There have been a lot of major mergers and acquisitions (M&As) in the video management software (VMS) side of the security industry as of late. Whether it be M&As between hardware and software companies, or the coming together or two software companies, one thing for sure is that the VMS landscape is a changing one, and one that looks like it will only continue to change in the near future.
In the past few years the security industry has witnessed several major M&As involving VMS companies. These M&As have come in the form of hardware companies acquiring VMS companies (e.g., Canon Europe acquiring Milestone Systems, Panasonic acquiring Video Insight, and Tyco acquiring Exacq Technologies) and one VMS company acquiring a fellow VMS (e.g., OnSSI acquiring SeeTec).
The reasoning behind most of these M&As seem pretty obvious. Whether it be to gain market share in new market regions, or to acquire new technology and create a fuller solution, these M&As are changing the VMS landscape. Now, the question is, how exactly will these M&As effect the VMS market, open platforms, and independent VMS companies?
The Many Sides of Consolidation
For the most part, anyone in the security industry will attest that M&As and market consolidation are a good thing: it is a sign of market maturity. In fact, consolidation fuels innovation and competition. But what does this mean for independent VMS companies that are now up against those with large corporations and plenty of investment capital behind them? While concern has been expressed over the possible repercussions of consolidation on open-platform standards, independent companies don't seem too worried about what that means for the future of the independent VMS.
More Investment, More Support
For those that have been acquired by larger companies, the benefits are obvious: more investment and more support. These two things are exactly what Mike Taylor, Director of Sales for North America at Milestone Systems, highlighted. The acquisition of Milestone Systems by Canon Europe last year sent shockwaves through the security industry, as the number one VMS company globally, best known for their commitment to an open platform, had been acquired by a relative no one in the security industry, Canon Europe. However, this marriage, according to Taylor, is nothing but beneficial to Milestone. "For us, there is additional investment which brings with it new growth opportunities in head count. We've changed our structure for the new year as to how we're going to market. And by having that additional investment it's given us the opportunity to add significant new roles, as well as upgrade our talent."
Power in Independence
Obviously, more investment opens up a lot of doors for R&D, talent recruitment, and marketing. Smaller, independent VMS companies definitely acknowledge these advantages. Despite the advantages, IPConfigure, an independent VMS company that specializes in cross-platform product offerings, also noted the drawbacks of outside investment — with more investment comes more complexity in running a business, which is exactly what Chris Uiterwyk, CEO and President expressed. According to Uiterwyk, IPConfigure has no immediate plans to acquire or merge with any other company for several reasons. "We're open to strategic partnerships but at the end of the day being independent means we don't have outsiders forcing us down paths that we don't believe are good for IPConfigure or the industry," he said. "As a result, the IPConfigure team has absolute influence over the company's destiny. Making informed and sound decisions comes faster and results in the development of new technologies ahead of our competitors."
M&As have also helped independent VMS companies increase their market value due to the uncertain future of recently acquired competitors. According to Uiterwyk, "The demand for our products and the value of our company goes up every time there's a M&A event, primarily because there are fewer independent VMS companies. However, customers do question the future of independent VMS companies realizing they too could become an acquisition target. This becomes a larger issue for integrators and installers who make large financial commitments to educate their sales and technical staff on a particular technology and expect a long return on their investment."
Likewise, Randy Miller, VP of Sales of WavestoreUSA pointed out remaining independent also gives them a leg up with integrators. "While we highly value our partnerships with those third-party partners that have involved themselves with competitive platforms, those that have not are garnering a greater attention from the integrator base that we're most interested in," he said. "Whether they're national, regional, or local integrators, they know they can go out and select the camera that fits their job in the best way, that WavestoreUSA is out there ready to enable them to be able to manage that."
Will Consolidation Close the Market?
One of the biggest concerns surrounding M&As has to do with whether or not they will close in on the openness of the market. Despite the fact that Canon has vowed to keep and support Milestone as a standalone company, there still remain many skeptics.
Eric Fullerton, CEO of Vicon believes that consolidation in the market is driving what he calls proprietary behavior. "We saw Exacq get acquired by Tyco and now they are prioritizing the Tyco cameras. You saw Panasonic buy Video Insight, now that's going to be included in the Panasonic solution as a proprietary VMS. You've seen Canon buy Milestone and Axis, and even though they're saying, 'We're not going to change anything,' they used US$2.5 billion; they're going to have to do something to get ROI. So, I predict that is going to drive more proprietary behavior."
In the end, it is the customer that will be the loser if the market starts to close in, according to Andrew Elvish, VP of Marketing and Product Management at Genetec. "When you see consolidation in an industry, often it signifies lock ups. Users are going to be locked into an offering where they can't choose different camera vendors or the right software for their needs. We think customers should have maximum choice. And we worry that with consolidation it makes sense for the acquirer to say we've acquired these brands so we want to build synergies between them. Ultimately, I think the customer loses out."
Openess for All
Regardless of what is going on in the marketplace and who has acquired who, the desire to keep the market open is an important point for major VMS vendors. As the two top VMS companies in the world, Genetec, who says being independent is part of their DNA, and Milestone, who is now part of Canon that also acquired Axis Communications, are both committed to providing an open platform to their customers.
Smaller VMS companies have also strongly committed to remaining open. "Open platform desirability is one of our core messages for 2015. The camera of your choice, the IP device of your choice, the system of your choice… We highly value the fact that open platform, open to choose really means something. The value that brings is significant and it's real to the integrator, it means they remain in complete control of their system offerings in the field," Miller added.
One thing is for sure, these types of M&As are not done. And, as the market moves to provide fuller solutions, we can expect to see further changes in the VMS market.