 2017
Recently, ADT has been in the news for a $16 million settlement for a cyber security vulnerability class action suit. One of the most important...
Resolver / PPM 2000 Incident Management Platform Profile on Jun 20, 2017
You might have seen the company whose employees wear hockey jerseys at trade shows and wondered "what do they do?" PPM 2000 has been active in...

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