VSaaS Will Hurt Integrators

By John Honovich, Published Aug 06, 2020, 12:27pm EDT (Info+)

VSaaS will hurt integrators, there is no question about that. How much integrators will be hurt is an important question.

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In this post, we examine the role of integrators, how that role has changed in the past 20 years, and how VSaaS will impact integrators in the next 5 years.

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Poll / ****

Comments (66)

As a VSaaS manufacture we struggle with identifying a business model that includes the integrator...

- Margins are tight

- End-users leverage multiple integrators

- Tight labor market means integrators struggle providing value-add Tier1/Tier2 technical support

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Verkada truly is the extreme example... name a hardware-agnostic VSaaS which is rapidly expanding their sales and tech support teams to go direct to end-users? I think Integrators shouldn't be concerned with VSaaS eating their lunch, but to instead not become lax with the installs Verkada is feeding them. Recognize the effect the lock-in will have on their regional market and offer a more competitive, open-architecture, system. Control your MSRP!

Client needs will evolve, especially as technology will continue to rapidly advance, and Verkada will not be the solution for elaborate system-to-system communication. Show me how Verkada is going to let me hook up my thermal system, to scale unmanned, show me how I will be able to deliver analytics beyond what can be edge processed, show me I can enable 10+ users to simultaneous view the feed, what are they going to do when I need to deliver auditable compliance and behavioural analytics. Start to think 5-10 years ahead.

Integrators, open VSaaS' are your confidant in the new trend.

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Verkada truly is the extreme example... name a hardware-agnostic VSaaS which is rapidly expanding their sales and tech support teams to go direct to end-users?

I agree generally on this. The question is how well Verkada will do. If they grow exponentially for a few years, this will force other market participants to copy them and will therefore have a direct and indirect effect on other participants.

I am not sure if that is going to happen and I agree about elaborate system-to-system communication.

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The "direct" to end user model from the manufacturer doesn't cut out the integrator, especially if the manufacturer is 100% Channel Sales. From my experience co-selling with integrators as a manufacturer to end users helps build deeper relationships at all levels.

That being said, if handled appropriately, there is still plenty of margin for the integrator on the install, but better margins on the backend with remote monitoring services, or other RMR models. These actually leaves room for the integrator to get creative and adapt to the "cloud" market to set themselves apart from traditional systems integrators.

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As a small business owner, I disagree entirely with your comment. You clearly have no experience nor understanding of how small businesses/integrators operate. The value of the equipment margin is huge and almost critical for our businesses.

Using your logic, if integrators were to take your software (which is where you make a great deal of your money) sales away and lost all your initial and recurring software margin your business would look drastically different and diminished. Your VC and/or bank funding would dry up and struggles inevitably follow.

VSaaS has a place because it matches some of our new clients' buying behavior and simplifies the delivered solution. It is another tool in our arsenal that will continue to grow, but like in the past their will be inevitable market saturation.

How we as integrators help our current partnered manufacturers and vice versa will be very important in the VSaaS arena. Our business is committed to not using any manufacturer that sells direct and will encourage others to stay away from these internet salesmen and their distance solution. Relationships are critical and it's clear that direct manufacturers do not care about us, don't understand our business, and want to take margin away.

We are competitors.

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I understand the value of equipment margin as being critical to your business, and I appreciate the insight, however assuming I have no understanding of how integrators operate if an unfair assumption.

I put "direct" in quotes because there are manufacturers who will receive purchase orders from end users (I disagree with this model entirely), and there are manufacturers who will call into businesses to generate demand (this model I support). If that relationship is handled responsibly (only speaking in MSRP, Introducing integrators early on) it protects margins on equipment and software.

Our business is committed to not using any manufacturer that sells direct and will encourage others to stay away from these internet salesmen and their distance solution. Relationships are critical and it's clear that direct manufacturers do not care about us, don't understand our business, and want to take margin away.

I support this statement, and agree with what you are saying here in its entirety. What I suggesting is if a manufacturer uncovers and opportunity, it would be appropriate to bring the integrator in to make introductions as early on in the process as possibly. Thus working together to create a relationship based on trust.

Please let me know your thoughts.

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Who do you think are the best options for 'open VSaaS' providers? I ask because some software-service providers in hospitality are packaging up cloud-based guest reservation systems, HVAC/thermostat controls, and entry door controls (think Yale wireless locksets) and such but now thinking about blending in hosted video for things like exterior parking areas, pool areas, etc. In keeping with the cloud/hosted mentaility, the preference would be to install cameras that are just "good enough" and hosted be a VSaaS provider who offers an easy API for inclusion in the hospitality portal for the property management company.

So, what VSaaS offerings might fit this bill hansomely?

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Based on the facility sizes, one would expect the number of cameras to be enormous, so using a live cloud connection for each one of them is hardly feasible in terms of bandwidth, so the main recording has to stay on-premise.

Am I right?

If recording stays locally, is the key then to have a 'faceless' VMS platform, that handles cameras and delivers video to hospitality systems?

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Some smart software engineer will figure out how to package a solution using OTS Cloud computing and private labeling for larger integrators.

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Her name is Google, and she’s starting with ADT.

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how to package a solution using OTS Cloud computing and private labeling for larger integrators.

Like AVHS but actually works? :) Related: Desperate Moves: AVHS and HDcctv and EMC Dumps Axis VSaaS.

Maybe private labelling will work for larger integrators but not sure how much power that gives to even those limited few. I am curious to see how that plays out.

My experience, though, is that the market leaders tend to not like private labelling, preferring to get all the profits themselves.

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Keep your eye on Cisco and Cisco culture, when they fall the world is the oyster for IoT self setup easy to manage products that/will/can bring down an entire chain.

Ring camera, QR code, done. That is just a starting example.

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This is a part of a broader trend of disintermediation as the Internet enables buyers and sellers to connect directly together, cutting out the cost and complexity of those in the middle.

While very true on the impact of VSaaS with Integrators, this reality is also eroding the value of Distributors - across all product lines.

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It's only a matter of time until the largest consumer VSaaS manufacturer and distributor gets into professional arena. Amazon.

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Friends, It will all depend on you all harden your contracts with the VSaaS, because they will still need you to install their equipment; but be careful who you work for. In the pat I got burned up with bad manufacturers that have stolen my clients that I open up to them. This is why I advice you to get a good legal team on your side. The other route is for your Co. to offer those services, there are way too many IaaS offering now days, it will be a matter in investing in a good IT expert or sub-it out.

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"In the past I got burned up with bad manufacturers that have stolen my clients that I open up to them"

I agree Jorge. And I made this EXACT argument on another string related to integrators allowing - or end users speaking directly to - the manufacturers (Avigilon String) - and I further went on to say by doing so starts a long and inevitable process by which the integrators businesses are destroyed by this over time - and I got 3 disagrees. (Probably more by now) and several comments to the contrary. I was truly surprised by that reaction and I was truly surprised by the somewhat gullible nature of some business people out there.

So, what is it? Ya cant have both. As an integrator, does allowing, encouraging, facilitating, or participating in a dialogue between the end users (your clients) and the manufacturers you represent, hurt or help YOUR BUSINESS in the long term? (not the clients and not the manufacturers) Is there or is there not an inherent long term danger to YOUR BUSINESS by doing this? Do we, as integrators, trust all the manufacturers not to use the data or the relationship itself to poach clients directly later on down the line? And regardless of whether your in business with a mental default position of "trust everyone" or not, what protections, if any, are in place in these relationships for the integrator or, what protections should be in place? Should all of the integrators ask for non-compete clauses from the manufacturers before they invest their hard earned money in promoting and selling their product in the field? I truly believe that when a mfr. starts to deal direct with one of your clients, it represents theft. Im pretty sure that the best way to tell if the beloved manufacturer that you've been repping hard for, and have a "GREAT" relationship with, has eventual plans to do this, is to simply ask them for a non-compete. Im confident their answer will betray their true long term motives. Perhaps all of the integrators collectively should force the issue with our favorites now, eh? The proof will be in the verbal dance that ensues.

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How many of you have non-competes executed between MFGR and Integrator? I'd like to see one if you don't mind sharing.

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Jorge, as you probably already understand, who you sign with is the key.

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I've worked with or spoken with several VSaaS vendors (not including Verkada) and all of them wanted to work through integrators as their primary customer conduit. At least in the case of the vendors where VSaaS is their primary business (i.e., not the Genetecs of the world), they tend to have small, focused teams. Their primary concern is with managing their application and their cloud infrastructure. They aren't set up to handle the myriad of customer requests and issues related to configuration changes, internet outages and slowdowns, etc. That's where they want integrator partners to take ownership.

In my opinion, the integrator model will certainly be *different*, but not necessarily lessened. Some of the biggest changes/challenges will be with mundane (but critical) items like billing management, since many of the VSaaS vendors employ different billing models. Also, they differ in their architectures - some record completely in the cloud, some record locally but manage it from the cloud, some do a little of both.

Again, IMHO, the integrators that can adapt to these new models should do just fine.

p.s. We tend to work with larger companies. My comments may not apply to the SOHO market space.

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I've worked with or spoken with several VSaaS vendors (not including Verkada) and all of them wanted to work through integrators as their primary customer conduit.

I can believe that but I can also believe the ones with the most funding (like Verakada) will see the benefits of disintermediating integrators. I am not hoping for it but I think that's a real risk.

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Meh. I don’t think it’ll hurt integrators that’s much. The market is so significant and still realistically untapped. There’s a lot of opportunity for everyone. Some of my clients are massive global conglomerates headquartered close to our office. They prefer to do business with small local companies even when they’re as big as they are. My biggest client who spends millions every year with us has mentioned to us many times they like that were small. They don’t want to do business with these VC backed companies. They want an integrator involved for a lot of reasons. I get into doors from time to time because someone else on the other side of the country shipped them a free plug and play camera to test. They ask my opinion, and I told them the truth. Then we did the project with someone else’s equipment.

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I think how much VSaaS hurts integrators is mostly up to how manufacturers view integrators. If a manufacturer decides that they will protect the channel and ensure that their partners are protected then VSaaS could become a relatively sticky product and help foster the relationship with the end-user and integrator; if they decide they want to maximize margins and control with that end-user relationship then integrators will be in a tough spot and be without much in the way of leverage.

That is where development of professional services will be a key component to survival.

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Integrators who cater to such customer profiles will mainly be effected. I don't think VSaaS model will be the answer for all the case. For smaller systems or less demanding end users it would matter but for the other ones it doesn't. Let's take a moment on and reflect on IT side of things. What happened to the time where there was consulting done and specialized IT provider called to set up your home PC or small office PC to now either we just buy the laptop or tablet from our living room on an e-commerce platform or small office has an IT lead who can also set up and manage the IT. isnt the same also true here. Probably certain market segments will be move on quickly but will VSaaS be the answer for the entire market i doubt .. Good idea to lead with access control ! End user and door hardware big Gap there

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Some ranting for IPVMers,

The economics of VSaaS symmetrically scales alongside many business continuity service models that end users are contractually familiar with. VSaaS architecture is in the adoption phase where early deployments are aging into a battle tested solution. Sales and marketing structure tactfully pokes at the cyber security elephants in the room with hopes of ensuring a VSaaS survival. I think VSaaS scales past 'hurting Integrators' and inevitably dominoes into the distributor's bottom line whom seem to think the cat is still in the bag. On another point, VSaaS if done right has the potential for cloud integrations with a plethora of systems and applications. Instead of dabbling with RSTP or ONVIF communications, which indicates supporting legacy integrator IP video models, the golden goose may be offer a world of turn key tie-in software unity, application use cases, that again the old man cannot offer without substantial margins popping the button of their pants. Unfortunately VSaaS will keep the door closed and hold the integrator void of taking back the turf that was once theirs. I believe the first comet has landed, we knew it was coming and no one prepared for it. A note for Access Control: Do not think that technology cannot change access control, denying this concept will only make it stronger and outright denial does not mean that the concept does not exist at all.

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I think it comes down to a cost analysis. Will one grow faster and profit more if they hire all their own sales and support staff and go direct to end-user?

Or will you grow faster and profit more if you keep your staff small and outsource a large part of sales and support to manufacturer reps, distribution, and integrators?

I think history shows us again and again that the market does not like closed systems. No single company can provide all the best benefits to a market. Being dependant on an internet connection for your critical systems to work will always be a risk many will not take.

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#9, I agree with your questions / analysis. I do think they can be split into 2 separate ones:

(A) What generates a higher return - closed or open systems?

(B) What generates a higher return - internal sales focused vs channel focused?

You can then have 4 combinations - closed / internal focused (Verkada), closed / channel focused, open / internal focused, open / channel focused (most traditional players).

While I think internal sales compliments a closed system better (since if you are selling direct it's easier to sell it all yourself), putting aside historical commitments to the channel, there is a strong business case for your own sales team to sell direct to end users with VSaaS.

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I agree with the dependence of internet and the issues with edge only analytics. This leaves a big hole in the product offering.

Also, many of my large customers see the issues with committing to a large corporation, especially a startup, as many have seen how these end up getting bought up by the big internationals who destroy the service offering (to squeeze out additional Profit) that was originally provided.

I like to offer these customers the consulting design and service they need with products and systems that keep me honest and give the customer the ability to go somewhere else if i don't perform.

Complete transparency

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VSaaS will work for some customers however it has several short comings which will cause it to not work for others specifically those that are security centric and have greater expectations and requirments.

Storage duration and costs: Storage isn’t free and if you have a customer that requires long retention periods the cost of VSaas increases significantly. (Marijuana grows, Casinos, Financial orginizations... some of these require up to 4 years of retention.)

Ease of export: You are beholden to the speed of your internet connection and if you are looking to export large amount of footage you are going to be twiddling your thumbs for a while.

Security Concerns: Dependent on customer requirements for security of their data/footage they may require a SOC 2 as report (Security report that captures how a company safeguards customer data and how well those controls are operating.)

This is the area where many of these VSaaS providers fall down as they are outsourcing the server and storage environments from other providers vs. standing up their own infrastructure. Which means the security of the customers data falls to multiple vendors vs a single one which becomes troublesome if there are issues like a hacking incident. (If the host is hacked are they required to notify your customer of the hack, are they required to notify the VSaaS vendor, ect…) Also the control/ownership of that data begins to get very murky as well. (Customers data may be spread across multiple servers and data centers(Some may be outside the country.)

Life Expectancy: How many of your customers are going to be willing to invest hundreds of thousands of dollars of capital in a new solution that has a short track record. If they VSaaS vendor tanks or decides to switch gears the customers are screwed and you are left dealing with a slightly upset customer...

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How many of your customers are going to be willing to invest hundreds of thousands of dollars of capital in a new solution that has a short track record.

The answer you don’t want to hear, A LOT! Welcome to the age of “Fancy Website” as a replacement for “Fancy Building” to signify legitimacy.

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Sadly that is a good point.

I know that many of customers and past employers jumped into Cloud head first and have since getting burned have went back to on prem solutions. Was a painful and costly experience for all of them and they regret it.

Some folks need to live and learn...

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Would you consider that your statement may be infused with some confusion?

The many customers and past employers mentioned need to look before they leap, similar to your end comment of the need to live and learn. The pain and regrets they experienced may stem from the underestimation of risk where the on prem solution was the dog whistle that made everyone default and get back on the boat? Not trying to argue or troll, but I feel like those that did not take the time to research all the risks involved is equal to not having initial seeding enabled.

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No worries you are asking a valid question.

Two of the companies did extensive research into moving to the Cloud. (One I was involved in the process as a stakeholder.) Over a year was spent on the research phase with an internal team of 15 indaviduals and multiple interactions with the vendor. At the end of the day it was believed by some that it was going to be in the best interest of the company to make the change. (I would say that some of the decision makers were swayed like many other businesses as it was the new “Cool” thing to do and everyone else was doing it so let’s jump on the bandwagon and look “Cool” like everyone else.) I was not in favor of it as we were giving up so much control of the environment and relying on the vendor to handle a large portion of the infrastructure support.

Tasks that typically one could complete with in 1-2 minutes suddenly were extended to 3-12 hours based upon the SLA. You also become beholden to their support. If there is a problem (and there will always be a problem) you are forced to rely on a 3rd party to facilitate resolving it and their sense of urgency is never the same as yours. I spent more time explaining what the issue was to support (Which was dedicated to our business and was supposed to have intimate knowledge of our processes and configurations) than it would have taken me to resolve the issue on my own or have one of my staff take care of it.

Information on where our data was stored and who managed it was also a problem. The primary vendor leased resources from someone else, so we were another layer removed and if there was an issue on that front another party was involved in resolving the issue. (We had no ability to communicate with them directly which caused an even greater delay is resolution.)

Restoring data from the environment never was a smooth process. There always seemed to be a problem. The most recent backup was corrupt, so we need to use an older backup. (Loss of an extra days worth of transactions.) There were network issues between the backup location and our environment which added additional time for the backup to complete.

Customer service was a joke… The Account Manager promised the world… and never was able to deliver which of course only made things worse at the end of the day.

Costs are another issue. Based on the plan we were supposed to see a 15% savings in the first year. Turns out we ended up spending 30% more than expected.

Now mind you this was a huge undertaking and was significantly more complex of a transition compared to a VSaaS integration. Though with that being said you are entering into a mine field when you shift to any sort of outsourced solution.

You are correct that research is key to navigating the mine field that being said even with a significant time investment into research you are still highly likely to step one as there will always be a scenario that was not thought of. Or the level of service that was promised is never delivered.

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Thanks for the reply. It's certainly makes for interesting but sobering reading!

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If you don’t mind me asking, What were the cost overruns? Thats a fairly large shift financially.

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There were several factors.

Things that were once handled internally were migrated over to the vendor. Which led to a loss of visibility to the actual day to day bump and grind of operations.

Initial contract was for X amount of storage. Once you exceed that level there were additional costs.

One team decided that they wanted to have 45 days of backup retention vs the normal 30. There was the perception of unlimited storage and no one took into consideration that there were costs associated with it.

There were supposed to be quota management tools in place to report usage. They however were not configured properly by the vendor. Little by little the bill started to climb and no one in finance reported the discrepancy as the bill didn’t increase dramatically from month to month.

The storage overrun issues wasn’t discovered until a DBA had done multiple large backups on a QA database he was working and neglected to clean them up and the bill that month was huge.

Getting people to delete crap is a tedious process as everyone seems to think everything, they have saved is critical. It took way to many hours to get it cleaned up and we still ended up being well beyond the original storage contract and it was decided to eat the cost vs wasting anymore resources trying to get it under control.

The second issue was the ease of ability to spin up additional resources like servers. Developers loved that they could setup new environments for testing. The issue here was again they never cleaned up and suddenly we went from having 150 server environments to 2000 over the period of a year. Again, there were small incremental increases from month to month and the changes were never flagged.

At the end of the day the issue was our fault as no one was monitoring closely as it was believed that there were mechanisms in place to stop this from happening or at least to warn us that things were creeping up.

Changes were made on our end to monitor things more closely however this took additional time and resources to accomplish and added to the overhead of the project as well.

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Thanks for the response RB. Technology must move forward and challenge our configuration mindset, our application deployment mindsets. All that you have mentioned is real, I just have to believe there is a success story out there with a cloud transition opportunity that is not just security. Other facets of instrumentation and management such as Salesforce, Iphone and Samsung universe of applications, Mobile banking(no need to cash that check at the bank in person) and of course Google maps...where we get from point A to B.

Security, with enough time to culture should reach a +positive equilibrium argument for cloud architecture rather than the tradition shoe lace builds of the past. Time will convince those on the fence, otherwise those that survey the next plot before the plot is needed will reap the benefits.

Change will happen, Amazon happened.

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i think that the smaller the integrator, the higher likelihood of being 'hurt' by VSaaS.

the larger the integrator, the more knowledge of complex integrations with other enterprise systems is required - which present day VSaaS direct to customer sales teams (like Verkada) simply don't have.

What is the median age/industry experience of the average Verkada sales person vs the median age/industry experience of the average large integrator tech/project manager?

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#10, my gut feel is the opposite, though certainly I could be wrong and I gave you an informative.

My hypothesis is this - older, bigger companies certainly have a lot more knowledge about how things have worked over the last 20 years. For example, there are guys who know all about upgrading CCURE or maintaining an XProtect system but the next gen of this will be in the cloud and those guys will have nothing to do since the hosting provider will take care of all that.

You mention Verkada. Their partners are overwhelmingly small and know little about video surveillance.

On a more positive note, I do think that smaller integrators can do better on the consultive element as end users look for people who know them and the overall domain better to help.

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the next gen of this will be in the cloud and those guys will have nothing to do since the hosting provider will take care of all that.

You mention Verkada. Their partners are overwhelmingly small and know little about video surveillance.

I don't disagree with either point - but when does the prediction from point 1 occur?

next year? 5 - 10 - 15 years?

in the foreseeable future, I do not think that large, critical infrastructure focused integrators have much to worry about when it comes to the encroaching VSaaS model.

i.e. I do not doubt that the shift in operational models is happening (though various pro-VSaaS posters above seem to think old people can't see the same things that they can see)... but imo VSaaS will consume market share from the bottom up.

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I don't disagree with either point - but when does the prediction from point 1 occur?

next year? 5 - 10 - 15 years?

Good question and hard for anyone to say with certainty exactly the number of years it takes as it depends on the actions of various players. Next year I think it's just incremental. The bigger question is whether it's 5 or 10 years for a massive change to occur.

in the foreseeable future, I do not think that large, critical infrastructure focused integrators have much to worry about

While I agree that 'critical infrastructure' is less likely / quickly impacted, how many integrators are truly 'critical infrastructure focused'? They exist, for sure, but it strikes me most integrators make most of their money from non critical infrastructure.

Thinking out loud, will VSaaS reduce the need for technical (implementation) skills of integrators as many technical issues are eliminated by cloud providers?

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Part of the attraction of Verkada is that the end-user can hire anyone who knows how to run and terminate cable and secure an IoT device to a wall or ceiling; the techs that integrators hire to sub that simple work out and charge a 50% mark-up on the labor.

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"the end-user can hire anyone who knows how to run and terminate cable and secure an IoT device to a wall or ceiling"

you portray this function in its most simplistic form as if this is all that goes into installing a camera - primarily in order to diminish the skill sets of the average integrator installer... and you know it's not as simple as that.

FOV, AGC, WDR and many, many other things are considered and configured for optimal performance when someone is 'securing a device to a wall or ceiling'.

Nobody is stating that Verkada has no benefits over the traditional channel market. But defending any new platform by being disingenuous about the weaknesses of the traditional platform is not a net positive move imo.

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Boutique, niche survivalist integrators have their fair share of the 3.14159.

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I wonder if the future is more Security Integrators and MSP's (Managed Service Providers) kind of becoming one? A lot of MSP's are getting into the Video Surveillance and Access control market, maybe Security Integrators should go the other way.

I know everyone things wireless is the future, but I can't see Structured Cabling going away. The wireless infrastructure still needs wires. The internet still needs wires.

There is a chance Video Surveillance could become the new Alarm Monitoring, but I think we missed that boat. Not enough Integrators built out the infrastructure to host VMS' or Storage, so manufactures did it. As others have said, white-labeling could be a thing I guess, or the Alarm.com way I suppose.

Hard to say what the future is. Diversifying for sure. Are there a lot of people out there who only rely on surveillance system installations for their business?

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Small start up businesses start with Quickbooks and some Nest cameras, as they mature, they need better tools designed and built by experts to properly run their business.

Fully integrated enterprise grade security solutions will never go away. Great Integrators will continue to thrive because the security space will always need an objective partner to help them navigate thru the next crisis on the horizon. A really good VSaas will need equally good Integrators to help them be part of the total solution. If they get greedy and go direct....they will live, but not thrive.

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One open question that comes to mind for VSaas solutions for mid-size projects is how to integrate them with other systems that they have (think access control, fire, alarm monitoring, etc.)? With on-premise VMS systems integrators often have experience and know-how about combining different systems to address such customer requirements, PSIMs and control room software play a part here, etc. But will Verkada and other VSaaS providers enable customers to easily integrate their pre-existing other systems?

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Here is an example of the type of problem that goes away with VSaaS:

IPVM Image

To be clear, this is not a criticism of the person asking it. Given the technology involved, these types of issues are inherent but that's quite a lot of complexity and cost.

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Here is an example of the type of problem that goes away with VSaaS

while this is true, it is only one side of the 'security equation' and - as a standalone sentence - doesn't take into account the 'loss column' factors that can/will occur by changing platforms. one problem goes away, 2 new problems might be introduced.

i.e. while VSaaS solves this particular complexity problem, what other types of problems are now introduced by adopting the VSaaS model?

many posters above have mentioned at least a few.

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It's also an example of a problem that goes away with end-to-end and depending on this company's infrastructure and budget model, either one might be the right fit. What he needs is a better service provider who he can trust to help guide the decision making process.

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I did not see any discussion on RMR...the holy grail on how integrators value their business. VSaaS boosts RMR and thus boosts integrators value. If you have a manufacturer who will only do business thru their integrator partners then RMR will build. My concern would be for distribution which often has the role of banker. The need to float money goes away when manufactures start collecting month to month directly from integrators.

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This is becoming dated information. M&A in the industry is switching to ebitda multiple rather than RMR multiple.

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I did not see any discussion on RMR

Thanks for bringing it up. It's definitely worth discussing.

holy grail on how integrators value their business

Very few commercial integrators are RMR focused and not simply because they are against RMR but generating RMR for commercial integrators is hard even beyond that commercial customers have historically been resistant to paying ongoing fees.

With residential, the security dealer / integrator gets their $30 or $50 a month and then a small cut of that goes to the central station.

But in commercial VSaaS, the security integrator only gets a small cut of the VSaaS ongoing license, with the overwhelming majority going to the VSaaS provider - great for the VSaaS provider, but not so good for the security integrator.

That said, VSaaS will increase RMR but I don't think that's enough to offset the lost service and sales revenue of the traditional model.

I do think, to your point, that integrators will eventually restructure themselves to leaner organizations with relatively fewer people and those businesses will benefit from RMR, though, I am skeptical of how much RMR an average integrator will get from VSaaS. If you are an integrator and have 10,000 cameras at say $2 a month cut for you, that's $20,000 a month in revenue, which is good for a small business but I don't see it being that big relative to historical revenue. I could be wrong here, curious to hear feedback on this.

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I believe VSaaS will chip away from the bottom up and will end up permeating all segments. There are may parallels with the Office365 story, and we all know traditional enterprise grade, conservative companies like banks, cyber security and Fortune 500 companies have now migrated to Office365 cloud. You could argue the information going through their corporate email is way more valuable than the physical security information that people say will not be put into the ether.

I agree that what you can achieve integrating systems in the cloud is still a long way off what can be achieved on-prem but that is merely a question of time and effort. Whether that time and effort will be put in by the manufacturers is the question.

VSaaS economics will definitely disrupt integrators, even if only from the number of IT companies it will bring into the market to service certain segments. I believe it will have to affect margins exactly because of the disintermediation mentioned, so we all need to sit up and figure out how to add new value in the XaaS world

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I absolutely love this article and appreciate IPVM bring this to light. It seems that Integrators, especially large integrators leading todays market are in denial of the future VSaaS or Cloud managed platforms. It feels very much like the transition from Analog video to IP, which opened the doors for companies like Axis and Arecont to dominate the IP Video market as we watched companies like AD and Pelco lose their dominance over the course of about 3-5 years.

This report is absolutely on point, this situation isn't going to happen, its happening and if larger integrators do not catch up and catch on now, it will be too late very soon. The rest of the world of industries are already operating in this model and we are starting to see tremendous opportunities in innovation with the integration of these platforms.

I am excited to see the partnership between ADT and Google, it is the first of its kind, and if ADT can adapt to the tools provided by Google, I believe we see the re-emergence of ADT taking over the commercial market in the very near future.

Integrators need to evolve their expertise into Network Topology, Network Security and Device Management, Professional services, and REAL Project Management in order to remain relevant in the future. Otherwise they will be great at installing IOT devices that consumers by from Amazon.

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Very interesting thread.

As a smaller integrator, we were an early adopter and focused on hosted Access Control (approaching 5K hosted readers and accelerating). The RMR stream has been and remains vital for withstanding economic ups and downs, staying "close to our clients," and increasing the value of our business—regardless of valuation methodology.

However, despite much investigation and research we have not yet committed to a VSAAS product. The market continues to lurch forward without clarity about which model will emerge as the "right" fit for our client base and which platforms are likely to be the winners in what will likely end up a a race-to-the-bottom scenario.

So far I continue to believe that integrators like us with "feet on the ground" will remain critical to clients, in no small part because we are a highly valued go-to expert for card access controls that integrate with alarms and process monitoring systems.

There will always be clients with a DIY outlook and approach, and they have never been a good fit for us. But for clients who want and need to focus on their core business, we will remain a vital partner. The nature of that partnership will evolve as new technologies emerge, but I don't see our role necessarily diminishing.

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Great article. I think this will definitely impact our line of work but to what extent is the question.

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John, the one thing the article seems to assume is that the VSaaS video providers are willing to ramp up staffing to provide the level of service customers currently get from their integrators. With few notable exceptions like Verkada, that is not the approach I am seeing whether we look at the traditional cloud companies like Eagle Eye and Open Eye or we look at the later players like Genetec.

When looking at the support aspect I see the integrator providing the following in most cases:

1. Server/application support -- Something the VSaaS company can easily do.

2. Routine tasks --Adding/Changing cameras, tweaking analytics -- While the VSaaS company could offer these services and in limited cases they might offer help, they are not staffed to offer this at the same level as integrators currently do. More importantly for the open VSaaS company that means they will need to train their support staff on every camera model the software supports, since the integrator installed the cameras they already have the trained staff and can avoid needed to support some of the more esoteric models.

3. Device troubleshooting -- VSaaS can do a good job of telling you the camera stopped working but did it stop due to a power failure, the camera got wet or a network issue. At least today most of the VSaaS offers do not have an in depth way of diagnosing camera failures. Despite many customers moving to a unified network, many of our national customers still have us install a separate network for cameras that interfaces with the customer network at a single point per location, or might even have its own internet connection.

Looking at the above, without a large investment as well as a change in focus from their product into services, as it sits today most of the VSaaS companies can chip away at some of the integrator service revenue but not all of it. The same would be true of install/commissioning. So the question becomes do the VSaaS companies want to pour the money into trying to take over part of what the integrator does but they never really will be able to without their own guys in trucks take over all of it.

Yes integrators are going to see less revenue from video as the shift to the cloud happens but I believe it will not be as large an impact as some think (unless the VSaaS companies really want to invest in the service side of their game) and I think there is actual benefit to the integrators in doing so.

Looking at access control as an example, when I started at my current company, I was very surprised at the amount of cloud based access control we were doing, probably 80% of our business is to one very well known cloud company. The more I looked at it though, for national companies it makes a lot of sense because who wants to deal with the hassle of setting up multiple access control servers all over the country and come up with ways to federate or sync their databases nor do you want all your eggs in one basket. I am starting to see our video going the same way as the VSaaS providers can now provide all of the same integrations that I can get our of a traditional VMS platform.

Except now I don't have to have the pre-sales guy spend time sizing servers so I can turn quotes around more quickly. I don't have to worry accounting for server failures when pricing service which is pretty much a gamble on the numbers. I won't need as many staff with advanced knowledge, lowering my labor costs. So yes while I lose some of the revenue, I also lose some of the pain and costs, done smartly an integrator could still make out OK.

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#18, excellent analysis!

I won't need as many staff with advanced knowledge, lowering my labor costs.

Yikes, true but think about it from the perspective of that 'staff' :) I do think some companies will be challenged about this because those people may have historically been top talent - the go-to-people to solve hard issues. Do these companies just cut them cold? And will this then favor companies with less IT expertise and more salesmanship? I don't know for sure but I wonder about such shifts.

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Great article and thread. Here is my contribution ..

Nobody wants a security camera. They want people to stop stealing their stuff or parking in wrong spots. They want people counting, data logging, to know when their kids come home from school safely ..... The point is that I would be shocked if even close to 1 percent of recorded video was ever viewed ... and then, if even 10 percent of that 1 percent was effective in solving a problem. So only pushing valuable information to the cloud in the first place is a way of disrupting the disruptors.

By definition, commodity service will never be uniquely suited to a particular problem. The integrator of the future will be able to tether the point of sale data with video and access control to answer questions such as :

"If there is a sales return for an item over $500, are there at least two employees at the till. Send me a monthly report of exceptions to this policy".

So I am thinking that although the art of installing and maintaining a traditional security system will become less in-demand, the art of problem solving (with a new set of skills) will still remain.

rbl

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It's "coming" so a few suggestions.

1) Choose folks you can trust to work with as that is more critical than ever

2) Build your revenue stream for the future with the right deal

3) Be sure that your business model (integrators) are supported and protected

The above seem obvious but still worth saying and considering

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A constant issue in these examples is that integrators do the hard work and big companies get most of the profit.

When support issues arise, usually are integrator that receive the call from clients. Hopefully companies understand the importance of the role that integrators play and be more balance in a profit standpoint.

In the side of integrators, this tech tendency is only going to get bigger (cloud services). The role of integrators should get wider (from consultant to innovators).

Business strategies must adapt to the new scene and projections in order to meet profit goals.

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"As a VSaaS manufacture we struggle with identifying a business model that includes the integrator...

- Margins are tight

- End-users leverage multiple integrators

- Tight labor market means integrators struggle providing value-add Tier1/Tier2 technical support"

I agree. So plan on a significant increase in your overhead, and thus a significant reduction in your profit, by hiring alot more people, buying some vans, tools and diagnostics equipment, adding salespeople, and placing about twice as many tech-support people in cubicles. In addition, your gonna wanna grab line 2, cause Mr. Smith from Smith Industries is on the phone. He asked for the owner. When I asked him if anyone else could help him, he screamed at me to speak to the owner. When i told him we were a publicly traded company who only manufactures VSaaS software, he told me he was gonna kill my dog. Oh yeah, benefits. Dont forget the bennies. Once you have come full circle on your little value spreadsheet ya got goin there, give us integrators a call.

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I do not see a delete button on this screen to delete this unintended comment.

So...........Enjoy the stimulating nothing that this section represents.

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buying some vans, tools and diagnostics equipment, adding salespeople, and placing about twice as many tech-support people in cubicles.

I don't think it's as bad for manufacturers. For example, things like Verkada Disruptive Embedded Live Help are going to reduce the need for labor. And being able to fully control the customer's systems remotely is going to help with service calls (e.g., exporting video).

Of course, this does not completely eliminate on-site work, hardware will fail and sometimes only being on site will solve the problem. I do think, 50% or more of the issues can be handled remotely, helping the VSaaS provider to reduce the value of local integrators.

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I dunno. I just dont know bout that. (Thinking, contemplating, squirrel!)

Its a big country out there. and its full of (at least over 70 million) crazy people.

I think theres always going to be end users that insist on a level of personal and personalized service to their organizations and that dont really see remote service as a value item. Theres alot of customers out there that I think are highly unlikely to embrace paying money for not having a human being present and accounted for. Regardless of the task.

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I started in the early IT business and I saw how quickly that went to commoditization, disposibility and do it yourself. Now in the physical security world it will soon be the same. Hosted services along with cheaper and less complicated equipment to install, where you increasingly have to compete with electricians, locksmiths, audio/video & home entertainment, even handymen and a GLUT of IT services desperate to find more business getting into physical security.

Will the security integrator and consultant go away? No, of course not, but it's going to be an ever dwindling need and down to the level where they're just arms and legs running wire and mounting equipment. I currently work the integrator side. But the as the years go by, the more I want to get out of that side of things and get into something else like the manufacture side, R&D, maybe even that lowly distribution side (just kidding my distro friends). Or, for a large end user who wants a technology person focused on those technologies for management and logistics.

NOTICE: This comment has been moved to its own discussion: Will The Security Integrator And Consultant Go Away? No, Of Course Not, But It's Going To Be An Ever Dwindling Need

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