What is Happening to DVRs? Examining March Networks

Author: John Honovich, Published on Jun 23, 2008

March Networks recently released an extremely detailed strategic report on the future of their product and its positioning. If you are a March customer, integrator or simply interested in understanding where a major manufacturer is heading, [Note: The report is no longer available]

March sees its future revenue growth coming from selling its IP Video Surveillance solution (Cieffe) and its product plan is focused around building out the software and encoders to support this strategy. March recently announced that they will be using Sun servers for recording and storage in their next-generation VideoSphere platform.

It's pretty clear they are moving away from DVRs swiftly and towards a more software focused future. As part of this trend, 2 months ago, March announced a partnership with Sun to use their hardware. At that time, I expressed my concerns over the risk of this move. This new report indicates to me that they are definitely making this move.

DVR appliance manufacturers are swiftly moving away from DVR appliances. This is a very risky move, maybe a necessary move, but chances are it will not work out well for them.

March is not the first to announce such partnerships; AD, Verint, NICE, etc. have all previously done so. What is significant about March is that March, more than any DVR manufacturer, has made its reputation and success based on building rock-solid appliances that don't fail and are easy to service. It's not as if March simply loaded its software on a windows PC. If that was the case, it would be easy to understand using SUN, HP or Dell hardware. But, it's the opposite. March's core competitive advantage is building better appliances (built over 10 years and through their heritage from Newbridge Networks).

So why does a vendor surrender their core competitive advantage?

Before I explore that:

From March's perspective, I am sure they don't believe this is the case. They likely see this as an expansion where customers can now choose from both March's own appliances and the March/Sun appliances. To them, it's the best of both worlds.

Doing both is going to be tough because of 1) integration challenges and 2) focus contention

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1) Integration Challenges

It is tough enough building one platform, if they are really going to support both Cieffe and R5, the integration effort has to be very complex and time consuming. This is not a knock on March. It would be hard for anyone to do it. Even if you pull it off, it can take a long time and distract you from other product development efforts.

2) Focus Contention

Given that the two product lines serve two different customer classes (traditional March appliances distributed, small facilities and new Sun appliances large facilities), where does the organization focus its sales, marketing and engineering efforts? Companies often wind up worse in both areas when they are torn between two mutually incompatible options.

So, now why is March doing this?

The biggest growth area in surveillance for the next number of years is super large deployments - schools, cities, bases, nations, etc. Traditional DVR markets like hospitals, retailers small/medium businesses are fairly saturated with DVRs at this point so you are mainly competing on upgrade rather than greenfield business. If, you are like March, in need of large top line growth and you already dominate a lot of the classic DVR market, this is the area where you can find it.

But can March and other DVR appliance manufacturers make the shift?

While I appreciate the motivation, success is very risky. Essentially, they are abandoning their core strength and moving the basis of competition to an area where they are solid at best. Using another manufacturer's hardware places the emphasis on your software. The quality of your software now needs to stand on its own. It has to be better than the other dozen players, including a number like Genetec, ONNSI and Milestone that have been optimizing their software for this use over the last 5 - 8 years. Cieffe seems solid but it does not have features that really distinguish from today's software only leaders.

While I certainly believe March and other major DVR appliance manufacturers will win some big deals, this is a dangerous new world where new entrants focused on software only will suddenly be much stronger competition and where pricing pressure could be intense.

Recommendations:

For existing customers: Make it clear that you want the same level of support and enhancements for your DVR appliances that you have historically obtained.

For prospective customers: Check carefully how mature and ready the software and integration is.

For integrators: March's DVR appliances are still strong but evaluate carefully whether marketing their new system is the best choice for you. The software only NVR field is crowded with a number of players. many of whom have been optimizing their solutions for years.

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