Software-as-a-service (SaaS) is shaking the physical security industry. A veteran of the IT and consumer markets, the service has cast a small but expanding spotlight, inviting security providers to further solution development in the IT world.
Since the rise of IP-based systems, Internet bandwidth has become more flexible and cost-efficient, while Internet security has become more reliable, said Fredrik Nilsson, GM of Axis Communications. These factors set the stage for software-as-a-service (SaaS) to enter physical security.
SaaS, hosted or managed services, offers users the flexibility of having their security systems managed and stored over a network. Vendors typically host accounts at their own databases that oversee computing infrastructure, while allowing clients to manage their own accounts, said Steve Van Till, President and CEO of Brivo Systems.
In a nutshell, customer benefits should include reduced complexity of installation and equipment costs, as well as easier access to systems locally and remotely — be it video, access control or intrusion detection. However, uptake has been slow. The service is not only new, it also faces installation, compatibility, scalability and security drawbacks.
"People had to be convinced that it's safe to have their data hosted off-site, but now with Gartner Research projecting US$10-to-12-billion worth of commerce being managed this way, corporate America has become much more accepting," Van Till said.
In the last two years, most new entrants are in hosted video, with hosted access control having a longer history. "The margins of sales of hardware are dropping and have been dropping for some time now. This is an opportunity for vendors and system integrators to participate in a higher margin business via recurring revenue," said Bill Bozeman, President and CEO of PSA Security.
Gartner Research predicted the overall SaaS market will grow at more than 22 percent a year, and 25 percent of new software services will be delivered by SaaS in a few years, Nilsson said. A report by IMS Research found global remote surveillance, comprising product sales and recurring service revenues, was worth more than $300 million in 2008.
At the moment, less than 5 percent of video is delivered as a service, but it is expected to grow quickly, Nilsson said. The U.S., a world leader in IT adoption, seems quick in picking up hosted video services.
Video surveillance and access control have different requirements. As a whole, surveillance demands for bandwidth and storage limit its applications.
Compared to the DVR market, the SaaS market is minute. Its potential attracts vendors who focus on individual or multisite small-tomedium businesses (SMBs) and residential security. "Restaurant chains and SMBs buy SaaS through central monitoring stations," said Alan Avidan, President of OzVision. "In the U.S. alone, there are 40 million accounts like this."
For example, the owner of a pizzeria equipped with alarms may add video capabilities. These applications are perfect candidates for video-as-a-service (VaaS).
Adding video capabilities to SMBs means that business owners can streamline management processes on top of the added layer of security. For example, owners can program open-and-close reports to see who first entered and last left the premises, Avidan said.
With traditional systems, users must install coaxial cables, DVRs and ensure maintenance, whereas hosted video requires only the installation of cameras with footage recorded off-site, Nilsson said.
Service providers include alarm monitoring companies and telecommunications companies. The difference between the two is that telecommunications providers host the video but users monitor it themselves. This is practical for private residential use.
For SMBs, however, the trend will be toward alarm monitoring companies, who will host and monitor the managed services. Business owners of multisite chain stores find this solution ideal, and currently account for the bulk of hosted video users, Nilsson said.
Enterprise risk management has emerged as a new vertical. Large installations with central monitoring rooms, such as hotels, employ hosted cameras to watch security personnel viewing the cameras. Data centers have also followed suit, with cameras watching over racks of NVRs and DVRs.
"There has been a growing niche in 'watching the watchers,' the value being that the video is not stored on site nor controlled by the user," said Brian Lohse, Director of Business Development at Secure-i. "This is seen as an external quality control audit."
Home security in the U.S. is an $8 billion industry, said Gregory Roberts, VP of Marketing at iControl Networks. With broadband becoming increasingly prevalent, the overlap between home security and broadband usage takes the stage. In homes with security, 80 percent of them utilize broadband connections, and convergence that will enhance numerous services will take the home security industry beyond its current 24 percent penetration in the U.S. marketplace, Roberts said.
VaaS gives the option of putting up as few as one or two cameras. Home owners typically refrain from using surveillance because the cost of purchasing and maintaining a DVR and software for one or two cameras is too high. With hosted video, users can ensure security and safety at home, while keeping an eye on children or the elderly, Lohse said.
For access control, the possibilities are virtually limitless. Property management for multidwelling units and condominiums, and commercial verticals, such as national large format retailers, are seeing the benefits of SaaS.
"Forty percent of our business is for property management applications.
These companies might manage tens or hundreds of different properties in a given area, and hosted access control services allow them to manage all their properties without involving an IT staff," Van Till said. "We're growing at about 50 percent a year, and property management is enjoying that similar rate with its adoption of SaaS."
Retail is an ideal application, as large chains can have hundreds or thousands of locations. Integrated with hosted video services, deployments would include two or three cameras at each location — the front/ back door, cash room, high-value merchandise room, or manager's office. "There are thousands of locations in many of these large retail operations, but each location only needs a handful of cameras and access control points," Van Till said.
Traditional Models vs. SaaS
For hosted video deployments, the importance of the camera is higher than it would be in a closed system. The hosted camera does more work, including motion detection, to determine when it should record and when sophisticated processing should work.
Often with NVRs or DVRs , cameras blindly send footage to the storage and management devices, which then decide what to save or discard. For this reason, VaaS vendors typically partner with top-of-the-line camera manufacturers or develop their own line of cameras to meet the requirements, Lohse said. "The power of a strong camera is more important than ever, because it's doing a lot of work that the DVR/ NVR usually does."
An advantage of hosted video is the separation of management and recording. If the Internet connection fails, cameras can continue to record on network attached storage (NAS) devices, while the off-site hosting server is able to send notification e-mails or SMS messages to users, Lohse said. DVRs, even if programmed to send notification E-mails, are unable to when the local
Internet connection fails.
With an added and often prioritized operational function, access is easy and convenient. SaaS speaks to smart phones and computers, so at any given time with adequate network coverage, users can log onto their accounts and access their camera footage.
DVRs are notorious for living and eventually dying, Avidan said. "When you manage several locations, you end up with continuous maintenance problems that involve constantly buying or replacing equipment, which adds up to heavy sunk costs." When DVRs need replacing, all information needs to be transferred elsewhere, adding another layer of complexity.
The benefits of access control are more transparent. Securing key areas separated by large distances via Web-based systems enables customers to tap into existing TCP/IP networks, and reduces the need to install expensive cables and wiring, said Terence Lee, Director of Product Management, APAC, Ingersoll Rand Security Technologies.
In the case of greenfield projects, vendors have developed access control panels with built-in GPRS modems that work over cellular networks. "As a reseller for major telecommunications providers, we can build connectivity into our control panels," Van Till said.
Lower costs are a primary driver for SaaS market penetration, but there are outstanding factors to consider. "Vendors argue that monthly fees for their services provide more financial flexibility than the significant upfront cost of buying DVRs. This benefit is limited by the implicit interest rate that users would absorb if the service's multiyear cost was significantly higher than the cost of a DVR/NVR," said John Honovich, founder of IPVideoMarket.info.
However, maintaining fleets of DVRs for multiple locations can be an IT nightmare. "Businesses usually end up with a lot of different types of DVRs. Maintenance, including the numerous patches sent to users by manufacturers, is time-consuming and costly," Avidan said. "A good DVR can cost users somewhere between $3,000 and $5,000, which is a rather hefty capital expense."
"Achieving a price point of $10 per camera per month is realistic, and at that point, the motivation to replace analog systems will be high," Honovich said. "Users should note that this price point pertains to services only, as camera costs are separate unless otherwise specified by the vendor."
When hardware and software companies partner to offer SaaS, they are two independent parties both seeking significant margins for their products. "The end result is that most hosted/managed video solutions are noncompetitive for a total system cost to the end user," said Steve Roskowski, CEO of Viaas. "Users have to pay a significant premium for the functionality delivered — they must buy the camera at the retail price, then pay for the services."
Vendors who provide the total solution will become increasingly competitive, as they can control pricing, manufacturing options around the hardware, the service and so on.
Security companies move to offer SaaS, as users look for more scalable, easy-to-access and feature-rich solutions, said Bill Diamond, President and CEO of Xanboo.
Experts in the field agree that SaaS will be a game-changing technology. "While 2010 should see exciting announcements and product improvements, broader use for SaaS will more likely occur in 2011 to 2012," Honovich said.
Over time, the SaaS market should polarize, dominating small installations such as SMBs, and large installations, like campuses or municipalities. "For installations between 16 and 100 cameras, however, premise-based solutions with direct integrator support will continue to be a compelling solution," Roskowski said.