Why VMS Annual Fees are Unfair

By: John Honovich, Published on Jul 12, 2012

VMS annual fees are generally unfair and harmful to users. This is a growing problem as more surveillance users migrate to software only systems that regularly use them. In this note, we explain the problems involved so you can prepare yourself.

Overview

In addition to an up-front software license fee, many VMS providers charge an annual fee, typically between 15 and 20% of the up-front license, providing access to software upgrades. For example, a user with a 100 camera system might pay $20,000 up front and then ~$3,000 each year thereafter. Without paying the annual fees, you will not receive any updates.

For background and integrator's perceptions on them, see our VMS annual license survey results.

Justification

The two most common justifications VMS vendors make for these fees are:

  • Software Costs Money: Developing new software costs substantial amounts of money so the VMS vendors need a way to get paid for the new features and improvements they roll out.
  • IT does it: VMS vendors regularly cite how common this is with enterprise IT systems. The implications are (1) this is a regular business practice and (2) if you do not accept it, you are a Neanderthal security guy.

With these noted, let's examine the problems we find.

Annual vs. Incremental

Typically, VMS vendors only allow software upgrades via annual licenses. You generally cannot just buy an upgrade from one version to another (e.g., from 3 to 4) when you want. You have to buy the annual license each year which may not include any specific upgrade you want. For instance, with Windows OS, you might buy XP in 2005 and then not pay Microsoft anything for OS licensing until 2010 when you purchased an upgrade to Windows 7. With VMSes, you would typically pay each year (2005, 2006, 2007, 2008, etc.) regardless of what upgrades you were getting.

Don't Know What You Are Getting

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

VMS annual licensing is typically paid upfront for the following 12 months (or longer). While the VMS vendor may give an overview of the roadmap, even they typically are not certain what or when they will release more than 6 months in the future. As such, the buyer takes the risk that the software upgrades will not be useful or not even come.

Penalties for Missing

Perhaps the trickiest part of annual licensing fees is that you have to pay them each and every year or you face significant penalties. For instance, let's say you bought a VMS in 2008 and paid annual fees in 2009 and 2010 but you failed to pay in 2011. Now, in 2012, you would either need to buy all new licenses or back pay the year you missed (often plus additional fees).

Because of this structure, you typically need to pay every year, regardless of what you are getting for the particular year or never pay and only upgrade your system every 5 years (or more) when you do a major overhaul.

All or Nothing

VMS vendors generally bundle all new features into a single package, rarely allowing users to purchase upgrades for specific functions. For instance, let's say you only need to add a new camera that is not supported in your existing VMS version. Generally, you would have to buy the whole annual license even if the other X number of features were not relevant to you. As such, it can be wasteful.

Obscured / Surprise

VMS vendors typically obscure or downplay annual licenses as they recognize that these back end costs are substantial and can be a big negative in purchasing. Morevoer, these licenses are not common with traditional DVR systems so many surveillance purchasers do not expect them. The combination creates for some unpleasant surprises.

Changing Terms

VMS vendors can change their terms at will, substantially increasing a customer's cost. For instance, recently, Milestone quietly changed two key terms in their annual license program that significantly increases the need to pay annually.

  • Camera Support restrictions: Milestone used to allow upgrades for camera support even without an annual license. This is now restricted to the current and following major software versions.
  • Greater penalty for not paying annual fees: Previously, if you did not pay their annual fee, you could upgrade to the current version and get a 50% credit for your past purchases. Now, this is dropped to 30%.

While VMS vendors like Milestone will emphasize that open platforms allow for switching VMSes (here's how), they also realize that it is painful and costly to do so.

Nasty Negotiations

The combinations of rigid structure and often unforeseen costs frequently results in nasty negotiations between VMS vendors and their customers. While not promoted, VMS vendors regularly offer major discounts to their annual license fees to overcome these issues.

Bad Business Practices

While these tactics may not be unethical, they are certainly bad business practice. It is a classic ‘win-lose' proposition that leaves many buyers feeling taken advantage of.

Solutions

Obviously, customers realize that they need to pay more for new features, just not via the common tactics VMS vendor's employee. They can increase good will and customer satisfaction by doing so in ways that are more straightforward. Here are two ways:

  • Version Upgrade - Allow customers to pay to upgrade from one major version to the next, regardless of the year or annual payment status.
  • Feature Upgrade - Allow customers to buy only certain feature sets that they need, most importantly new/added camera support.
Comments : PRO Members only. Login. or Join.

Related Reports on VMS

Anyvision Facial Recognition Tested on Aug 21, 2019
Anyvision is aiming for $1 billion in revenue by 2022, backed by $74 million in funding. But does their performance live up to the hype they have...
Dahua 4K Camera Shootout on Aug 20, 2019
Dahua's new Pro Series 4K N85CL5Z claims to "deliver superior images in all lighting and environmental conditions", but how does this compare to...
Proactive CCTV "Only Affordable Video Archiving Solution" Profile on Aug 12, 2019
Proactive CCTV is claiming to offer "the only affordable video archiving solution on the market", reducing the storage typically required for H.265...
Milestone "GDPR-ready" Certification Claim Critiqued on Aug 12, 2019
Milestone is touting that its latest XProtect VMS is "GDPR-ready" with a 'European Privacy Seal'. However, our investigation raises significant...
Axis Door Station A8207-VE Tested on Aug 07, 2019
Axis newest door station, the A8207-VE, claims to deliver "video surveillance, two-way communication, and access control" in a single device. But...
Avigilon Blue VSaaS Tested on Aug 05, 2019
Avigilon says Blue is a "powerful integrator cloud service platform", easy to set up and configure, quickly scale business, by leveraging cloud...
Cisco Settles False Claims Act Suit For Video Surveillance Vulnerabilities on Aug 01, 2019
Cisco entered the video surveillance market in 2007 and suffered for many years through a variety of its own errors and arrogance. The conclusion...
Ionodes Company Profile on Jul 31, 2019
What happened to Ionodes? With seasoned leadership from Jean-Paul Saindon founder of SmartSight and Dr. Michael Gilge, founder of VCS, back in...
Vivotek Trend Micro Cyber Security Camera App Tested on Jul 22, 2019
Vivotek and Trend Micro are claiming five million blocked attacks on IP cameras, with their jointly developed app for Vivotek cameras. This new...
Avigilon ACC7 VMS Tested on Jul 22, 2019
Avigilon's Control Center 7 boldly claims it will "transform live video monitoring" with the new Focus of Attention "AI-enabled" interface. We...

Most Recent Industry Reports

TMA Apologizes to Amazon / Ring on Aug 23, 2019
Not only is Amazon / Ring making major incursions into the residential security market, the organization representing the biggest incumbents, The...
China Dahua Replaces Their Software With US Pepper on Aug 22, 2019
What does a US government banned company do to improve its security positioning in the US? Well, Dahua is unveiling a novel solution, partnering...
Security Integrators Outlook On Remaining Integrators In 2025 on Aug 22, 2019
The industry has changed substantially in the last decade, with the rise of IP cameras and the race to the bottom. Indeed, more changes may be...
First GDPR Facial Recognition Fine For Sweden School on Aug 22, 2019
A school in Sweden has been fined $20,000 for using facial recognition to keep attendance in what is Sweden's first GDPR fine. Notably, the fine is...
Anyvision Facial Recognition Tested on Aug 21, 2019
Anyvision is aiming for $1 billion in revenue by 2022, backed by $74 million in funding. But does their performance live up to the hype they have...
JCI Sues Wyze on Aug 21, 2019
The mega manufacturer / integrator JCI has sued the fast-growing $20 camera Seattle startup Wyze. Inside this note: Share the court...
Dahua 4K Camera Shootout on Aug 20, 2019
Dahua's new Pro Series 4K N85CL5Z claims to "deliver superior images in all lighting and environmental conditions", but how does this compare to...
ZK Teco Atlas Access Control Tested on Aug 20, 2019
Who needs access specialists? China-based ZKTeco claims its newest access panel 'makes it very easy for anyone to learn and install access control...
Uniview Beats Intel In Trademark Lawsuit on Aug 19, 2019
Uniview has won a long-running trademark lawsuit brought by Intel, with Beijing's highest court reversing an earlier Intel win, centered on...
Suprema Biometric Mass Leak Examined on Aug 19, 2019
While Suprema is rarely discussed even within the physical security market, the South Korean biometrics manufacturer made global news this past...

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