The video surveillance industry is turning towards a recurring monthly revenue model that includes the cost of hardware into a monthly service fee, according to a new report from IHS.The world market for video surveillance as a service (VSaaS) is expected to see average annual growth of 17 percent from 2012 to 2017, reaching nearly $1.3 billion by 2017. Growth in specific segments of the market, such as the residential and small-medium business (SMB) sectors, is expected to drive a change in the typical buying model.
Much like the mobile phone industry, the video surveillance industry is turning towards a recurring monthly revenue model that includes the cost of hardware into a monthly service fee, according to a new report from IHS, a leading global source of critical information and insight.
The world market for video surveillance as a service (VSaaS) is expected to see average annual growth of 17 percent from 2012 to 2017, reaching nearly $1.3 billion by 2017. Growth in specific segments of the market, such as the residential and small-medium business (SMB) sectors, is expected to drive a change in the typical buying model.
“End users in the residential and SMB segments, while interested in a video surveillance system, often are not in a position to make the significant capital outlay required to purchase hardware upfront,” said Aaron Dale, analyst for the Security and Fire group at IHS. “Inherently, businesses and consumers prefer to spread the cost of goods and services over time.” Including the cost of hardware in the monthly service fee has proved particularly popular with end users in China, a market that accounted for an estimated 68 percent of global revenues last year.
A move toward this type of billing method could present a challenge for some video surveillance equipment vendors, which are used to transactional sales. Even so, many companies prefer the recurring monthly revenue model, as it fosters a more dependable cash-flow model and has the potential to generate a larger profit margin.
“Security systems integrators are uniquely positioned to capitalize on the growing popularity of this business model, as they are used to billing on a monthly basis,” Dale added. For their part, both integrators and manufactures could take advantage of this market by creating strategic partnerships. The integrator provides a service package, while the manufacturer benefits from additional camera sales.
The growing popularity of hardware-inclusive billing models, in turn, has the potential to reshape the competitive landscape and spur new interest in the overall video surveillance industry.