Yikes.

It is a crazy time in the world when you see something like the current credit crisis reverberating around the world in such a dramatic and rapid manner.  Thomas Freidman wrote “The World is Flat” to highlight the growing global competitiveness and the fact that it is becoming a much more level international playing field.  Wonder if he ever thought about how inextricably tied global markets are becoming as result and how a major U.S. crisis would have a crippling effect on other economies as well.  While I watch my stock portfolio tank and listen to NPR about how banks are failing or being privatized in countries like Great Britain, Iceland, Russia and elsewhere I of course reflect on how the current economic conditions are going to effect our market – the market for MVaaS.

As I wrote in an earlier post, “Recessions – Bad for most, good for some”, a bad economy might not be the end of the world for video providers.  However, at the time I wrote that post, I had no idea the magnitude of the looming financial issues.  Given how significant it appears the issues are and how long experts are suggesting that the current crisis will last, I’ve had to re-assess my position to see if I still think it holds true.

My current thinking is this: while some potential customers may arbitrarily cease expenditures and others may disappear as bankruptcy related casualties, the current market conditions will accelerate the adoption of MVaaS versus traditional video solutions and the gap will widen between those that have already developed MVaaS solutions and those that have yet to demonstrate material customer traction and results.

Here’s my logic:  In retail and restaurant markets where top-line revenue growth will be off and underlying costs will continue to rise, businesses will look for ways to be more efficient with their existing resources and to increase their profitability.  Capital budgets will disappear or tighten, so any investment in new technology or programs will have to have a very quick payback and a very certain ROI – speculative or experimental technologies will suffer.  Layoffs will hit many of our customers and these layoffs will hit the management layers, the LP teams, and the IT staffs, leaving the organizations trying to do more with less across the board.

The value proposition of MVaaS is fairly compelling in light of these circumstances.  By incorporating MVaaS into their ongoing operational and loss prevention processes, businesses have shown that they can add 1-2% of revenue to their bottom lines as incremental profit.  This also enables businesses to increase the efficiency of their people from operators/managers to loss prevention and other corporate personnel.  The payback on this investment is often less than 6 months and has been proven by some of the leading operators in the industry, far from a speculative investment.  MVaaS does not require material capital expenditures, unlike a traditional video solution, and it also does not require a huge effort from a company’s IT organization, again very much unlike a traditional video solution.

Leaders in this space, like Envysion, will benefit disproportionally from this environment because we have already established ourselves in the market with a differentiated service that has been tested and scaled, we have major customers that are demonstrating the value, and we have plenty of runway because we don’t need to raise capital anytime soon.  Competitors that are small and starting up are going to find capital harder to come by and will face a customer base that is increasingly wary of betting on an unproven commodity.  Larger competitors are likely to be less willing to devote the substantial resources required to implement a new MVaaS solution when they are facing their own financial problems.

I believe that 2009 is going to be a difficult year across the board (says Captain Obvious) but that there will be a very few industries and companies that will thrive in the coming trying times.  I believe that MVaaS will be one of these industries and Envysion will be one of these companies.