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Looking into the pricing structure of managed security services

Looking into the pricing structure of managed security services
The advent of cloud technology has changed existing business models in many sectors, including in the security industry. The major benefit managed services bring is flexibility in infrastructure and finance. Opting for a managed service offers end users flexibility in scaling their systems, either expanding or downsizing according to the business needs. From a financial perspective, it also offers the possibility of spreading the associated costs over time instead of paying a large sum upfront.

Managed services also give users the chance to get better features and technological capabilities, for example video analytics or features previously available only in high-end video management systems that might be out of the financial reach of smaller players.

The cost saving is not only for the end user but also on the vendor side. Apart from the initial installation, vendors also centralize their operations and can achieve efficiencies in management and maintenance, reducing the need for site visits and giving them the ability to upgrade systems in a centralized manner and address problems faster.

For video surveillance, the ongoing subscription fee is generally associated with the number of cameras and video retention period. Payment is per-camera and according to the length of storage in days the end user wants. Resellers usually offer either fully managed or partially managed services. In a fully managed service, the end user signs a multi-year contract which amortizes the cost of installation and cameras over the course of the contract, along with other subscription services. With a partially managed service, the end user pays upfront for cameras and installation, and pays a monthly fee.

Recurring monthly revenue (RMR) is of course a lucrative option for solution providers, but might be a deterrent for end users who don’t want to be tied into a recurring cost. “Resellers need to present the value proposition of hosted services in a way that makes sense — like the data plan that goes with a cellular subscription. The service is a continual benefit to the customer, so it only makes sense that there is an ongoing fee for as long as the benefit is being provided. Hosted services offer far more value than on premise alternatives,” Steve Van Till, President and CEO of Brivo added.

In some cases, the pricing of managed services follows models common in other managed services, such as the “freemium” model. Freemium is a pricing strategy by which a product or service is provided free of charge, but money (premium) is charged for advanced features and functionality.

Ivideon’s cloud video surveillance service is one such example. The company offers three pricing plans: free, premium, and professional. The free program allows users to connect up to two cameras per account. Larger numbers of cameras, longer periods of cloud storage (e.g., seven or 30 days), as well as other features are covered in the other plans. 

Who Should Choose VSaaS?
Managed-service solutions are most suitable for small and medium businesses (SMBs) or large businesses made up of many smaller locations. Nikhil Shenoy, Director of Product Marketing at Kastle Systems pointed in particular to owners and managers of multi-tenant office buildings as well as the tenants themselves (most usually small/medium services companies or branches of larger enterprises) as the typical users of managed security services. These clients do not have the resources to maintain a full-time IT department or security department and managed services give them the ability to outsource a part of their operation that is not their core competence.

“We generally find companies that do not have in-house security personnel (e.g., a director of security who assembles, maintains, and manages their own system with their own people) will turn to a managed security provider to outsource that part of their operations,” said Shenoy.

“Any ongoing service incurs ongoing costs including: maintenance of equipment, operations staffing, and asset monitoring. In-house operations will still incur these costs and have 100 percent of the system and overhead/HR burden, whereas the recurring monthly fee of a managed service is more efficient and contained to that aspect of business operations.”

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