the potential in video surveillance for it varswright-associates.com/wa/resources/file/the potential...

The potential in video surveillance for IT VARs The opportunities and challenges for VARs presented by the emergence of IP

technology in the mature video surveillance market

Andy Coaton, Managing Director

IP Surveillance Go-to-Market Solutions - Wright Associates Services Ltd, 6 Thirsk Gardens, Milton Keynes, MK3 5LH

T: +44(0)7721 782227 E: [email protected]

www.wright-associates.com

mailto:[email protected]

The potential in video surveillance for IT VARs | 2

Executive Summary

IT VARs are under pressure

IT value added resellers (VARs) face two key issues:

1) Constant erosion of hardware prices creating the need to continually introduce new generations of equipment

and develop new, high margin services;

2) Demands from vendor partners to sell large quantities of data storage in order to retain partner tier status with its

attractive discounts and support levels.

Potential salvation through video surveillance

What VARs need is an emergent, fast-growth application, bandwidth and storage hungry, that taps into corporate budgets

outside the investment-constrained IT department. Fortunately, such a market exists, IP video surveillance (IP VS).

The UK leads the world in CCTV coverage - it is the most watched nation in the world. This market is currently undergoing

a major technology disruption. Analogue and digital CCTV cameras linked to recorders are being superseded by IP

networked systems.

This has profound implications for existing market participants as it is not entirely clear that they are either willing or

capable of up-skilling and adapting to the new world where CCTV is not standalone but an IT network application.

This creates a large opportunity for IT VARs since much of the technology now falls squarely into their core competence.

An IP camera can now be seen as one more device attached to the network, and running it requires another network

software application. IT VARs know how to do this.

The added capabilities of video as networked data also open up the possibility of applications beyond surveillance for

security. These include its use as a customer recognition or behaviour tool, thereby turning it into an enabler for revenue

generating applications rather than just loss containment.

An exciting extension for VARs is the emerging concept of Video Surveillance as a Service (VSaaS) where the cameras are

local to the user, but the software application and the video storage reside and are managed by a third party in the cloud.

VARs need to choose whether to create such a service, white label it or be a supplier to a provider.

There may be no choice

Video surveillance will become an IT-influenced purchase and so a competitive arena for IT VARs. This means non-

participation runs the risk of opening the door to new players who may then in turn compete in the VARs’ existing space.


Benefits for VARS

For those VARs that embrace the market and develop effective strategy the prize is clear. By embracing IP video

surveillance, and in particular VSaaS, VARs can:

Expand demand for data storage;

Create high margin recurring service revenue to counter hardware commoditisation;

Maintain their one-stop-shop proposition to clients;

Gain access to physical security budgets, and potentially marketing budgets, for wider commercial applications.

Barriers to success

However there are some issues which VARs will need to overcome:

A lack familiarity with the video surveillance market: law, culture, buyer behaviour, users, competition, installers,

and vendors;

The need to engage with a new set of individuals, both physical security equipment buyers and commercial

business unit heads, not just the network or IT managers who currently procure their products and services;

The requirement to understand and operationalise video security laws, optimal camera layout design, physical

camera installation siting, use and maintenance.

How well VARs develop strategies to overcome these issues will determine whether the opportunity is realised.


CONTENTS

Executive Summary 2

IT VARs are under pressure 5

Downward pressure on hardware prices 5

Vendor pressure 5

Potential salvation through video surveillance 6

The video surveillance market 6

Market structure 7

Implications of IP VS for traditional market players 7

The opportunity for IT VARs 8

Wider applications for IP surveillance 8

Video Surveillance as a Service (VSaaS) 9

There may be no choice 9

Benefits for VARS 10

Expand demand for data storage 10

Create high margin recurring service 10

Maintain a one-stop-shop proposition 11

Gain access to new budgets 11

Barriers to success 11

Lack understanding of the video surveillance market 11

The need to engage with a new set of individuals 12

The requirement to understand operational aspects of video surveillance 12

Conclusion 12


IT VARs are under pressure IT value added resellers (VARs) face two key issues:

1) Constant erosion of hardware prices creating the need to continually introduce new generations of equipment

and develop new, high margin services;

2) Demands from vendor partners to sell large quantities of data storage in order to retain partner tier status with its

attractive discounts and support levels.

Downward pressure on hardware prices

PRICE FOR 1 GIGABYTE OF STORAGE

YEAR $

1981 300,000

1987 50,000

1990 10,000

1994 1,000

1997 100

2000 10

2004 1

2010 0.1

The table on the right tells the familiar story of technology products. Driven by Moore’s Law, the performance of micro-electronics soar and prices plummet.

This is great for demand and drives innovation. But it means that VARs are on a continual treadmill of finding ways to sell more ‘stuff’ each and every year, just to stand still.

Vendor pressure

Many vendors operate tiered partner programmes, with tier qualification being dependent on various criteria such as training, service, customer satisfaction levels and volumes. For the VAR there are incremental benefits at each tier including various support resources, but in particular increased discount from list price.

These discounts make staying at a tier vitally important for profits, but this is generally contingent on big volume requirements. In today’s networking market this means moving lots of file servers. VARs need to be continually aware of new applications that can become drivers for that infrastructure demand.

What VARs need is an emergent, fast-growth application, bandwidth and storage hungry, that taps into corporate

budgets outside the investment-constrained IT department.


Potential salvation through video surveillance Fortunately, that new storage hungry- application with access to corporate funds beyond the IT budget does exist - IP

video surveillance.

The video surveillance market

The UK leads the world in CCTV coverage; it is the most watched nation in the world with an estimated 4.25 million CCTV

cameras1. Video surveillance is a major tool in protecting corporate and public assets, crime prevention, anti-terrorism,

public safety and traffic monitoring. Almost every commercial premises and public facility, plus many public spaces, are

covered. Buyers are commercial companies of every size and, of course, the public sector including local government,

police, prisons, universities and the NHS. In addition there is a sizable and growing residential market.

The market is currently experiencing acute technology disruption. Analogue and digital CCTV systems, with cameras

linked by basic cabling to a control centre and recorders, are being superseded by IP networked systems. Grainy and blurry

analogue CCTV systems are being replaced by high-definition, real-time digital video cameras connected to high-speed IP

networking infrastructure. There are many benefits to the new systems: high-quality recordings; no loss of quality in

transmission or copying; fast search and retrieval; easy maintenance; lower cost for enterprise deployments; megapixel

quality images; system scalability; system resilience; and the removal of the error-prone manual management and storage

of video tapes over multiple sites or buildings by security guards.

These networking capabilities, supported by software platforms known as Physical Security Information Management

(PSIM) systems, enable a series of extended features including the ability to integrate with other security equipment,

access control, fire safety systems, and business automation systems; and the simplicity of running multiple cameras on

the same network to cover larger areas more efficiently.

The transformation has already started and so there is no

doubt about the future technological direction of the

market. The chart here shows our projections for the size

of the UK market for CCTV and IP surveillance based on

discussions with industry sources. It shows the steady rise

of IP technology over the next few years. IMS Research

has also forecast that 2014 will be the year that network

video sales overtake analogue2. Additionally, beyond the

UK a study by RNCOS suggests that the global video

surveillance market will be worth about $23.5bn (£14bn) a

year by the end of 20143

1 UK security and video recording market, BSRIA, Dec 2011

2 Beyond The Tipping Point – What Happens Next to the Video Surveillance Market? 28 July 2011

3 Global CCTV Market Forecast to 2014, INCOS, March 2012.

0

100

200

300

400

500

600

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

£m

ANCILLARIES IP ANALOGUE

http://www.imsresearch.com/

http://www.rncos.com/Market-Analysis-Reports/Global-CCTV-Market-Forecast-to-2014-IM374.htm


Market structure

CCTV is part of the wider physical security market, including access control and intruder alarms. Prior to IP, the value chain was mature, simple and stable.

Electronics vendors make CCTV cameras, intruder alarms, access controls, ancillaries and recorder boxes. Vendors include Honeywell, Axis Communications, Bosch and Panasonic.

The installer community in the UK comprises around twenty large companies and a long tail of small entities. The major ones include Tyco, ADT and UTC. Company size then drops quickly down to several thousand 1-20 man outfits.

The very large players deal directly with vendors for most of their significant supplies, this accounts for 50% by value. The

vast bulk of installer companies, however, source from the six key distributors in the UK: Norbain, ADI, Provision, Anixter,

Videocom and Enterprise. These tend to offer a one-stop-shop for all CCTV equipment needs. Services are bundled in

with the price and may include same or next day delivery, no quibble returns, pre and post sales technical support and

generous payment terms.

Implications of IP VS for traditional market players

IP technology as a disruptor has profound implications for the existing market participants as the challenges they face are

considerable. A very different skill set is required to sell, design, install, manage and support these systems.

The new systems have to work on the user’s IT data network or inefficiently duplicate a network for surveillance. This

means the IT department will be a key influencer, if not the actual buyer. The existing players do not know IT managers

and their buying behaviour. They don’t understand the impact of video on the corporate network and they don’t

understand server software patches, secure access, and data backups.

All the traditional camera and equipment vendors are now well on the way to transforming themselves and have IP based

products to offer, but now find that they are competing against new IP only competitors.

The installer community must become systems integrators or the user contract point or service provider for surveillance

that sub-contracts IT elements. But it is a big learning curve. A report by IMS Research in 2012 concluded that:

“Systems installers have stated their requirements for better training, support, and demo systems. Many of these installers will

only have taken a general training course for an overview of what the technology offers, while many still have had no formal

training what so ever. This knowledge needs to be provided to installers, so that the installers feel more comfortable with IP

systems.”4

4 IMS Research, Security Systems Integrators Unsure of IT Distributors, 17 May 2012

Vendors

Distributors

Installers End users

Technical consultants


Interview and quantitative studies undertaken by Wright Associates with UK installers have confirmed a clear recognition

by installers of the need for in-depth IP network and software training, together with other support such as: system design;

contract IP installation engineers; pre-configuration; on-site troubleshooting; and remote image storage and monitoring

‘cloud’ services. It is not clear how they will source these needs.

In the UK there are perhaps a couple of dozen installer companies with the scale to make the investment needed in the

training, recruitment and business change to becoming systems integrators. The vast majority have less than 15

employees each and many are just not either willing or capable of up-skilling and adapting to the new world where CCTV is

an IT network application. If they do not adapt they will become extinct or at best a minor part of the value chain limited to

camera siting and fitting.

The opportunity for IT VARs

The very same factors that create problems for the

traditional value chain create a large opportunity for IT

VARs. Much of the technology falls right into their core

competence. An IP camera now becomes just one more

of the many devices attached to the network, whilst

running them requires another network software

application. IT VARs know how to do this.

The opportunity for IT VARs is to restructure the value

chain by interjecting themselves as the sole user contact

point for security surveillance and other video

applications, just as they are for other IT infrastructure

and applications. Traditional installers may remain part

of the implementation, but as sub-contractors to the

VAR or be absorbed by the VAR.

Wider applications for IP surveillance

Superseding the existing security applications with new technology is just the start. The added capabilities of video as

networked data also open up the possibility of applications beyond security surveillance. IP CCTV is a smart technology

and extensions include its use as a customer recognition or behaviour tool, thereby turning it into an enabler for revenue

generating applications.

Example video data analytics applications that suggest themselves include automatic number plate recognition (ANPR),

people counting, footfall, and presence management - for instance, an individual walking the wrong way in a one-way

area, standing in front of a lobby desk for more than a certain number of seconds, or leaving an unattended package.

Intelligent building control applications will be able to economise on energy usage based on real-time monitoring and

prediction of building occupancy. A fast food chain could monitor operations and customer service remotely in all its

outlets without having to invest in putting an expensive area manager on the road.

IP Vendors

IT VARs

Installers

End users


The retail sector is already leading the way with systems originally installed to manage shrinkage being deployed to drive sales proactively through buying behaviour monitoring. This moves the focus beyond what people buy to how they buy, for example, the reaction of customers to a promotional display. It is easy to foresee that similar concepts that will be adopted in other sectors such as health and social care provision.

Every new application drives demands on IT infrastructure and storage, plus the accompanying design, installation and support services.

Video Surveillance as a Service (VSaaS)

An exciting extension for VARs is the emerging concept of Video Surveillance as a Service (VSaaS) where the cameras are

local to the user, but the software application and the video storage reside and are managed by a third party in the cloud.

Managed IP video monitoring revolutionises the way video is accessed, controlled and stored. A fully managed and

maintained service 24/7, means user IT and security teams can concentrate on core tasks and avoid proactive fault

management and remote diagnostics, resilience, capacity management, data security and backup.

VSaaS avoids upfront capex for the user and is paid for as a monthly fee. From the perspective of a service provider a

valuable, sticky, predicable, recurring revenue stream is created as well as, that crucial, further demand for storage.

VSaaS may become ubiquitous and VARs customers may ask for one. Each VAR that embraces IP VS needs to determine

whether to create such a service, white label it or be a supplier to a provider.

There may be no choice

Video surveillance will become an IT-influenced purchase and so a competitive arena for IT VARs. This means non-participation runs the risk of opening the door to new players who may then compete in the VARs existing space.

A significant danger for a VAR that ignores this space is that user security teams will start demanding IP VS and so inevitably involve IT. IT will then be forced to engage with the IP VS provider. If that is a competitor IT VAR, the dangers of letting them establish a relationship with the IT or network manager are obvious.


Benefits for VARS For those VARs that embrace the market and develop effective strategy the prize is clear. By seizing the opportunity, in

particular VSaaS, VARs can:

Expand demand for data storage;

Create high margin recurring service revenue to counter hardware commoditisation;

Maintain a one-stop-shop proposition;

Gain access to physical security budgets and potentially marketing budgets for wider commercial applications.

Expand demand for data storage

VARs are under constant pressure from partner vendors to take large quantities of storage. IP VS could almost be a tailor

made solution for this issue.

Video, of course, makes considerable bandwidth demands on networks which in turn drives upgrades and design, planning

and maintenance requirements. It also has huge demands for storage. The amount depends on video format, resolution,

frame rate, number of cameras and retention period. But many users need to record at the highest quality and frame rate

so it can be used as evidence. The table below gives an illustration of the order of magnitude of storage needs. This is for

4CIF resolution of 704x576, but bear in mind that megapixel cameras are on stream with resolutions of 1280x1024.

SYSTEM DATA STORAGE NEEDS5

RETENTION PERIOD 1 CAMERA 5 CAMERAS 25 CAMERAS 100 CAMERAS

1 DAY 22 GB 100 GB 540 GB 2.1 TB

7 DAYS 150 GB 760 GB 3.8 TB 15.1 TB

30 DAYS 650 GB 3.2 TB 16.2 TB 64.8 TB

Create high margin recurring service

Hardware prices are always under downward pressure, but as a counter to this VSaaS has the potential to create high

margin, recurring, service revenue. Users pay a fixed monthly fee to remove what is for them the headache of buying and

managing software applications and storage with corresponding updates, cyber and physical security risks and backups.

But for a VAR this is bread and butter and relatively low cost. This highly efficient central facility can be scaled up with new

clients gaining increasing economies of scale. The revenue is highly predictable and recurring, giving the VAR CFO a warm

glow.

5 4CIF resolution, 25 frames per second, with h.264compression at 2Mbs


Maintain a one-stop-shop proposition

IP video surveillance will be demanded by a VAR’s existing customers. If they currently single source IT networking needs,

they are going to want their VAR to provide the IP VS solution as well. In the near future absence of IP VS will likely be

seen as a large hole in the portfolio.

Gain access to new budgets

The traditional source of VAR revenue is the IT budget. But according to a report by TechTarget6, the majority, 55%, of UK

CIOs expect their budgets to remain the same or decline during 2013. IT spending has been under severe constraint since

the start of the economic recession and CIOs remain under financial pressure to do more with less.

IP video surveillance offers the prospect of escaping this limitation. Physical security is financed from an entirely different

budget and with an entirely independent business case. The wider revenue generating applications mentioned earlier

open up the additional prospect of accessing marketing and operational budgets.

Barriers to success However there are some issues which VARs will need to overcome:

Lack understanding of the video surveillance market: law, culture, buyer behaviour, users, competition, installers,

and vendors;

The need to engage with a new set of individuals, both physical security equipment buyers and commercial

business unit heads, not just the network or IT managers who currently buy their products and services;

The requirement to understand and operationalise video security laws, optimal camera layout design, physical

camera installation siting, use and maintenance.

Lack understanding of the video surveillance market

A key problem in realising this opportunity is that VARs do not have an

understanding of the market. They do not know the suppliers, the

competitors, plus the customers and the problems that they are trying to

solve. It is a market of men in white vans and ladders; of cameras screwed

to the wall outside under potential physical attack. It is a market filled with

practical men, street smart ex-policemen and ex-criminals. It is governed

by a particular part of the Data Protection Act (DPA) and Security Industry

Authority (SIA) regulations and it is very different to the IT techie culture

VARs know and love.

6 2013 IT Priorities- Europe, TechTarget, January 2013


The need to engage with a new set of individuals

VARs have intimate relationships with the IT department: the CIOs, IT managers and network managers. VARs understand these people’s needs and how they make purchasing decisions. IP VS falls under physical security and is the responsibility of either the Security or Facilities Management department. These teams rarely have board representation, do not speak IT jargon and have an entirely different culture and buying process.

These relationships remain a strong card for existing CCTV players.

The requirement to understand operational aspects of video surveillance

A report from IMS concluded that end users were concerned about engaging with the IT channel for their video security. It

stated:

“The main concerns are that IT distributors have the knowledge about the networking part of the installation, but many still

lack the knowledge of what lenses, housings or physical mounts to use.”7

Users are concerned that the IT channel does not understand the application domain. They don’t know how to design a

surveillance system to provide protection for the physical environment: to maximise coverage; to handle changing sun-

light conditions; the deal with the weather; to comply with the law; and to be secure from physical attack.

Conclusion IP video surveillance is a disruptive technology and will likely quickly come to dominate in the established and growing

video security market, plus extend video surveillance into new applications. This disruption offers IT VARs a golden

opportunity to place themselves at the core of the value chain of a fast growth, bandwidth and storage hungry application

that taps into corporate budgets outside the investment-constrained IT department.

However, there are significant challenges to be overcome. Those VARs who wish to play an active part in this change have

multiple key and urgent choices to make. To maximise the chance of success and minimise risk, their strategy needs to be

professionally researched, analysed, planned and implemented.

This white paper is provided "as is" and without any warranty of any kind, expressed or implied. All warranties are expressly disclaimed.

7 IMS Research, Security Systems Integrators Unsure of IT Distributors, 17 May 2012

A 2012 IMS Research report stated:

“The ... factor holding back many traditional

systems integrators are the legacy security

distributors where strong relationships exist

and continue to persist”1

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