Current State of Electronic Security: Or, why is this market responding to the SaaS value proposition?

Every solution needs to solve a problem, or it ceases to exist. So, the fact that numerous hosted services are taking off in today’s electronic security marketplace tells me that they are answering a real need in this space. But what is that need?

Expectations
Let’s start with expectations. Our experiences with the Internet have conditioned all of us to expect that information services:

• be easy and quick to set up;
• not require the installation of special software; and
• be accessible from any Internet access point

In effect, the software experiences we are having in our personal transactions, and increasingly those we are having in most commercial transactions, are spilling over into our expectations of all business software. Why, customers are asking, should my security software be any harder to use than my HR or accounting software?

Software
Let’s start by looking at the state of existing software in the electronic security business.

First of all, most of the traditional providers are still selling legacy products that require a trained expert to install them on a PC or server that meets very exacting requirements. In other words, probably not the PC or server you already own. Second, even after it’s installed, it’s not quick or easy to set up. Many of these software packages require users to attend several days of training in a stuffy hotel conference room somewhere just to learn how to use it. And then there’s Internet accessibility of these older systems:  in many cases it’s not really built in and would have to be engineered on a per-site basis, which brings up a lot of IT concerns.

All of that explains why, when we entered the business in 2002, we heard from dealers and integrators that their number one source of customer support calls, and their number one ongoing support expense was—you guessed it—keeping the software alive. For end users, the pain was similar:  no one wants to call for technical support; they just want the products to work. That’s why more and more of the security market—whether video or access control—is shifting to either SaaS or perhaps to appliances with embedded applications and Web servers that address these same points, at least for local solutions.

Hardware
And what about the hardware that’s used in electronic security systems? The mainstays of the industry—whether it be control panels, DVRs, or cameras—are either gaining IP connectivity or losing ground to a variety of technologies that do, such as edge devices, network-based storage, IP cameras, etc. But was equipment a source of pain? In many respects, yes. To the extent that it required expensive, specialty wiring, the equipment was simply inconvenient and cumbersome to install or retrofit into an existing facility. To the extent that gaining remote access—a given with any IP communications medium—then, again, yes, older equipment was a source of pain. And regardless of what it took to physically install and hook up the equipment, configuration and provisioning was a large chore that required lots of specialized expertise, and probably a large dose of involvement from the IT department if any of it was touching the network.

Integration Services
Integration services are the third leg in this stool, after software and hardware. How do they fare in a context where buyers are seeking SaaS solutions for physical security?

For those not familiar with the security industry, the role of the integrator is to understand customer needs, select from the available products and technologies that provide the best value, and then deploy the solution at the customer’s facilities. Integration labor is usually the most expensive component of any security installation, so you can be sure it has the buyer’s eye. A lot of that labor was historically driven by the complexity and difficulty-of-use of the underlying software and hardware products, as we’ve already discussed.

So, what happens when a new technology comes along and reduces the need for much of that labor? For one interesting discussion of this scenario, take a look at the recent post on IPVideoMarket.info titled The End of Integrators? There, John Honovich argues that SaaS offerings represent a classic disruptive force within the industry (see The Innovators Dilemma [1]). In this scenario, the shift to simpler on-site integration will change the balance of services required to put physical security systems in place, and thereby alter the relationships between manufacturers (or service providers), integrators, and end users—presumably with lower-cost solutions winning out in the customer’s mind.

In speaking with an IT integrator at a recent security conference, I asked how this shift away from the traditionally heavy labor component of a security installation looked to him. He said that his company welcomed it. His reasoning: “my skilled people are in such high demand that I can't afford to waste them on jobs that can be simplified through SaaS to permit a less skilled guy to do most of the work.” In other words, in a competitive labor market, he valued the fact that he could reserve his high-value employees for high-value work.

I think that this trend is an important one for integrators, because it can change the security ROI calculation in two ways, both good. In the first instance, integrators can take advantage of SaaS efficiencies, and offer equivalent (or better) functionality at a much lower price point. Initially, this will be a way for integrators who adopt SaaS to gain market share and margin at the same time. Alternatively, an integrator who wants to offer more—say, risk management analysis or loss prevention consulting—can now bundle these professional services inside of a larger engagement that uses SaaS, and provide a much higher value service at the same price tag that the electronics alone of an older system would have cost, and still retain better earnings from moving further up the food chain.

Alternatively, those consultants who provide high value services in risk management and loss prevention, and understand the SaaS model, have an opportunity to specify more competitive systems that develop a better ROI for the customer, or mitigate more risk at less cost. Just like each of us does when we compare umbrella insurance policies and look at their features and associated costs.

Conclusion
We started today by asking what needs customers were responding to when adopting SaaS solutions for physical security. What we’ve seen is that, as with many disruptive technologies before it, the market responds to greater ease of use and lower cost while maintaining or improving the quality of service. And that’s why it’s here to stay.

-Steve Van Till

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[1] Clayton M. Christenson, The Innovator's Dilemma (Boston: Harvard Business School Press, 1997).