What will be the next 'Big' VMS Offering?

With more than 50 VMS offerings available, what product or approach will be the next big thing to impact the video surveillance industry? We believe it will be VMS software sold directly on-line at a low price.

The overwhelming majority of VMS software products today are sold through the channel (that is, indirectly, through dealers and distributors to end users using a sales force). While one VMS may try to beat another based on more features or different combinations of features, differences tend to be incremental or marginal.

By contrast, we believe on-line direct sales of VMS software to end users would be disruptive (from a business standpoint, not technologically) and that a company who executed properly could become a sizable force within the industry.

A number of key advantages exist:

• Cuts out sales and marketing costs (both direct and cut to the channel)
• Allows users to quickly access without having to negotiate or draft a contractor with a dealer/integrator
• Enables much lower pricing (by cutting out the 'middle man')
• Allows a few developers to compete with much larger organizations
• Would face limited competition from establish players afraid to hurt their channel partners

Early comments on our budget VMS series have been skeptical about selling VMS software for so low (often under $50 per channel) and the ability to stay in business at that price point.

We think this is quite feasible - primarily because the costs are so much lower and it is so much easier to reach customers. We have seen this in our own business's build-up in 18 months gaining over 1200 subscribers in 70 countries with no direct nor inderect sales/marketing force.

Relative to the 'established' model, selling VMS software in this manner has 'downsides':

• Lower total company revenue: whereas a large VMS provider today may do tens of millions, an on-line provider may only do a few million (after a few years)
• Meeting the needs of larger projects may be difficult as the features will likely be insufficient for their needs
• Integrators will have less incentive to specify one's solution

While we agree with all of these 'downsides', this does not prevent such providers from carving out an important segment that undermines the current VMS market ('turning analog dollars into digital pennies' - this is exemplified by Craigslist - they blew up a multi-billion dollar market but are only generating a fraction of the historical revenue).

VCs won't get rich from this and large investments won't make sense. However, small teams of developers should be able to take meaningful share of the low end market by offering simple access to VMS software at low prices. In our budget VMS analysis so far, we see some providers doing ok but not truly maximizing the opportunity. We think this is an important area for industry professionals to watch and engage, as appropriate.