In this article, we would like to discuss what are business ecosystems, their relevance and impact to the security industry and how channel players can play a role in them.
In our conversations with security channel players over recent years, three important issues stand out. Distributors and integrators alike state that they are facing mounting challenges posed by product commoditization (cameras in particular), market consolidation, and the changing technology landscape.
Dropping camera prices and their increased availability through new sales channels (like IT distributors, big box retailers or online portals) have reduced margins significantly and pushed many players out of the market. In parallel, big companies are acquiring more brands under their umbrella. When there are less and less players in the market, the need for more channel players diminishes.
Digitization and the growing acceptance of cloud technology pose additional challenges for the traditional channel player. If cloud companies can do business directly with the end user, the role of the channel player as an intermediary becomes less significant.
The growing sophistication of edge devices has also changed the demands for installation, integration and maintenance. This puts pressure on channel players to improve their technical skills in order to deliver proper solutions.
In order to succeed and stay relevant, channel players need to look for new ways of doing business that can deliver better results to end users. If before, businesses focused on creating a competitive barrier against other companies, now the trend is to cooperate and create new ecosystems that rely on cooperation more than on competition.
What is an ecosystem?
When attending large security trade shows, you will undoubtedly see companies promoting their “ecosystem partners” in their respective booths. The confusing part is that the same company may also be represented in several other “ecosystems.” Hence, clearer differentiation is needed to be able to identify a new business ecosystem from what is simply an integration partnership.
Management consulting company Boston Consulting Group defines a business ecosystem as “a dynamic group of largely independent economic players that create products or services that together constitute a coherent solution they couldn’t deliver on their own.”
This definition means that each ecosystem has:
1. A specific and defined solution – this is the value they deliver.
2. Clearly defined members with different roles that work together to bring their solution to life.
It also implies that business ecosystems are:
Coordinated. Ecosystems are not controlled from the top down, but instead have some sort of mechanism for coordination — either through standards, rules, or processes. Ecosystems also have an orchestrator, a core member that coordinates the work of member companies. Orchestrators build the ecosystem, encourage others to join, define standards and rules, and help resolve conflicts.
Customizable. The products and services of the ecosystem participants tend to be customized to the ecosystem and made mutually compatible.
Multilateral. Ecosystems are not made up of just bilateral relationships. This means that a successful contract between A and B (e.g., the camera manufacturer and VMS provider) can be undermined by the failure of the contract between A and C (e.g., the camera manufacturer and the video analytics provider).
This is part of the definition that is most relevant to the security industry. If the partnerships within the said ecosystem are all standalone partnerships (bilateral and not multilateral), this would indicate that it is not an ecosystem, but rather an integration partnership.
This can pose a challenge in security projects: how to identify and match the required partners – the interfaces between the components are not always well standardized, the specifications of individual components can change, and changes to one component require corresponding changes of other components for the ecosystem to realize its full value.
How will this impact the security industry?
The sad truth is that many business ecosystems fail. Many vendors have tried to create their own digital marketplace, or promote themselves as orchestrators of an ecosystem. You can no doubt think of a few companies that have tried but didn’t make it.
This can be due to several inherent factors. One, ecosystems consist of largely independent players that agree to collaborate, which translates to limited control of the overall system by each participant and limited means to enforce or control the behavior of partners. Another potential issue lies in value distribution, which needs to be fair and attractive enough for all the participants to remain in the ecosystem.
We believe that we will see 2 trends in the coming years, increasing the number and nature of involved companies.
The first is the growing involvement of channel players. More distributors and integrators will shift to become value-added resellers and play a bigger part in localizing the vendor ecosystems, being able to contribute more due to their direct access to customers and their needs.
The second major development will be non-security companies joining existing ecosystems. For example, business intelligence or ERP companies can use video feeds from video security systems for better business efficiency and resource use.
Companies that can adapt to this new way of doing business and move from building competitive barriers to coordinating partnerships, stand to reap the most benefit. These partnerships can offer access to a broad range of capabilities that may be too expensive or complicated to build in-house as well as open new sales channels for existing products or services.
But perhaps their biggest contribution is as innovation drivers. The collaboration that ecosystems encourage can introduce new components or combinations of existing components that in turn will become a new product offering, enabling to provide value also beyond security.
Product Adopted:Other