Industry in Flux Remains Hush-Hush About Entry Level

In a globe-sweeping trend, major security players are providing entry-level, no-frills products or else lowering the prices of previously considered enterprise-level offerings. Whether to target the burgeoning SMB market or to provide more options for existing customers in the subsiding but ongoing credit crisis, manufacturers have reacted to this topic in a more or less hush-hush manner. A&S explores why.


Security is not the first to witness the "entry-level" trend. In consumer electronics, netbooks are emerging as a bright spot in computer sales compared to notebooks, and DisplaySearch estimated that worldwide sales of netbooks will double from last year to a total of 32.7 million units this year.


Users today, with easier access to information, are getting "smarter." With the recession, a growing array of choice is becoming available, and users' evaluation of price/performance is increasingly demanding and stringent. This, in turn, has placed an added strain on manufacturers. Some industry experts, in response to this phenomenon, have said that though users' needs remain, they are more careful with cost; as a result, more customers are demanding "special discounts" compared to the past.


Well-known brands such as Axis Communications, GE Security, Bosch Security Systems, Honeywell Security, Pelco (a Schneider Electric company), Paxton Access, Elmo and Chubb (a UTC Fire & Security company) are all poised to get a fair piece of the pie, and yet many have been hesitant to share marketing strategies with the media. When asked about their entry-level offerings, most manufacturers responded, "Our key focus is still the professional market," or politely declined the opportunity altogether.


Interestingly, some manufacturers seem to be testing the waters, first offering entry-level products then quickly discontinuing them. This is bemusing and can only be tentatively ascribed to a lack of adequate channel strategy and support, or simply a change of heart to stick with premium offerings.


Opening Pandora's Box
All is not lost, as a handful of bolder vendors warily discussed their entry-level product specifications as well as the strategies behind their offerings. To keep in tune with market needs, offering reliable entry-level products will help companies become more aggressive, said Brunello Mabel, Export Manager at Elmo. Even so, after-sales support for these offerings is critical for successful market penetration.


Oh Tee Lee, Regional Director for South Asia Pacific, Axis Communications said, "We're offering entry-level products partly because there are customers who require cameras with very good image quality only. These customers will not wind up paying for features they don't need."


While there is a huge potential, not all are successful. "There's an ambition for many manufacturers to get into this segment, but unless they have a clear strategy on portfolio, quality, price-point and after sales-support, it can be a big challenge to survive in a long run," said Surajit Biswas, Director of Vendor and Business Development at ADI Global Distribution.


Previously much attention was diverted to value-added channel partners, whereas a fair amount today is also spent on distributors well-versed in IT/IP who are just venturing into electronic security with entry-level offerings targeted at SMBs. "The SMB market is not a growing segment; it's quite untapped. People in India, for example, are used to buying unbranded products from unorganized players, but if known brands enter the fore, it gives customers more confidence on quality to purchase a product, and the market more support to grow," Biswas said.


Beginning with video surveillance, this article explores the basic product needs in each category and discusses manufacturers' and distributors' takes on the elusive topic.


Video Surveillance
The make-it-or-break-it feature of an entry-level camera is image quality. Users purchasing these products are not fussy about the latest compression format, resolution, zoom features, low-light capability or added accessories.
What they demand is good image quality.


"Using progressive scan, our cameras provide clear video images of moving objects without blur motion," Lee said. "Cameras of inferior quality will consume a lot of power and generate a lot of heat, whereas well-designed products can operate 24/7 without burning up." This year, Axis's entry-level M10 series sold better than ever before.


"Our entry-level speed domes cater to customers who don't have the budget or requirement for high-end cameras. These customers don't need the bells and whistles — they need a simple camera," said Alex Doorduyn, Product Marketing Manager of Pelco (a Schneider Electric company). "The SMB market is growing, particularly in Asia for the commercial vertical which, up until recently, has not deployed video surveillance on a large scale like high-security applications such as airports or prisons."


Interestingly, experts have let on that some companies are lowering the prices of their network cameras not only to make them more affordable, but also to push them into a similar price/performance league as analog cameras (with a difference of roughly US$20 to 30). "Manufacturers can play with specifications and features to such an extent that they can develop an entry-level product that is stable," Biswas said.


Entry-level network cameras should be around $100 and DVRs $140(manufacturer suggested retail price).


Honeywell Security has also ventured forth, and Jeremy Kimber, Strategy and Channel Marketing Director, EMEA, said, "We're extremely excited about the Performance-series cameras and DVRs and feel confident that we've positioned this line to offer both performance and competitive pricing."


Jon Hughes, Video Product Marketing Manager of GE Security, agreed, adding that, "Budgets are being slashed, and security directors are being asked to do more with less. We'll be introducing a new line of DVRs under the TruVision brand, and despite additional capabilities (H.264 compression), the DVR will be at a price point our customers will appreciate."


While maximum opportunities for entry-level products sit with video surveillance products, access control and intrusion detection are another story.


Access Control
"More entry-level products can possibly enhance the access control customer base, but brand name is still important here," Biswas said. "Developing countries such as Southeast Asia, China and India are in need of products catered to the SMB segment," said David Lee, MD at Horizonline. "We target the mass market because that's where opportunities are. SMBs are looking for systems at a lower cost, but often entry-level products from China don't yield satisfactory quality." The competition in access control is, therefore, price and quality.


Bosch Security Systems offers an access control solution that allows users to start out small without lowering the safety standard. "Users' investments are safeguarded because the system supports the same controllers as do project-based systems, and can easily be expanded into a larger system," said Harald Gillessen, Access Control Product Manager. Some basic features include simple and fast installation, where installers do not need to administrate a database system and video verification capabilities.


Over in the U.K., Paxton Access' Easyprox Nano combines a wireless access control unit and a reader into one system. Without wiring costs, users can save thousands of dollars. This entry-level access control product is suitable for offices and homes, among other applications.


Biometrics
It is safe to say that there has been great interest in entry-level biometrics. Fingerprint scanners, for example, are common on notebook computers. "However, the experience with these systems is very patchy," said Stephen Wilson, MD of Lockstep Consulting. "I think entry-level biometrics creates risks. They create a false sense of security, which is especially dangerous with biometrics because there is no way to recover from ID theft."


Entry-level devices tend to be tuned for convenience rather than for accuracy. Few users understand this trade-off, which means that the offering might not deliver the sort of security consumers expect, Wilson said.


On the other hand, SMBs are beginning to look at iris recognition for entry-level access control and workforce management applications. Customers looking for one or two, up to four control access points to manage their workforce better, said Mohammed Murad, VP Global Business Development and Sales at LG Iris. "We believe this is going to be a growth area, so we're placing a lot of emphasis on this market segment."


Intrusion Alarms
Intrusion alarms are a slightly different story. "People typically refrain from purchasing entry-level alarms unless these products have a good reference check and experience in the market," Biswas said. Technical competence is critical, as a high rate of false alarms can render a system useless. Alarms are also difficult to put a price on because there are many components involved — detectors, panels, accessories and so on.


For system integrators, intrusion alarms remain a small portion of the overall sales compared to video surveillance and access control, and most will keep these offerings limited, with one or two brands available, said Alex Ng, Executive Director of Viewtech & Communication.


New interest comes from clients who have never had a security system before, said Mark Brisson, MD of Chubb for Hong Kong, Macau and Taiwan, UTC Fire & Security. The starter package represents a cost-effective solution to secure premises. Intrusion detection adds safety and value even with a basic system of motion detectors covering vital areas.


Starter packages typically feature alarms triggered at the premises only, whereas mid-level systems would include notifying a monitoring center. "We would advise clients who have installed a basic service to enhance protection by connecting to monitoring center," Brisson continued.


An established brand and quality assurance are the differentiating features to successful market penetration of entry-level intrusion alarms. "There's a tendency for customers to go for these products, as premium users sometimes look for an alternative, so long as it has better price-performance and its features are the same as well-known brands," said Indra Komari, Business Line Manager for Retail and Site Protection of Indonesia, Gunnebo.


Purchasing Decisions
Now, with quality assurance from international brands, the next question seems inevitable: What will happen to after-sales services and warranties? "There's a general opinion that entry-level products break down easily and are of low quality," said M. Fatih Kili?, CEO of S Mart Business Solutions.


Products with basic features are typically stand-alone and easy to use. The question of reliability is one that crops up when distributors consider them. "Even customers looking at entry-level products, who are not brand loyal, are careful to choose for reliability. Warranties and after-sales services are very important," Biswas said.


Typically, entry-level products carry less warranties compared to premium brand products. Countless manufacturers offer cheap products but fail to sell them in longevity because they lack quality and after-sales support. Therefore, suppliers who provide defined warranties (minimum one year) and after-sales support (spares and/or replacement) are those who have a chance at addressing the market, Biswas said. Most major providers issue warranties of one to two years, and though the market is potentially huge, distributors are extremely wary of entry-level products before making a purchasing decision.


"Buyers need to be cautious about going for entry-level products because it's attractive to buy them to ramp up revenue, but it can be dangerous after few months if it gets returned," Biswas said. A thorough due diligence is important (including testing of samples, checking certifications, visiting factories, checking quality processes and understanding the back-support), before making inventory decisions.


In the whole sale business, however, distributors need to carry entry-level products to attract system integrators so that they, in turn, can offer more economic solutions to their clients, Kili? said.


In terms of after-sales service, some distributors manage component level swap outs, but if it is a board-level issue, local service centers or service centers abroad get involved. Clients will pay a fee if the item is out of warranty, said Bernard Senekal, MD at Sentronics.


Despite these reasons to remain cautious, it is popular opinion that distributors are satisfied with entry-level products backed by well-known brands. "Clients will say that it's a bit expensive in some instances, but Tier-1 product offerings are good for the price," Senekal said. "Some Tier-1 manufacturers didn't hit the entry-level market at the growth they had hoped for, but brand continuity will mean trying to cover as much of the market as possible in a way that doesn't damage the brand."


Other experts disagree. "In general, I think it's difficult for premium-oriented manufacturers to compete with entry-level product suppliers," said John Honovich, founder of IPVideoMarket.info . Most importantly, pricing tends to be too high and they are not aggressive enough on squeezing out cost. Therefore, while some manufacturers are offering entry-level series, the bigger and more important trend is a shift to "budget" manufacturers, Honovich said.


Involving the Mass Market
With the spiraling economy, SMBs are not the only ones interested in entry-level products, as users from all market segments are turning heads to lowered prices and basic features. Some manufacturers have even gone so far as to actively market their overstocked or discontinued products at a special price to expand their customer base.


There has been much talk about security becoming a "must-have" purchase, rather than a grudge or luxury purchase. If this is truly the case, SMBs must be a new focus group, as all technologies will gradually become more available and accommodate mass-market needs. "Prices are going down. This means it's going to be more competitive, and security may be on its way to involve the mass market," Doorduyn said.


That being said, it remains a challenge for suppliers to develop a stable, rugged, cost-effective entry-level product, Biswas said. "There's a huge opportunity in this segment, and the next few years pose tremendous potential for entry-level products."