I almost never open marketing solicitation emails, but Friday morning I got one from IMS (a UK based research firm that covers the worldwide video surveillance market) that caught my eye.  Title was Top 10 trends in video for 2010.  I hadn’t talked to the folks at IMS in a while so I didn’t have a good sense for what they were thinking these days so I clicked through to the report to see what they had to say.

It didn’t take long for the smile to cross my face as I read through their report.  The first sentence of the report (here’s the full report) was:

“It has a host of names – Managed Video as a Service (MVaaS), Video Surveillance as a Service (VSaaS), Remotely Monitored Video – but whatever the name, 2010 will be the year it moves out of the shadows into the limelight.”

It has been several years since I posted on this blog, introducing the term Managed Video as a Service as a way of giving the new category we were creating a name.  The name isn’t that important, although it is really cool to see it being used by other companies and by research analysts.  What is important is that the segment is maturing enough that there is general recognition of how important it is and how much it is going to change the traditional video surveillance market.

I couldn’t agree more with Alistair’s position – 2010 is definitely going to be a game changing year for all of the SaaS and other as-a-Service models that are beginning to proliferate in the video world.  While there are a lot of different definitions and different business models, we all share the common goal – provide video in a service model that eliminates the barriers (economic, management, complexity) that have traditionally limited customers’ ability to maximize the impact and value of video.

John Honovich had a post a while back on the topic of Crowdsourcing.   In the post he asked the question of whether crowdsourcing can compete with traditional remote monitoring providers.  It’s a good article and you should check it out.  His conclusion is that crowdsourcing is unlikely to be a material threat to traditional proprietary remote monitoring services due to the difficulty in lots of people accessing video, privacy concerns, and the ability for proprietary providers to leverage video analytics to exceed human based efficiency.

I’ve got a slightly different take on the topic, although I do agree with John’s assessment of the challenges.  While “crowdsourcing” in its pure definition may not take off right away, I think that one of its key principles is already having a huge impact on the video surveillance market.  The principle at the heart of crowdsourcing is this:  providing access to video to a larger number of people can enable more value to be created from that video.

This principle is incredibly simple and very hard to argue with, but many in the industry have not yet come to understand how broad of an impact it will have or what is required to deliver.  Regardless of how much value is being generated from video today (whether in identifying risks, investigating issues, or learning about and improving operations) you could always generate more value by having more people review it.  It could be a numbers game in that you don’t have time to review everything or it could be an expertise game in that there are specific subject matter experts that could identify more useful information from the video.  The “more people” in this could be others inside the company (marketing, operations, finance) or outside the company (remote monitoring providers, guard replacement, operational auditors, LP consultants, cheap labor in India).

Most of the arguments against this trend don’t really attack the concept, they focus on the challenges that keep companies from giving access to more people.

it is hard technically

This is absolutely true, it is very hard to give access to video in a useable way to a large number of people, inside or outside of the company.  Most video systems were designed for onsite use by a handful of expert users.  While many video systems are now remotely accessable, many require significant effort including VPNs and lot of IT intensive setup to make this happen.  Extending video access to 1000s of people across 1000s of locations has some very difficult challenges that many video providers have not historically addressed.  MVaaS is in the forefront of addressing these challenges to eliminate technology as a barrier to wider spread video utilization.

it requires a much more sophisticated approach to access control

Privacy concerns are the most commonly stated issue, but the access control challenges start well before you think about giving access to your video  to Joe the Plumber.  When you had 20 people using video in your company your access control concerns were likely binary: someone had access to all the video or they had access to none of the video.  When you have 1,000 people accessing a large number of locations you have to worry about which sites they get access to, what they can do with the video, etc.  It is materially more complicated and more important to control who can see what.  Extend that one step further to outside organizations that you trust (a consultant, a remote guard company, etc.) and you need another layer of complexity to manage access within their organization.  Moving even closer to the crowdsourcing model and giving access to people you may not yet know you need mechanisms for ensuring reviewers are certified, flagging inappropriate or ineffective reviewers, etc.  MVaaS goes a long way to addressing the first two, but the third is an area, while solveable, that has not been fully addressed by the market.

it is not always economical (value of information generated greater than the incremental cost to generate)

Once you solve the technical issues and ensure that only the people you want to review video are able to do so, the remaining question is whether the additional viewers can create value for you at a price you are willing to pay.  This requires that video be efficiently useable by the extended group of people and that the output of their review be easily consumable by the organization.  Neither of these are true with most video systems today.  Telling a potential user to review hours of video on a clunky interface is not efficient.  Using POS data or targeted video analytics to limit the video that must be reviewed is efficient.  Creating a bunch of PDF audit documents or sending thousands of stand-alone email alerts is not easily consumable.  Using an easily configurable web interface for reviewers to create audits or capture new data from the video and then allowing the company to massage and filter the results is easily consumable.

Companies and organizations will continue to expand the number of people that have access to their video as it will most certainly increase their return on that investment.   While it may be a while before crowdsourcing becomes a material business model,  companies like Envysion are working to address the challenges that this broader access creates.

The other day I opened my utility bill and just about hit the floor because my electric bill was so huge.  I have to get a handle on how much power I am using, I thought, as I wrote way to large of a check to our local utility.  Fast forward a month and I found myself having lunch with a good friend of mine, Dennis Kyle, a consumer marketing uberstar who is now working at Tendril Networks.  Tendril is a “smart energy” start-up that is working in the energy management industry.  For a consumer, Tendril will provide a small display device called an Insight.  The Insight will track kilowatts used and cost per hour of energy as it is used.  It can also communicate wirelessly with other energy management devices in your home.

For those of you with children that leave lights on all over the house, or who turn on two electric ovens to 450 degrees to cook two pizzas, the Insight will alert you when your power usage exceeds a pre-configured threshold, signaling an alarm that clues everyone into the situation immediately.

After lunch, my mind started spinning with how this service could be optimized for restaurants.  The key to Tendril is that it can use information from multiple devices to make smart energy decisions.  For me, the obvious information tie into restaurants was point of sale data.  What if you could interconnect POS trending data with energy management?  How about turning on/off ovens or other cooking devices based on historical trending of the average/peak number of guests for that day?

While it’s early, smart energy is the way of the future and I suspect the return on investment for retail is just around the corner.

Fredrik Nilsson of Axis Communications gives a talk promoting the benefits of SaaS.

While the talk focuses a bit on security applications, it’s refreshing to see that they’re not focusing exclusively on “remote recording” for video.   Instead they are focusing more on “hosted software” aspect, where the video managment system is hosted.

The power point presentation does mention that DVR’s for the hosted service are often deployed on site.  This is an important requirement for many if not most applications in order to make the solution cost effective.

Not sure if you’ve been paying attention, but it appears that there are a host of players and investors that share our bullish view of the opportunity in the restaurant and retail space – despite the gloomy economy.

By my informal count, $35 million has been invested in video providers that target retail and restaurants in the first half of 2009 alone.  None of these companies are MVaaS providers (well except for us, as we are counted in that $35M figure having raised a round ourselves), but all of them are squarely focused on the value proposition of taking video beyond security and extending it into the organization.

Here’s are some examples:

• DTT - Geovision based DVR solution + operational audits focused on franchisee community – $7M
• Westec – Video and remote guard/monitoring – $20M (although big chunk of that was recap)
• Agilence – Video, exception reporting and LP consulting – $4M + undisclosed strategic investment from Schneider

I’m excited to see this activity, despite the competitive nature of these companies, for a couple of reasons.  First, it is again a sign that others (including investors willing to bet serious $) see the same opportunity that we do, which is always reassuring for our current and prospective investors.  Second, one of the biggest categories of competition we face is the “status quo” – old DVR and video technology that companies still buy that will only ever be used by a small group of people in a company for security purposes only.  The more companies that are promoting a broader value proposition, the more customers will start looking for solutions that meet these increased needs – this will be good for all of the providers that can deliver a more extensive ROI.

There might be more people competing for the same opportunities, but the number of opportunities will grow exponentially.   This is good for the space and good for us (b/c I really like our chances..)

IMS has a new report on RVMaS (Remote Video Monitoring and Surveillance).  IMS defines RVMaS as: “…network camera based solutions that allow the end user to remotely view live or recently recorded video in security and non security related applications.”

MVaaS is certainly a piece of that market which IMS claims is about $158M in annual revenue and they estimate will grow to be 3 times that in 2013.

Or perhaps, more precisely, sales of tickets to see movies on the big screen are up over 10%  according to a report from NPR.  In the last 7 years of recession since 1965, movie sales have gone up in 5 of them.

Mall Cop out grossed all comedy films of 2008.  Fast and Furious 3 had the biggest April opening sales of all time.

It makes sense.  A two hour $12 get out of the house escape from the depressing headlines of the day.  And with ticket sales up, I wonder what’s happening with popcorn sales?   Well according to Variety, it appears that concessions, where movie theaters make a lot of their money, are down by 15%.

Literally, by a little bit, and figuratively, by an order of magnitude for me.  A couple of folks from Envysion went with me to ISC West this year and personally it felt a lot smaller than in years past.

On the literal side, it actually wasn’t as much smaller as I had expected it to be from a pure attendance standpoint.  I don’t have the actual stats, maybe they will be posted somewhere, but one of my colleagues that is on their planning board told me that attendance was down 5-10% depending on whether you were talking about exhibitors or attendees.  An even less formal source (my cabbie) said that all of the trade shows were way down this year and that ISC West seemed down to he and his peers as well.  To be honest, you couldn’t really tell that much walking around the halls as it is such a big show that there were people everywhere.  While Stanley and Cisco were some big names that didn’t make it and a couple of booths were notably smaller than in years past, it didn’t seem too different as a ton of companies were represented there.

The big difference to me was how much smaller and more manageable it felt to me personally.  ISC West has a very strong place in my Envysion memory, as I went to my first one just about a month after starting the company.  I didn’t come from the security or video world, we hadn’t even started to develop the new MVaaS platform that our customers are using today, and I was still trying to figure out where we fit in the market.  My first hour at the show 3 years ago resulted in a mild coronary and early signs of an ulcer – I was completely overwhelmed at all of the different providers, almost every one of which was demoing some kind of video, many of which were touting web-based solutions.  I kept asking Rob Hagens “remind me again why we are different?”.  I left that first show a little frazzled and without a very clear understanding of where we fit.  Although I was confident in the idea and approach we were pursuing I couldn’t be sure that someone else wasn’t already doing it in the vast security and video market that I had been exposed to.

We have worked hard over the last few years to both better understand and better communicate how Envysion and MVaaS differ from what other providers are doing.  My quick two day trip to ISC West this year was evidence to me that after all of our efforts, I finally understand the industry well enough that to know exactly where we sit and why we are different.  It was this understanding that made ISC West feel a lot smaller to me than it ever has.  I understood who the majority of the players were and what they did.  I had spoken personally with or at least looked into most of the major players there.  I now knew enough about the big hardware guys and big security integrators and knew where there core focuses were.  I had a sense for a lot of the smaller players and knew who was getting traction and who wasn’t and in what type of markets.  I don’t claim to understand the industry better than anyone else, but for me it was a very different experience going to this massive conference and really being able to put everything in its place.

I’ll write another post this week on the two key takeaways I had on our major differentiators in the market that became incredibly evident to me at the show.

If you are an investor, you likely have had a tough year.  After closing at 1,427 on May 19, 2008, the S&P 500 Index has generally gone one way – down.  The closing mark for the Index on March 9th was 677.  This is a stunning 53% drop!

If you foresaw this and moved appropriately, hats off to you.  For the rest of us, though, it’s been painful.

Among their benefits, stock markets, as measured by various indices, act as leading indicators of what is expected from the underlying companies.  Since the overall economy impacts business results, the market is also a measure of where investors see the economy going (not where it is now).   To this end, the U.S. market started its fall as the asset “bubble” burst, bank failures were witnessed, more were expected, and a recession seemed inevitable.  Even though the U.S. economy grew the first half of 2008, investors, and by proxy the market indices, anticipated problems ahead.

If you haven’t stopped watching, the U.S. stock markets has gone dramatically upward in the past seven trading days.  From its low, the S&P500 Index has returned 17% to investors in this very short period.  Did we hit bottom on March 9th?  Is this the start of a significant move upward?  I’m not so brazen to make this call.  But some government officials and market experts are expressing cautious optimism about the future.  The outlook seems to have improved a bit from one month ago.

We have repeatedly explained how the value proposition for MVaaS solutions improves in a tough economic environment.  Still, it would be a welcome development to see the economies of the world improve in the 2nd half, and return to growth in 2010.

Christopher Cabrera, CEO of Xactly, an on-demand sales performance management company, has an interesting opinion piece on SandHill.com.  Mr. Cabrera joins the conversation debating what SaaS is and what it isn’t, specifically as the on-demand providers compare to traditional ISV’s.  The central question, is SaaS just software?  It is worth the quick read.