Winners and Losers Spring 2011
Now that the dust has settled from the numerous new announcements of the last month, we can better understand the impact on the overall video surveillance market.
This Spring has been highly active. While overall new product announcements were relatively modest, the rise in acquisitions and lawsuits helped trigger significant shifts.
This review provides our recommendations on what companies and segments achieved the greatest positive and negative shifts in the market. It is based on the in-depth research presented in our Spring 2011 New Products Directory.
For comparison to last year, review our Fall 2010 Manufacturer Trends report.
The Big Three
Overall, the top three shifts we saw were:
- Winner - Axis's Aggressive Expansion
- Loser - The Analytics Market
- Loser - The Death of the Independent PSIM
Let's review each of the three.
Winner - Axis
Axis is the clear winner. The tear that they are on right now should frighten their competitors. When video surveillance companies get big, product development generally starts falling behind and mediocrity sets in (see Honeywell). When Axis struggled in 2009, we expected the rest of the market to start catching up. Instead, since then, Axis has released far more products than anyone in the industry, including a broad megapixel portfolio and now, an aggressive expansion into the low end of the market. Just in the last month, Axis has released 5 low cost new products, an innovative low cost PTZ series (the Axis M50s), a panoramic camera and Hosted Integration for Iomega NAS appliances.
Loser - The Analytics Market
This is a shame. The analytics market was really starting to turn the corner. Unrealistic expectations were reset. Dangeorous manufacturer marketing disappeared. The spread of IP cameras were helping the adoption of edge based analytics.
And then OV launched its new business strategy of patent enforcement / industry wide lawsuits. OV clearly has a sizable warchest and a mission to execute. Until resolved, this is a black cloud over the industry that makes video analytic decisions across the board significantly riskier.
Loser - Independent PSIM
PSIM proponents will say that ADT's acquisition of Proximex and Verint's acquisition of Rontal shows the industry validating PSIM. We disagree and, more importantly, we believe this signals an end to the PSIM 'dream'.
Command and control systems have been an important part of large security systems for years. Big companies like Boeing, Northrop, Siemens, Raytheon, even GE (Facility Commander), etc. have had such systems for a long time. ADT and Verint's move follow the historical norm (as did the 2009 NICE / Orsus PSIM deal).
A key aspect of the 'new' PSIM companies (Proximex, Orsus, etc.) was that they were independent startups that could freely partner and integrate with myriad systems common in the security industry - a crucial advantage over traditional command and control systems. Now, these PSIMs are just like the old systems - a component of large proprietary organizations.
More Winners and Losers
Inside the Pro section, we will examine more winners and losers taking a look at the following companies and segments:
- ACTi
- ADT
- Axis
- BRS Labs
- Entry Level VMS Providers
- Genetec
- Milestone
- Mobotix
- DVTel
- Exacq
- ObjectVideo
- OV Partners
- PSIM End Users
- VSaaS Market
- ObjectVideo
- ADT
- BRS Labs
- Genetec
- VSaaS
- Entry Level VMS Providers
- PSIM End Users
- OV Partners
- ACTi
- DVTel
- Mobotix
- Pelco
Our judgements are based on progress made relative to the company's past and the market's growth. A company we select as a 'winner' may be a 'bad' company but one that has unexpectedly gained ground. Conversely a company that is a 'loser' may be a very strong company but surprisingly fell behind their historical pace in the last few months.
Winners
First, in addition to Axis, here are our 5 'winners':
These companies (and market segment) did better than one would have expected over the last few months. Here's why:
Axis: As we cited above, Axis's new product development has been very strong. In doing so, Axis has suddenly become competitive against Asian manufacturers and has laid a strong foundation for taking on the low end of the VMS software market, in addition to their existing core strength in premium cameras. Since their nadir in 2009, Axis's financial results have been outstanding. It is one thing for a small company to grow revenue 30-40% per year. It is another thing for a large company like Axis (now passing a half billion in annual revenue) to grow at that rate. Axis is so big and growing so fast, their yearly organic expansion is the equivalent of them acquiring Verint's entire surveillance business. Given historical comparables, Axis should be losing market share as IP goes mainstream. Instead, with their aggressive product development, we expect them to gain share this year and take away business from their smaller competitors.
ObjectVideo: At the end of 2010, they were a company with a sharply declining reputation and a failing OEM business model. Now, they have a brand new business, patent enforcement, and a war chest to fund it. We do not know if they will be successful with this. However, given their funds available to spend on lawsuits, competitors may decide it is better to pay than fight. Plus, as a bonus, now OV can rationalize the problems with their OEM business model as the fault of competitors stealing their Intellectual Property rather than their own strategic mistakes.
ADT: Getting Proximex, likely at a reasonable price, is a strong move for ADT. Command and Control systems are great tools for locking in large project wins. ADT not only gets the price for Proximex licenses but they also increase the probability of video and access product sales and installation.
BRS Labs: Over the last few years, BRS Labs spend a lot of time making audacious claims (see an unrealistic demo and claims about solving terrorist threats). For almost a year now, their PR and marketing organizations have been quiet while they have built a fairly large enterprise sales team. This, alone, helps makes them more mature and less enraptured in crazy science fiction debates. Additionally, we believe BRS Labs is one of the few video analytics companies that is helped by the OV lawsuit campaign. First, BRS Labs technology approach does appear very different from OV's. Secondly, BRS Labs has demonstrated its own resources and aggressiveness to go after big deals. We think BRS Labs will position themselves as a safe alternative to the analytic lawsuit mess. This does not mean we think they will be a great company or even that we think the technology 'works'. We simply think their competitive position is much improved.
Genetec: On the negative side, Verint and ADT strengthened their competitive positioning against Genetec on the high end, just like NICE did. By contrast, and against general consensus, rather than buy a command and control system, Genetec has been building their own (i.e., SecurityCenter). We believe Genetec's approach will be much less expensive, much less complex and much easier for them to extend. All of these will be strong competitive advantages as Genetec competes against 3rd party PSIM software. Also, on the positive side, Genetec continues to outpace their direct VMS competitors (like Milestone, OnSSI and DvTel) in the development of high end features (such as edge recording [link no longer available]).
VSaaS: The ROI of hosted video is weak. Unfortunately, VSaaS has been conflated with hosted video (streaming and storing video in the cloud) because most VSaaS offerings were hosted only. Axis's partnership with Iomega accomplishes two important points: (1) it makes Axis a full fledged managed video provider (by definition, once a VSaaS stores on a customer site it's no longer hosted) and (2) it validates for other market players the importance of managed video. Axis's move will help accelerate the legitimacy of managed video and improve the VSaaS business case by reducing monthly recurring costs.
Losers
The following companies have lost ground relative to their historical position:
Entry Level VMS Providers: The price declines continue, driven by primarily by larger VMS providers (like Milestone, Axxon, Exacq, etc.) who can make money from their higher end products/versions. Worse, Axis's Iomega NAS support now introduces another class/category of competitor. Rather than buying a PC, $100 per channel VMS software and setting it up, now you can get a cheap NAS and with nearly no networking setup get a system on-line and remotely accessible.
PSIM End Users: The big risk of any command and control system historically is getting locked into that system. The most frequent issue was limitations of 3rd party system support. An end user makes a request and the provider starts off with 'sure we are an open system and can integrate with anything' but after quarters or years of waiting, no progress. The good thing with small, independent PSIM companies was that larger end users had some leverage and those companies generally had strong in-house engineering talent allowed to quickly add in new systems. By contrast, in big companies like ADT and Verint, those things are going to be much harder. Leverage is almost non-existence and the process to add in new features and systems is much more complex and time consuming.
OV Partners: The good news for OV partners is that if you stay with OV, you will not be sued. The bad news is that this is the same logic behind the mafia 'convincing' small business owners to pay them protection money. Not being sued by OV does not create real customer value. This only comes from analytic solutions that work robustly in the field without significant operational headaches. Unfortunately, it appears that OV has not been able to achieve this consistently over the years. The question, then, becomes: Will OV significantly improve their technology? They say they will invest resources but we are skeptical. We think it is more reasonable that OV will be more focused on lawsuits than product development. We see the ultimate revenue generator being patent licensing, not software licensing. To that end, aggressive investment in new product/software development would be less expected than in lawsuits to generate more patent licensing.
ACTi: While ACTi is finally releasing the 4MP product line it has been promoting since ASIS 2010, ACTi's overall new product releases remains low - especially in comparison to Axis which has released over a dozen lower cost products in the last year designed to win business away from lower cost Asian alternatives. While the 4MP line is relatively inexpensive compared to cameras with similar resolutions, ACTi's lineup is fairly meager and expensive at the more common 1 and 2MP product categories.
DVTel: In the last 6 months, DVTel has done the following: (1) ASIS 2010 showcase on 3D / 'Avitar', (2) Changed CEOs [link no longer available] and (3) issued no new product announcements at ISC West 2011. By contrast, prices for low end VMS software plunged and large competitors bought out PSIM companies or developed their own. Lastly, DVTel's ioimage offering is subject to the OV lawsuit campaign. DVTel has a lot of challenges.
Mobotix: Instead of real new product announcements, Mobotix's ISC West 2011 announcement highlighted existing products and last year's revenue growth. There's no doubt Mobotix is an impressive company with strong products. The big question, as we recently reviewed in our Mobotix challenges analysis, is their willingness to keep pace with overall industry developments. In particular, while the T24 door station may be novel and unique, it is likely a small market and misses the heart of the surveillance market and puts Mobotix at a disadvantage to IP camera manufacturers rapidly catching up (or passing) Mobotix on the pure surveillance side.
Pelco: While Pelco continued to make modest announcements (a hybrid DVR offering 2 channels of MP, upcoming higher end 1.2 MP camera, etc.), we think it is very clear that Pelco cannot catch or match Axis's development. Of the analog CCTV incumbents, we continue to view Pelco as the most innovative and aggressive at new product development (compared to AD, GE/UTC, Honeywell, Vicon, etc.). Despite this, we do not see how they can maintain their competitive positioning in IP that they had in analog. As an added negative, the new black cloud over Pelco is the rumored Schneider / Tyco deal which can only make things worse (i.e., year or two of re-organizations and delays, etc.).