The demand for cloud video surveillance solutions, e.g., video surveillance as a service (VSaaS) is growing significantly each year. But how much are users willing to pay and what are key obstacles to cloud-based and hybrid security solution adoption?
The past years have seen a steady erosion of margins for security distributors and integrators. The commoditization of IP cameras created the so-called “race to the bottom.”
Read: These 10 companies earned a total revenue of $17.76 billion in 2019
Declining prices have pushed out many of the smaller market players and today, the camera industry is dominated by a handful of large companies.
When cloud-based security solutions emerged and matured, many saw this as an offering that can revitalize the security industry and bring in new players. We have seen demand for cloud video surveillance solutions (e.g., Video as a Service) grow significantly each year. Memoori even forecasted a CAGR of no less than 12% over the next five years. It is of no surprise that this has attracted the attention of both integrators and manufacturers -- who wouldn’t want recurrent revenue streams and better profit margins?
But for this business model to work, they need paying customers.
Which boils this down to one question, How much are users willing to pay?
Top user obstacle for cloud adoption
In our recent reader survey of industry channel players, one of the questions we asked was: “What are the key obstacles you see in adopting a cloud solution?”
If you’re thinking money… you’ve hit the nail on the head.
51% of respondents cited the price or the cost of cloud solutions
as the top reason they haven’t adopted a cloud solution, followed very closely by information security concerns (their reluctance to allow a third party to access their video data).
When asked about their perceptions of price, the vast majority of respondents expected cloud solutions to be cheap
Our survey showed that 33% of respondents expect the price of a VSaaS solution to be between 0-15 USD (per camera per year)
, with an additional 30% expecting a price range of 16-50 USD per camera per year.
This raises some question marks about the viability of the VSaaS business model.
We can of course try to reason this out as such – Many cameras today are relatively cheap and accessible. Since VSaaS is offered as a free “add-on” in some existing VMS systems, the market may have a low “willingness” to pay higher for this service.
If you are a manufacturer or integrator planning a VSaaS offering, you might need to consider this point carefully moving forward.
Will cloud help in stopping the security industry's race to the bottom?
Our opinion: Yes. VSaaS is not new, but its value proposition in the midst of COVID-19 is giving VSaaS adoption a strong push.
- Feature-wise, channel players are appreciating the fact that cloud infrastructure allows remote monitoring and centralized monitoring, reducing the need to go onsite.
Read: Cloud market survey says these are the key benefits users are after
- The business impact of end-user financial constraints posed by pandemic. Despite predictions of a post-pandemic economic boom, many companies that were out of business for almost a year will not have extra cash to invest. There will be a shift in purchasing behavor from CAPEX to OPEX model. In other words, End users will be leasing or "renting" according to their needs instead of paying a huge amount upfront for security equipment.
Read: The 3 business practices and features that will change post-COVID19
Whether users go full-on cloud or deciding on a mix of on-premises and cloud-based services, there is room for more players in the market. Our reader survey indicated that the security industry wants to go cloud- but still doesn't know with whom. Vendors that are able to provide such a model and help their clients reduce the impact on their cash flow, have a better chance of winning new projects in the coming years.
Full survey result infographic here
This cloud and hybrid video surveillance guide for security channel players includes a comparison of the pros and cons of cloud versus hybrid-based cloud surveillance solutions, a reader survey of the cloud security market, FAQs and best practices for hybrid video surveillance, and an industry directory of cloud security service providers.
Asmag.com cloud market survey
We asked channel players chosen from asmag.com weekly newsletter subscribers to take our cloud survey. 147 valid responses were collected and are the basis for our findings. The respondents are representative of asmag.com’s readership: most of our readers are from APAC and EMEA and survey responses were also concentrated from these 2 regions: 44% of answers came from APAC, 42% came from EMEA and 15% from North America.