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Thursday, January 21, 2010
Wednesday, January 13, 2010
Monday, January 4, 2010
Interestingly, crime seems to be down. Some have speculated that it has something to do with the fact that gun sales are up. I don't know about that, but I do know that the security industry can't even go to people and say “boogity boogity, give us money or your children will be murdered by rampaging thieves!!!” which is of course the go-to pitch for lazy salespeople since Linus Yale invented the pin tumbler way back before the Civil War.
Slow sales to end users translate of course to slow sales by manufacturers. This means that all the manufacturers are scrambling for an ever shrinking pool of potential integrator dollars. What can manufacturers do to make their offerings more attractive to integrators?
There are several factors that go into the decision to purchase this or that product. Physical security integrators are a conservative and cautious lot, and so reliability is almost always the most important factor. There is a real lack of impartial product evaluation in the security industry, so purchasers are often forced to rely on personal experience and word of mouth reputation in order to judge the perceived reliability of products. This of course means that it takes a while for new technologies to filter through the industry. Put simply, physicals security integrators are not exactly hostile to change, but do not believe in change for change’s sake. This makes it far too easy for a company to rest on its laurels, believing that because customers are buying now, they will buy forever, with no need for technological innovation. Eventually the technology stagnates, and suddenly all your customers are buying from AverMedia or somebody. Put simply, a lot of product offerings out there is nothing special. It’s just the same old same old that we’ve been seeing for the past couple of years, and prices have stayed exactly where they are, too.
GE is a terrific example of this. They (or the companies they devoured, anyway) were early innovators, back in the 90s when the industry was slowly going digital, and either led the way forward with carefully rolled out technological innovation. But then they just got fat and lazy and stopped innovating while keeping their pricing sky high, believing that customers would “shop the name”, purchasing cameras and DVRs because there was a GE sticker on the outside. And it worked for a while. Then, in August 2009, GE started looking for a buyer for their security segment, and was eventually acquired by UTC. This was widely seen as an effort by UTC to enhance their already strong access control and fire alarm offerings, two markets in which the former GE Security remain strong- and it is important to note that both access control and fire are relatively low tech, unlike surveillance video. If I may, I'd like to refresh everyone's memory with a link to this acrimonious thread on IP Video Market.
Simply put: aging, expensive product simply will not fly. With the economy the way it is now, everyone is sensitive to price.
The economy is also the reason why a lot of the old guard is experiencing a sharp drop off instead of a slow steady decline in terms of sales. Basically, the two factors that drive DVR sales is new construction and product failure. With new construction in the toilet, especially new construction of large complicated high security multibuilding projects, I’m not surprised that no one is buying expensive DVRs. There is still some replacement activity- as in, replacement of failed equipment- but it takes a while for a DVR to fail, failures can to a certain extent be planned for because they happen on a more or less predictable timeline, and the only time you buy a legacy DVR is to replace another legacy DVR and you have enterprise management software that requires you to use that manufacturer's product. If your DVR goes kablooie tomorrow, and it’s a standalone 16 camera installation, the first thing you do is find a cheaper DVR with similar or superior specs. After all, analog cameras work with all analog DVRs; you don’t have to buy a specific DVR to work with your existing cameras.
Replacing failing cameras is a good steady business, but there is very few cameras out there that you can’t find from somewhere else cheaper. In other words, it’s a simple matter to just go to another manufacturer’s offerings, and budgetary constraints are encouraging security managers to shop around, and the integrators are required to deliver.
You want to know who will ride out the financiapocalypse? EverFocus. You'll note that their stock price has climbed steadily all year long. Why? Three reasons: they've been incredibly aggressive on pricing, they've announced new product on a fairly regular basis (every few months or so, not so quick that it just looks like their spewing in all directions but not so slow that everyone forgets who they are, either), and most importantly, they are one of the prime movers behind HDCCTV, a concept that may revolutionize the industry forever ('forever' meaning 'probably for the next eight to ten years or so') if it actually works.
We are in the beginning stages of a worrying trend in the surveillance video business. Simply put, there is a lot of redundancy in the security market, and we are seeing a contraction of the industry. Manufacturers that cannot entice customers to purchase their products will simply cease to be. So if you're sitting on some cash reserves, you can 1) dump as much money and effort into R&D as possible as quickly as possible, 2) buy some startup with an awesome idea and a cash flow problem, or 3) find some sucker to buy you out. You have a little time to decide... but not much.
The best part? Even if new construction does pick up, customers may get used to paying less money for newer technology, and you may never recover if they continue the way you've been going on.