John Honovich, on his IPVideoMarket.info blog, posted an interesting article on ease of use or user interface design and how it applies to products typically found in the video management space.

I found his article http://ipvideomarket.info/report/easy_to_use_video_management_software a very compelling read and wanted to compare some of his findings to our experience here at Envysion.

His first and most important point is “Training = Failure” – I couldn’t agree more. Our goal at Envysion is to build software that does not require any training to use. Our goal is that with at most a 5-10 minute demo, most users should be able to navigate the software, search for recorded video with data, and share that video with others. Based on customer feedback to date, we seem to be generally reaching that goal.

John also raises a very interesting point about the type of person and their skill sets for whom the video application is designed. My general sense, especially when walking the floors of a conference such as ASIS, is that nearly all vendors design their system for the security professional, who is typically located in a video room with a wall of monitors. Their user interfaces are focused around cramming as many features into a single screen as possible. How else, for example, might you come up with the idea to display 48 thumbnail sized live video channels on a single screen? These professionals may represent perhaps less than 1% of the total population of a company that has video cameras in use.

At Envysion, on the other hand, we design our application for the other 99% of the population of the company. This includes marketing, sales, IT, operations, management, human resources, and so on. To be successful in this, we constantly have to balance complexity and features with ease of use and simplicity.

Use of icons, as John points out, is a great example of this balance. With Envysion, we used to use a number of icons for functions such as “edit user” or “remove user”; based on customer feed back we have found it much more effective to use simple words such as “edit” or “delete”. As a result, we’ve removed many of these icons and replaced them with text.

Another challenge that we face, especially with a web-based application, is consistency of style. Just because you may have hundreds colors doesn’t mean that you should use them all. We have found it important to be very consistent with respect to fonts, colors and general style-sheet items. A great example of this is the design of buttons. We have found it very helpful to insure that buttons have an identical look and feel. In addition, our users appreciate that fact that the most commonly pressed button in a specific situation (e.g., the “OK” button in a search dialog”) is highlighted to stand out. You’ll find this technique used in many web sites today. (Hint: look for the shape and size of  the “purchase” or “buy” button on any commerce web site).

This same approach applies to links within a page. Users always appreciate common indicators that a link exists – e.g., the link is always a specific color and has the same behavior when you hover over it. Wikipedia is a good example of this behavior.

For those of you who are curious about our application, I’ve posted a short demonstration of our application below.

Enjoy

We’ve long been advocates of the merits of Software as a Service (SaaS) and have always said that we believe there is tremendous potential for this model to disrupt the traditional video surveillance business.  Despite our firm belief in this, other providers in the market have been slow to pursue this model and continue to pursue the traditional hardware or enterprise software models.  While on one hand this is good for us from a competitive standpoint, it leaves the burden of educating the market on the benefits to a small group of companies, of which we are one.

With that as a back drop I was pleasantly surprised to see an article in Today’s System’s Integrator about the merits of SaaS.  I’ll forgive the author for saying SaaS is Security as a Service as the overall article was a reasonable overview of the concepts aimed at an audience that hasn’t spent a lot of time thinking about it.

It’s great to see this becoming part of the dialog in the industry beyond what we’ve been contributing.

Computers use a lot of power.  A typical home PC might use between $5-$10 a month in power if left on 24×7 without any power savings functions turned on.  Video recording systems based on PC’s which are encoding video and constantly writing that to hard drives puts a heavy load on computers and normally  defeats any power saving capabilities they have.   Multiply this times hundreds or thousands of video recorders and the cost for power starts to add up to tens of thousands of dollars a year.

As part of some development we’ve done to implement the Envysion EnVR software on low power embedded type systems coupled with IP cameras I wondered what the cost savings in power might be versus more power hungry PC based platforms.  So I compared the embedded platform to a configuring using our standard video recorder system which runs on PC based hardware and utilizes software compression with analog capture and analog cameras.

Doing this we’ve found the embedded system running the same EnVR software reduces power consumption by about 70% on up to 8 camera systems.  However, power still really isn’t currently all that expensive at a US national average somewhere around $0.11 per kilowatt hour.  So even with this big power reduction it didn’t make sense to go beyond 8 cameras due to the increased cost of the IP cameras versus analog cameras.

Even at 6-8 cameras, the cost savings in power consumption takes  3+ years to payback versus the lower cost analog cameras.  With more than 8 cameras, it quickly takes some much longer to achieve any cost savings that the time exceeds a reasonable life expectancy of the video recorder system (Assuming a range of 3-5 years for the hard drive and cooling fans in the recording system).

Half of the physics prize will be shared by two researchers from Bell Laboratories in Murray Hill, N.J. While at Bell Labs, Willard Boyle and George Smith invented the charge-coupled device, or CCD, which takes the place of conventional film in many of today’s digital cameras.

The CCD also powers a lot of surveillance cameras and was invented in 1969.  They were working on a video phone.  My my, how time files and still no video phones! 

Yesterday I left readers dangling with a “things are looking better, but…” ending. So with commodity costs down, sales down to flat, but profitability starting to tick upwards, why wouldn’t a small business owner want to draw a paycheck? Perhaps the first paycheck in over a year?

Earlier this month, a coalition led by the USDA and the US Senate took actions that resulted in a “Dairy Bailout.” That’s right – a bailout of the American dairy industry. Since dairy prices have sank to 30 year lows, many dairy producers were pricing below operating cost. The government has stepped in to purposely bid higher than market and remove excess inventory, nearly a $350 million price tag to taxpayers. The result? The price of cheese has skyrocketed 25% and is expected to hit 40% by year’s end.

Market forces of our great economy at work? Doesn’t sound like it. When the price of cheese was 2x their current levels in 2008 and pizzerias were bleeding red, was there an equivalent support model? No, and it really never crossed their minds back then. However, I can guarantee small business owners are seeing red having their tax dollars go towards a program that is systematically eroding the profitability that has been so elusive over the past 18 months.

So what does all of this have to do with MVaaS? It comes down to maximizing profitability. While we can’t control the surprising dealings on Capitol Hill that raid the bottom line, we can control the exceptions, variance and negative behaviors at the store level and across the enterprise. MVaaS will help you and your business keep a few more cents for every dollar that goes in the register.

Over the past year I’ve tracked the roller coaster trends in commodity food costs that affect the restaurant industry. It started in late 2007 with the “corn bubble” where over zealous farmers were chasing the ethanol craze, creating a ripple effect on the world food supply. The resulting food cost escalation squeezed restaurant profitability and forced many to shutter their eateries for good.

In early 2009 it appeared the bubble had burst and the sky-high costs of proteins, wheat and dairy came crashing down. As is typical with this economic condition, high prices led to over supply and now dairy prices have plummeted to 30 year lows. This is great news for restaurants and specifically, pizzerias, who consume 25% of  cheese in the US. While consumer spending continues to apply pressure to top line growth, there has been some commodity cost relief following an awful 2008.

Yep, the market forces of our great economy are at work. We can expect that lower production will offset any market oversupply to naturally stabilize prices. It may take some time and the overflowing coffers of the suppliers from the record high prices of 2008 may suffer a bit. On the flip side, the wholesale consumers get to enjoy a little extra profit that had all but vanished during the same period.

Just when you thought it was safe to draw a paycheck from your small business…

Despite the challenging economy (and perhaps b/c of it), Envysion’s MVaaS solution continues to drive material value and resonate with large multi-unit operators.  We are seeing more demand in the retail and restaurant space now than we ever have.  We’re well ahead of our 2009 plan and have some very material opportunities for 3Q09.

As a result, we’re stepping on the gas to take advantage of the opportunity we have.  If you are interested in joining a rapidly growing startup that is disrupting a large traditional marketplace with a differentiated and compelling solution, shoot your resume to jobs@envysion.com

All jobs (except Sales) are in Louisville, CO – which happens to be CNN Money’s #1 Best Small Town in America.  Here are some of the areas we are looking to augment:

• Product Management (SaaS, software product management)
• Customer Implementation (to manage customers through pilots and early rollouts)
• Customer Service (need basic technical skills, Linux knowledge)
• Sales (strong enterprise solution selling capabilities)
• Procurement/Inventory Management
• Web development (PHP, Java, Linux, Apache, MySQL)

Today’s 40th anniversary NASA will broadcast the best available footage from some recordings engineers made of the video received on the ground as opposed to the original tapes from the moon.  These are reported the highest quality images published in 40 years since the lunar mission.  Some original tapes from the lunar cameras of the Apollo 11 moonwalk appear to be lost.

The lunar camera used Slow-scan television (SSTV) and when re-broadcast for TV, it was converted which resulted in a big loss in image quality.  According to Wikipedia, early Apollo 11 video was at 10 frames per second and 320 lines of resolution.  Not so different from the typical low-end CCTV system today.

Is IT governance a problem?  Using internal charge back schemes to manage costs for IT?  A simpler solution might just be SaaS.  Check out RSR’s article on IT Chargebacks: Tools for Business Alignment or Past their Prime?

I agree with them that internal chargebacks for IT have past their prime.  SaaS is helping to further make such schemes unnecessary by helping companies stay specialized on their business and not building ‘infrastructure’ that is outside their core competence.  It seems to especially make sense in business segments where technology isn’t the core product or competency.

As part of my on-going responsibilities I meet with investors (both my current and some potential future investors) throughout the year. My current investors, Columbia Capital, High Country Ventures (the Colorado state technology fund that is managed by local private equity firm Tango), and Dan Caruso meet with me monthly during our monthly board calls. I meet with other potential new investors all the time whenever I travel as it is always good to build relationships with potential partners regardless of whether you are actively seeking additional funding. (For the record, we aren’t actively seeking funding having just closed another round with our existing investors last month – although this could change in the next ~18 months as we look to accelerate our growth even further)

In any case, I’ve talked to more than a half dozen investors that I know over the past couple of weeks and came away with a very consistent theme that I’m not sure the rest of the security industry has internalized yet. The takeaway relates to how Venture Capital firms view recurring revenue.

Monthly Recurring Revenue (MRR), if you come from telecom or Recurring Monthly Revenue (RMR), which seems to be the term used more frequently in the security space, means on-going revenue that you get each month for an on-going service that you provide to a customer. MRR is the new holy grail in the security space. The appeal of MRR is simple, you get to wake up in the morning knowing that you have revenue already coming in for the month without having to go out and sell another thing. Assuming your churn (the rate at which customers decide to stop using/paying for your service) is low, it is much easier to grow revenue when you are in a recurring revenue business b/c you don’t have to start from zero each month and can build on your previous successes. Security providers see the advantages of having a predictable on-going revenue stream and are looking for ways to build that part of their business. There are segments (alarm monitoring for example) that have been MRR businesses for a long time, so this is not entirely new to the space.

The takeaway on how VCs view MRR is that not all MRR is created equal. A number of providers (systems integrators, DVR manufacturers, etc) are trying to build MRR by financing equipment. They take what used to be an upfront purchase (the sale of a DVR and cameras for a couple thousand dollars) and make it a monthly payment instead (the lease of a DVR and cameras for a couple of hundred dollars per month). There are a number of providers out there that are pushing this model heavily as they see the multiples that financial and strategic buyers pay on recurring revenue and that is very appealing to them.

Problem is this type of recurring revenue is not valued as much as the more classic recurring revenue businesses. Why would this be the case? Because leasing equipment is not at all the same as providing an on-going service and doesn’t have the same financial characteristics as other MRR businesses.

First, the only real difference between buying and leasing hardware is the nature of the payments (get cash now or get cash over time) as the customer gets the gear in either case; it isn’t really a true on-going service that is being provided.

Second, the recurring revenue is only really recurring during the lease period, then it ends (most leases have a buyout clause at the end where customer can keep the gear for a nominal amount like $1). This means that three years after a lease is signed the customer can keep using the gear but stop paying until they decide they want to buy new gear. Contrast this with alarm monitoring where the customer pays in perpetuity as long as they want their alarms monitored or with MVaaS where the customer pays in perpetuity as long as they want to use the service.

Third, the scale economics are not as strong and the working capital requirements are worse for equipment financing models. The more leased equipment you sell, the more upfront capital you need as you have to pay upfront for the gear (which you could also lease yourself). The only real scale benefit you get would come from volume discounts. Compare this to a software service where you have a fixed cost of maintaining and supporting the service, but incremental customers and monthly recurring revenue have almost no variable cost. Once you get to scale to cover your relatively fixed costs, all of your incremental revenue drops straight to the bottom line as cash.

The net of this is that VCs place a much higher valuation on true MRR than they do on equipment financing revenue. If you want to create massive shareholder value, focus on building compelling services that customers will want to pay for over time that you can deliver in a very scalable way to drive material on-going profitability. If you want to be a bank/financing company in one of the worst credit environments in recent history, that works too – just don’t expect to get the same multiples on that revenue as you would with a true service.