John Honovitch has a great post entitled Top Five IP Camera Problems. He identifies five reasons why people don't usually choose analog over IP (still):
IP Cameras are too Expensive Compared to Analog Cameras
Storage for Megapixel cameras is too expensive
Smart Cameras are still in their infancy
DVRs offer limited support
Lack of Integrator Training
IMHO, problems 2 and 4 are non-issues. Storage is dirt cheap and getting cheaper every day. I have a 4TB Drobo kit, for example, for $1,249.95. Very soon, we will not be worried about storage. As for DVRs offering limited support, well, that's what NVRs are for.
The price and limited capabilities of IP cameras are very troubling, but to me, the biggest challenge is the fact that integrators won't sell it because they are completely ignorant about the technology and unwilling to learn. It won't matter how good and cheap IP cameras get, if installers won't spec them, install them, or support them, then they just won't get used. End of story.
As soon as, say 60% of medium sized installers are confident enough to at least offer IP cameras as an option to their customers, we will see the widespread use of IP cameras. Not before.
That's why initiatives like Northern Video's IP Roadshow is so vital to the future of this industry. I attended the show in New York City and took the Northern Video Systems' IP Networks: An Introductory Course class. It was excellent, by the way, though I may have been the youngest person in the room. And that's fine- I think it's terrific that the people on the top are taking the time to check out this whole "internet camera thing" the kids are talking about.