IP cameras set to make channel smile

IP camera sales are threatening to overtake ordinary cameras and CCTVs

IP camera sales are threatening to overtake ordinary cameras and CCTVs. Is the channel aware of what’s happening in the market, and just which companies are going to be there to make the profit? Ben Tudor investigates

Back in the days before voice and data convergence, CRN talked to a LAN reseller who was considering a move into the voice market.

“We are going to eat those stodgy old cardigan-wearing Key system guys for breakfast,” he said. “They have been making fat margins for years, with no competition. We are thinner and faster than them. We can run on paper-thin margins and besides, it is all going IP. They don’t know anything about IP.”

As it turns out, this reseller was bought by one of those ‘stodgy old’ Key system resellers (VARs selling small phone systems) a few months later using the huge cash reserves it had collected over years of fat margins and low competition.

Many of the lessons that voice and data resellers have learned in the past few years can be applied to other markets where IP networking is replacing older technologies.

One of those markets is video cameras. According to Swedish IP camera vendor Axis Communications, existing channels are used to margins of 20 per cent and up. CCTV cameras typically use coaxial cabling, rely on external power supplies and tend to need a control suite all of their own, all of which help to pile on the services margin.

In contrast, IP cameras are often able to use power over Ethernet and existing data cabling. The preferred method of control and monitoring is over a web browser, and freely available APIs make it relatively straightforward to design applications around the hardware.

So will IP cameras ever outsell other kinds? Research and consulting firm JP Freeman expects this to be at some point in 2007 (see graph, top right). However, Ray Mauritsson, president and chief executive of IP camera supplier Axis, suggested the crossover point may be further off.

“The most optimistic estimate is not what I expect,” Mauritsson said. “There is a tendency for the growth rate to go up. The fact that our competitors now heavily promote IP systems suggests we are moving towards a huge growth rate.”

Tom Kneis, sales director at Anixter, said the CCTV security business has posted year-in-year-out double-digit growth.

However, he said that the idea of snappy IT resellers displacing reactionary CCTV installers is not necessarily true. On top of that, CCTV systems are also seeing a growth in sales.

“At the moment it is a mix of all types of resellers. We educate IP resellers into selling security, and security resellers on selling IP. We are also supplying traditional security equipment, traditional CCTV systems are an area of growth as well.

“IP is going through the roof at the moment. My belief is that it depends on where the decision lies with the end-user. I’d say we will see the changeover [more IP than analogue CCTV camera sales] in three years,” Kneis said

However, there is still minimal noise about IP cameras. This is partly because one small Swedish company, Axis, owns the majority of the IP market. It is also because the market is still relatively small.

Axis is pretty vocal, but no match for the IP marketing machines that are Nortel, Cisco, 3Com and Avaya. That is not to say that the market isn’t potentially large. Business consultancy firm Frost & Sullivan expects revenues in the worldwide video surveillance market to climb by a minimum of 10 per cent a year from $4.7bn in 2003 to $9.7bn in 2009.

For Axis, which recorded sales of about $100m in 2004, the potential is significant. In the second quarter of this year, 81 per cent of the firm’s sales were of its video products, while print servers made up 16 per cent.

However, it remains to be seen if the IT channel can make hard cash on IP cameras alone. Many networking vendors have, over the past five years, gone from emphasising the data sheet numbers for their latest box to promoting applications and the software vendors that help develop them. To pick two such applications, both voice and videoconferencing have received boosts over the past few years from networking vendors.

In addition, a number of vendors and integrators are pushing single network infrastructures for buildings. Perhaps the most prominent of these is Cisco’s Connected Real Estate initiative. Others include Honeywell’s Enterprise Building Integrator, Hewlett-Packard Bulldog and IBM Value net. These plans are all generally aimed at large customers, and there is plenty of scope for the channel to do the same for SMEs.