Top 5 Disruptive Surveillance Companies 2012By John Honovich, Published Dec 15, 2011, 07:00pm EST
What companies are driving changes in the video surveillance industry? What companies are the toughest competitors? In this new report, we answer these questions by looking at the top 5 most disruptive companies we see in the market.
To find what is really disruptive, we first need to eliminate 'phantom forces' - areas where the talk far exceeds the action. Buzz alone is bull. In the real world, what counts are companies and products that are shifting buying habits and motivating incumbent integrators and buyers to switch heavily to new offerings.
In this regard, VSaaS and PSIM are clearly phantom forces. While they both generate a lot of press releases and vendor submitted trade magazine articles, their bark is much bigger than their bite. Actual product improvements have been minimal over the last year and the product categories continue to suffer from an overall weak value proposition. For background, see our analysis comparing VSaaS to VMS and PSIM to VMS.
Disrupted Product Segments
To count as truly disruptive, we look for (1) product segments where manufacturers are changing the value proposition by either dropping prices or adding in major new features and (2) that is resulting in large shifts in buying patterns.
To that end, we see 5 areas:
- End to End IP Camera Offerings
- Multi Megapixel Cameras
- Professional HD Cameras and Encoders
- VMS Software
- Wireless Video Surveillance Transport
- Arecont Vision
Obviously, given that Arecont is listed first, this list is not a list of our 'favorite' or perceived 'best' manufacturers. Companies can be disruptive in negative and positive ways and the type of disruption can be more or less sustainable.
However, one thing all these companies have in common is very high growth rates - with 3 of the companies at the ~100% level (Arecont, Avigilon and Ubiquiti) and Milestone at ~50% level. Axis is the 'slowest' grower at about 30-40% rate. However, Axis's growth might be the most impressive as they are significantly bigger than all the other 4 companies combined yet still growing strongly.
Arecont Vision's multi-megapixel cameras are disrupting the surveillance industry. The lineup of 5MP, 8MP, 10MP and 20MP cameras provide unmatched options at unmatched prices. Equally importantly, the company has broad 3rd party support making them a threat across the market. For instance, an Arecont 5MP camera is in the same price range as an Axis 1.3MP / HD camera and the Arecont 20MP camera is under $2,000, the cheapest price per pixel in the entire industry.
From integrators and competitors we speak with, there is no doubt Arecont is having significant real world success winning major deals with their multi-megapixel camera lineup. While we obviously dislike their irresponsible marketing and their ongoing quality problems, their unique offering of low cost, high resolution, broadly supported cameras are pushing the market forward.
The challenge is how long will this last? A lot of Arecont buyers are simply making mistakes. Only the naive really think a 10MP camera is equal to 7 to 8 HD cameras. Eventually buyers should become more sophisticated and better realize tradeoffs in low light and WDR performance plus frame rate limitations. In the meantime, perhaps Arecont rectifies some of their problems. For the foreseeable future, Arecont will be disrupting the industry with its multi megapixel offerings.
Avigilon's H.264 camera and encoder lineup are disrupting the industry. While Avigilon is much better known for their super high resolution cameras, we do not see this as being their key disruption to the industry. Given those cameras have no 3rd party support and relatively astronomical prices, they are an interesting sales tool and niche offering but do not really drive disruption.
The H.264 cameras and encoders combine three factors that make them disruptive: (1) low cost, (2) high quality and (3) third party support. You combine that with their nicely developed VMS software and Avigilon becomes an extremely tough competitor. Indeed, we think Avigilon is the toughest company in the entire global surveillance market to compete against. They do not have any major fundamantal flaws and their pricing is so attractive that it is hard to win against them. Their close to 100% year over year growth rate is no fluke. We hear competitors across North America complain / worry about how to handle them.
The H.264 cameras and encoders are obviously less known but certainly not less of a threat. On their encoders, review our Encoders vs Hybrid DVR price analysis to see details on why Avigilon's encoder's pricing is unprecedented. Additionally, their H.264 day/night cameras are priced at the levels of most mainstream competitors color only / mid level cameras despite Avigilon having integrated zoom lenses.
Axis is disrupting the industry with an unprecedented end to end camera lineup covering seemingly every possible niche or product option on the market. As we examined in the IP Camera favorites report, this 'one stop shopping' approach combined with high reliability and support is threatening to overwhelm other competitors.
We recently got an unauthorized copy of Axis's 2012 product roadmap and it looks to be more of the same - dozens of new models that continue to fill in various niche applications. Companies that have products optimized for every niche do not need to compete as fiercely on low price. This is a strong tactic by Axis to avoid price wars while better meeting customer needs. It equally also shows the result of their massive ongoing investment in R&D.
The next potential disruption by Axis looks to be image quality. Historically, Axis's image quality has been competitively mediocre - not bad but not heads and shoulders above other mainstream players. While we criticized the Q1602 for its overall tradeoffs, the Q1602 absolutely demonstrates that Axis has the will and technical competency to now deliver ground breaking advances in surveillance image quality. If Axis can combine those advances into more mainstream products (that deliver a balance of higher resolution, stronger WDR and improved low light), the threat to Sony and Panasonic will become very strong.
The surveillance industry is used to mega companies who see surveillance as a secondary priority to their bigger business units (e.g., Bosch, GE, Honeywell, Panasonic, Sony, etc.). If Axis stays independent and committed to such high levels of R&D, they could actually gain market share and increase their dominance (which is something that would be unprecedented and something we could not believe would happen just 3 years ago).
Milestone's VMS software price drops have befuddled their competitors and won converts across the mass market. While we have seen a half dozen VMS companies aggressively respond to Milestone's price drops (e.g., Axxon, Exacq, Avigilon), many VMS companies have kept their pricing in the traditional $100 - $150 price point for entry level VMS software. Those companies are undoubtedly faced with squeezing market share - not simply because of Milestone but because of Milestone and the handful of other VMS providers who have followed suit.
We see the low end of the VMS software market shrinking to a small number of larger VMS providers. While the other VMS providers with higher prices might win a few deals to their core integrator base, integrators who specialize in small camera count projects are likely to migrate strongly to Milestone and other providers offering super low cost VMS versions.
While wireless is a niche, what Ubiquiti has done in the wireless video surveillance market is destructive to its competitors and astounding within the market. Ubiquiti's selection by integrators as their overall favorite wireless surveillance choice is amazing given their zero marketing approach. It is equally interesting to see the practical impact it has had on wireless competitors. We have yet to see a wireless manufacturer with a real counter attack to Ubiquiti's offerings. Basically, they are surrendering mass market applications to Ubiquiti and concentrating on niche markets like large scale or custom projects.
Future Forces - Video Analytics
Right now, we do not see any truly disruptive force in video analytics. While VideoIQ may have become the most respected and practical choice, their weird hard drive in a camera approach makes them a more expensive niche play. VideoIQ has the plug n play and high accuracy capabilities to make them an attractive player but not the overall form factor and pricing options to drive broader market disruption. We think a sub $1,000 street price 'real' smart camera would be truly disruptive. VideoIQ is the closest to delivering it but they are not there yet. Indeed, we think there is an outside chance that Axis might be the one to deliver this in 2013 as they are clearly gearing up their analytic offerings.
Future Forces - PSIM
With ADT, NICE and Verint all recently picking up PSIMs on the cheap, they join the last few PSIMs pumping the press with traditional marketing tactics (e.g, NICE marketing guy pretends to be analyst says PSIM is next big trend, Vidsys sales guy writes puff piece about getting money for PSIM, CNL sends press release for 'free PSIM webinars'.) This is great for building short term buzz among the 23 insiders who read these pubs but does little to change the fundamental shortcomings of the market segment. ADT, NICE and Verint may make a profitable niche business of selling a small number of very expensive PSIM projects but that does not disrupt or fundamentally change PSIM's place in the market.
We only see two potential companies on the horizon that might disrupt PSIM but both have significant limitations in their ability to disrupt. SureView has potential given its significantly lower prices, fairly broad 3rd party integration and stability as a long term central station software provider. However, it does not appear to be a very aggressive company nor is the pricing so much lower that it would fundamentally change PSIM's place in the market. Genetec, with their rapidly expanding Security Center, is the other company who we believe has potential to disrupt. With a strong technology and customer base and comparatively to traditional PSIM, cheap pricing, Gentec represents a fundamentally disruptive approach. However, Genetec is either scared or afraid to even call themselves PSIM plus they tend to be reluctant marketers (Genetec is like OnSSI but with the actual technology that OnSSI hypes).
Future Forces - Budget Cameras
Right now, the big names in budget cameras are, in alphabetical order, ACTi, Hikvision and Vivotek. As we examined in our Buyer's Guide, we think Vivotek has the strongest overall budget camera portfolio. However, even Vivotek, while solid in many respects, is not terribly disruptive.
We think that by late 2012 or 2013, Ubiquiti could become a terror in the budget IP camera market replicating its game plan for wireless networking equipment in the core surveillance market. As we examined in our Ubiquiti bulletcam test, they have a very promising start but need a broader and better professional camera portfolio to really disrupt the surveillance camera market.
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