Editor’s note: This is part one in a two-part roundtable series on video surveillance trends from the perspective of several industry experts. Part one will examine some of the larger, overarching issues that stand to shape the industry moving forward while part two will delve into technology-specific trends and how they will impact the market in 2016 and beyond.
It has been said that video surveillance is responsible for driving growth in the security industry as a whole and it is easy to see why many people feel that way. Anyone who has ever been to an industry tradeshow can personally attest to the fact that security camera vendors easily outnumber their security counterparts in show aisles by a wide margin. But despite its prominent position, video surveillance is also the product segment that is the most influx.
Pundits have long foreseen industry consolidation as inevitable and predictions of increased M&A activity in the market have certainly come to fruition. In the past two years, Canon has acquired both Milestone Systems and Axis Communications, two of biggest industry players in video surveillance software and hardware respectively. There have also been a number of other notable transactions during that same time span including FLIR’s recent purchase of DVTEL and Vicon’s acquisition of IQinVision in March 2014.
Consolidation aside, there are also a number of other elements that are having a big impact on the industry, as well as on the adoption of surveillance technology in general. SecurityInfoWatch.com (SIW) recently reached out to a number of industry experts to get their take on what developments we can expect to see unfold in market during 2016.
SIW: What do you think will be the most significant trend that takes shape within the video surveillance market in 2016?
Josh Woodhouse, senior market analyst, video surveillance, IHS: We can expect to see the continued importance of China to the world market for video surveillance equipment. IHS forecasts that China alone will account for over 40 percent of the world market in 2016. Also, the world’s largest two vendors, Hikvision and Dahua, come from China and are aggressively expanding overseas, particularly targeting the second largest market in the world – the U.S. Furthermore, innovation in the industry, particularly the development of H.265 and HD CCTV, is being driven by Chinese vendors and component suppliers. This is one of the key trends that will also drive further M&A activity as non-Chinese suppliers look at M&A as a means of strengthening their competitive offering. Of course, we could also see major M&A activity from Chinese suppliers who are looking to maintain their high rates of growth.
Fredrik Nilsson, general manager, Axis Communications: For several years, IP video has become the de facto choice for enterprise systems. Meanwhile, the market has recognized the opportunity for and benefit of IP video in small and mid-size systems, which will continue in 2016. In very small systems, cloud-based systems will become more important. The common theme tying this trend together is the importance of ease of design, ease of install and ease of use.
Tom Cook, vice president of sales, North America, Samsung: In the last year, we saw an increase in the popularity and adoption of 360- and 180-degree cameras – a trend that will continue to grow in 2016. Of special note are multi-sensor panoramic cameras, which are able to cover a wide field-of-view in high resolution. While some early multi-sensor cameras had quality issues, new technology has brought costs down while increasing reliability and delivering feature-rich models. As a result, security professionals are beginning to recognize the ability of these cameras to overcome the limitations of PTZ cameras, most notably their unfortunate tendency to be pointed in the wrong direction when an incident or other event of interest occurs.
The drive to deliver higher video resolution seems to perennially land on each year’s “top trends” list, and 2016 should be no exception. The industry has seen adoption rates of 4K pick up in the last few months, and that will no doubt continue, with the tipping point coming when the cost of these cameras comes down to the point where they are more affordable to more users. At the same time, there are already efforts to develop cameras with even higher resolution, made possible by advanced technologies and improvements in video compression. How high will resolution eventually go? Only time will tell, but for now, there are no indications that we’re anywhere near reaching the “enough is enough” stage.
Bob Germain, director of product management, Hikvision USA: Several important trends will take form in 2016. As terrorist threats continue to be a concern in the U.S. and abroad, we’ll see a higher prevalence of high-risk surveillance solutions in the homeland security, government, and military sectors, including border and transportation applications.
The product outlook for 2016 spans a broad array of technologies both old and new. 4K cameras and their associated equipment are an obvious one, along with H.265. Additionally, we expect that 360- and 180-degree IP surveillance will be a popular trend, including panoramic, multi-sensor, and multi-camera systems. Analog still has a foothold in the market, due to the popularity of HD analog. 2016 will see the introduction of 3-megapixel and 5-megapixel HD analog products paired with enhanced functionality and hybrid capabilities.
Karl Erik Traberg, head of corporate communications, Milestone Systems: We believe that video enabling will gain momentum in 2016. Video management software fits into a broad range of business management applications, such as enterprise resource management, operations and supply chain management as well as customer relationship management. Milestone refers to this as video enabling business. The adoption is speeding up as vendors and system integrators learn to include both security and business solutions in their offerings. The key opportunity for the Milestone partner network is to shift the conversation with customers from cost to business value and to generate interest in larger investments in new technology solutions for enhanced business purposes.
Dean Drako, president and CEO, Eagle Eye Networks: The physical security industry will see a surge of growth in managed video surveillance services using cloud technology. Managed services bring close alignment between the objectives of businesses and their integrators. Security integrators use cloud-managed VSaaS to offer their customers lower total cost of ownership, centralized management, tiered services, and flexibility in the number of cameras and retention period. Businesses are shifting from capital expenditures to operating expenditures to simplify their budgets and to make them more predictable and flexible. They are also seeking to minimize their IT headaches.
Ken LaMarca, vice president of sales and marketing, OnSSI: In 2015, we saw the continuing – and growing – need to support multiple disparate systems that sometimes include multiple brands of cameras and devices. The main driver behind this has been the accelerated pace with which manufacturers are introducing new and updated products – a trend that will not only continue, but should increase in 2016.
In the last year, we’ve also seen growth in the challenges security providers face. Of particular note are oversupply and increased competition, with both contributing to falling equipment prices. While this is excellent for end users, it puts even greater pressure on margins and directly impacts the bottom line for dealers and integrators. Additionally, as a result of a number of high-profile and well-publicized data breaches, the balance of spending on security has shifted from the physical realm to cybersecurity initiatives to protect organizations’ data. Unfortunately, each of these challenges will continue in 2016, meaning security providers will have to find creative ways to grow their profits or even change their business models altogether.
Uri Guterman, video solutions product manager, Qognify: Enrichment of VMS offerings to include more and more features from the PSIM world. Video management being a main security system in an organization requires more than just playing video, and system vendors acknowledge that and add capabilities such as incidents management and connectivity to other security sensors and systems in a bidirectional manner to their products.
SIW: Industry consolidation has also been on the rise recently with the increasing commoditization of video hardware. What kind of impact do you think this is going to have on the market heading into 2016 and beyond?
Woodhouse: Despite recent consolidation, supply of video surveillance equipment remains remarkably fragmented. The largest fifteen vendors accounted for just 52 percent of market revenues in 2014.
Nevertheless, average camera and recorder prices have been falling rapidly putting pressure on vendor profits. For example, IHS forecasts that the global average price of a network camera will fall by over 18 percent in 2015. At the same time, vendors like Hikvision and Avigilon that provide full system solutions, have been gaining market share (Hikvision's share increased by five and a half percent between 2013 and 2014). Where three years ago the industry was looking at “best of breed” and integrated systems from multiple vendors, the market data suggests single vendor solutions are now often preferred. These developments are likely to drive future consolidation as specialists are highly sought after to differentiate total solution providers offerings. Interestingly, we now have an increasing amount of formerly independent specialist vendors who are now part of a wider solution but claim to remain committed to open platforms – the question is will this last?
Nilsson: There is a clear trend of prices declining on hardware, especially in smaller systems. That also means that the number of cameras are increasing very fast, which puts more requirements on the way devices and video are managed. The increased number of cameras also poses bigger requirements on the video management software to manage and find all the video.
Cook: The video surveillance market is extremely diverse and this diversity carries through from applications to solutions. Users will always determine which segment of the market they will deploy based on their risk levels and their budgets. And there will always be a need for industry-leading providers to develop innovative products that introduce new technology capabilities to the market.
Germain: Industry consolidation will improve overall product quality as industry leaders become benchmarks for the marketplace. Another benefit is that product pricing will flatten price across channels with less disruption. Vertical focus will also become more important as customers look for tailored solutions from these consolidated companies.
Traberg: The immense price pressures will continue and the industry is facing a shakeout where only the strongest companies will survive.
Drako: Industry consolidation can result in deeper integration with a better user experience for customers. The potential tradeoff is whether the customers are still able to get best-in-class tools which fit their specific requirements. Camera prices continue to decline, with reduced technology differentiation, and DVRs are already commoditized for basic functionality.
In contrast, cloud-based solutions offer tremendous potential for innovation and differentiation across analytics, authorized user sharing, easy multi-site integration, secure mobile access and alerts. Further, the cloud allows the innovations to be delivered instantly to existing systems, accelerating the sheer pace of differentiation.
LaMarca: Regardless of industry, the commoditization of hardware will inevitably become a factor and the security industry is by no means immune to this. From burglar alarm systems through video hardware and more, we have certainly seen our share of commoditization over the years, with more to come. The commoditization of video hardware, specifically, has led a number of manufacturers to acquire software companies to help grow and support their value proposition with complementary solutions. This trend will no doubt continue into 2016 and beyond, not only for video hardware manufacturers, but ultimately for the entire security industry as a whole, as commoditization becomes a factor for an increasing number and variety of hardware solutions.
Guterman: With commoditized video hardware, some vendors will seek for ways they can differentiate their products by focusing on niches and specific verticals, and investing in video applications
SIW: Video analytics have experienced somewhat of a renaissance in the industry over the past several years. What do you think the future holds for analytics and do you see any new capabilities on the horizon that could further improve situational awareness for end users?
Woodhouse: The video analytics market has grown most rapidly through the deployment of analytics built into devices. These video analytics shipping with smart cameras/encoders or recorders are a good way to differentiate. In the UK, there has recently been the first widespread trial of facial recognition in retail for a potential loss prevention warning system. Retailers globally will be watching this eagerly to see if it proves successful. This could be a catalyst for more widespread use of facial recognition.
Nilsson: Analytics has found a role in a few specific applications such as retail, transportation and perimeter protection. The value added by analytics is tremendous. The three things needed to make it successful are: processing power, image quality and analytics software. All three are getting better all the time, and with reasonable accuracy, I see the trend continuing to strengthen, with stronger partnerships between the providers of the technologies to make it easier to deploy.
Cook: The performance of today’s video analytics has largely overcome the initial bad rap the technology earned in the early “over-promise and under-deliver” days. Better still, analytics are continually improving and have become integral to strong video surveillance.
A main driver of end users’ adoption of the technology today lies in the use of advanced video analytics for more non-traditional applications that don’t necessarily fit under the umbrella of security. For example, retailers have found tremendous business benefits from analytics that perform customer counting, identify traffic patterns within a store, and heat mapping to determine product placement and more. Whereas in the past, video surveillance would primarily be used for loss prevention or for investigating incidents after the fact, retailers are now using those same systems to determine marketing strategies and improve overall business operations to increase customer service and grow their bottom line – in addition to security. The result of this shift in video security from a cost center to a business intelligence solution makes surveillance systems much more attractive for a growing number of businesses and other organizations.
Germain: 4K resolution will improve reliance on analytics since it provides more information to make decisions. Desire to prevent terrorist activity in transit points and public areas will also increase the usage of analytics. This is one area where improved object and facial recognition techniques will be important. Another vertical that will be using analytics to a greater degree is retail where behavior analysis will become more prevalent.
Traberg: Analytics technology is definitely having a comeback in the security industry, but we think that use of analytics in video systems for non-security applications is an area that will also see rapid development. Recently, we have seen concept demonstrations that bring video and analytics into your local sports club. 3D tracking of people can be used for play statistics and heat maps in an economical way, which will give coaches beyond even the high-end environments, such as NFL in the U.S. and Champions League in Europe, new knowledge and new ways to analyze and understand their teams. A Milestone Solution Partner in Australia has integrated a very interesting marketing solution with our software, Axis cameras and IBM analytics that works with digital billboards to register relevant types of cars approaching and rotate the billboard on display to reach the best target audience with the customer’s message. Another Australian innovator in our network is using our VMS with water measurement analytics in that country’s growing Safe Cities initiatives. Options abound with an open platform VMS ability to integrate with analytics and other systems or devices.
Drako: Analytics will continue to improve and be useful in security, productivity and business optimization applications. We are just seeing the tip of iceberg. It’s still hard to implement, but open APIs and evolving standards will open the doors wider to more rapid innovation here.
LaMarca: Expanded applications for video analytics have played a key role in transforming perception of the technology from disappointment to a highly useful tool. Once deployed almost exclusively for security purposes, video analytics today have become a highly effective tool for generating business intelligence, which organizations can use to identify areas where overall operations can be improved.
From a technical standpoint, video analytics are also useful for helping to identify meaningful events as opposed to nuisance alarms. This is made possible with event fusion technology that collects and combines disparate, perhaps seemingly unrelated events from video analytics to provide a clearer picture of an event or incident. The result is greater real-time situational awareness that can increase the speed and effectiveness of a response in addition to conserving resources that would be wasted responding to nuisance alarms.
Guterman: Video analytics will be more accurate and enable new solutions. Video analytic capabilities are getting to be more commonly embedded in cameras. Also, statistical VA is starting to be used in an interactive mode, which introduces a new approach of using video analytics and creates a new kind of VA applications. These factors will increase adoption of VA in more organizations which seek to improve situational awareness and add more value to their security operation.
