Much like the mobile phone industry, the video surveillance industry is turning towards a recurring monthly revenue model that includes the cost of hardware into a monthly service fee, according to a new report from IHS Inc., a leading global source of critical information and insight.
The world market for video surveillance as a service (VSaaS) is expected to see average annual growth of 17 percent from 2012 to 2017, reaching nearly $1.3B by 2017. Growth in specific segments of the market, such as the residential and small-medium business (SMB) sectors, is expected to drive a change in the typical buying model.
“End users in the residential and SMB segments, while interested in a video surveillance system, often are not in a position to make the significant capital outlay required to purchase hardware upfront,” said Aaron Dale, analyst for the Security and Fire group at IHS. “Inherently, businesses and consumers prefer to spread the cost of goods and services over time.”
Including the cost of hardware in the monthly service fee has proved particularly popular with end users in China, a market that accounted for an estimated 68 percent of global revenues last year.
A move toward this type of billing method could present a challenge for some video surveillance equipment vendors, which are used to transactional sales. Even so, many companies prefer the recurring monthly revenue model, as it fosters a more dependable cash-flow model and has the potential to generate a larger profit margin.
“Security systems integrators are uniquely positioned to capitalize on the growing popularity of this business model, as they are used to billing on a monthly basis,” Dale added. For their part, both integrators and manufactures could take advantage of this market by creating strategic partnerships. The integrator provides a service package, while the manufacturer benefits from additional camera sales.
The growing popularity of hardware-inclusive billing models, in turn, has the potential to reshape the competitive landscape and spur new interest in the overall video surveillance industry.
IHS is the leading source of information, insight and analytics in critical areas that shape today's business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs approximately 8,000 people in 31 countries around the world. For more information, visit www.ihs.com
SOURCE: IHS Inc.