It is the time of year for reflections, resolutions, predictions and lists. News stories about trends are everywhere, with tips about getting businesses on track for success in 2022. Two trends dominating lists this year are artificial intelligence (AI) and cloud. In the physical security industry the number of security resellers incorporating cloud video surveillance and AI into their business offerings continues to increase. Many resellers are in the process of evaluating newer technologies and business models. Below are four reasons why AI and cloud are topping the 2022 lists, and what it means for security resellers.
1. Security cameras can do more than collect dust
Omdia projected that 2021 would be the year that global video surveillance market revenues reached $24 billion, and the year we would surpass one billion security cameras globally. Impressive stats for sure, but those of us who work in the security industry know that the majority of security cameras do not provide proactive security they are simply recording video.
More than one billion security cameras are generating video data which is costly to store, and difficult—if not impossible—to interpret or learn from. Fortunately, the cloud can economically and securely store and analyze video data. Even more important, in the cloud, we can make sense of video data. We can learn from it. Meaningful information can be extracted from video to improve customer service, supply chain management and logistics. It can reduce waste, increase efficiency, and more. Another bonus: True cloud video surveillance systems can re-use existing security cameras and infrastructure. There is no rip-and-replace necessary.
2. AI is out of the lab — it is ready
In recent years, AI has become a popular and often misused term in video surveillance. In many cases, “AI” became a new name for typical video analytics. The reality is that the deployment of AI is just beginning, but it is no longer just a buzzword. AI is out of the lab and deployed in the real world. Neural networks and AI training make it possible to get more accurate solutions than in the past, and to deliver features such as video search.
AI is poised and will profoundly change video surveillance, transforming it from simply physical security into a core business intelligence system, improving efficiency and effectiveness, while making the world safer.
3. AI is better in the cloud
AI is easier, better and faster in the cloud. To install and run a typical AI license plate recognition system or other AI analytics, a reseller would typically need to deploy GPU compute power at the edge. There are many use cases where this works, but it is typically complicated to install and configure. When AI is deployed in the cloud, it is accurate and simple to deploy. Resellers do not have to worry about maintaining, configuring and upgrading hardware on site.
When you are running AI at the edge, maintenance and support is a headache for resellers and security directors. When you do AI in the cloud, the cloud video surveillance provider will handle this. That means the business owners are not burdened with hardware and software maintenance, upgrades and repairs.
4. The business model
For years, industry leaders, such as PSA Security, have been making the case for switching to a recurring monthly revenue (RMR)-based business model. RMR is the cloud video surveillance business model, and it is part of a smart, long-term plan for resellers who want to build a strong business.
True cloud video surveillance is sold via subscription. End users pay a per-camera fee, which is based on the camera resolution and how long the video is retained in the cloud. The subscription model, or RMR model, is profitable and sustainable. In addition, when a reseller is ready to sell their business, those with RMR are more valuable.
The Security Industry Association in December put out its annual Megatrends report, where “Cloud and Service Models” is identified as a major trend. In that report, Imperial Capital EVP John Mack explains why RMR is important when it is time to sell a business.
“There are clearly much higher valuations for companies with recurring revenue models. Witness that security integrators with mostly one-time install revenue will trade for 0.5 to 1.5x revenue while recurring-revenue-focused alarm companies will trade for 3 to 5 times annual recurring revenue or ARR,” Mack said. “And then in the high technology SaaS [Software as a Service] businesses which are heavily recurring revenue focused, you can see revenue multiples of over 10x.”
For resellers who are accustomed to one-time install revenue, the transition to an RMR model takes time and planning. As more resellers make the move to cloud and the RMR model, they are taking advantage of vendor training and partner programs to get set up for subscription (RMR) model selling.
The trend list makers of 2022 are onto something. AI and cloud, many agree, will fundamentally change the video surveillance industry for the better. This represents a tremendous opportunity for security resellers who embrace cloud and AI, to position themselves and their customers for success beyond 2022.