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Access Control as a Service (ACaaS) and Video Surveillance as a Service (VSaaS) have long been touted as the next big thing in security. In 2018 they finally realised substantial growth and in the case of VSaaS, we believe the market broke through the $1Bn barrier. Some are forecasting demand will grow at a Compound Annual Growth Rate (CAGR) of 20% to 2023. ACaaS is approximately half the size but has a higher level of penetration.
The supply side has put more effort and investment into providing VSaaS and ACaaS services and technology has overcome many limitations, whilst reducing service costs. At the same time they are winning over system integrators to adopt cloud services and this has also provided a significant boost to growth.
Product manufacturers are also increasingly seeing this route as one that could help them to alleviate some of the pressure on margins, if the leading Chinese suppliers continue to cut prices in a “race to the bottom”.
Existing owners of video surveillance and access control systems have within the last 2 years seen the need to upgrade their operations and many are now investigating “as a service” options. More customers will come into this category over the next 5 years. However VSaaS and ACaaS has taken much longer to get established than analysts originally predicted. We have now reached the stage where this option is being seriously investigated for both new installations and retrofitting.
We estimate that the global market size for VSaaS in 2018 was around $1.2Bn. Some are forecasting growth at a CAGR of approximately 20% to 2023.
There are a number of reasons why VSaaS has taken longer than expected to breakthrough. The first being that new technology features have helped the service deliver major improvements.
These include upstream bandwidth availability and the relative cost of centralized storage, whilst bandwidth prices have fallen, and peak speeds have been increasing, making VSaaS potentially more viable in a larger range of applications. A bigger help to VSaaS will be the emergence of Smart CODECs and the adoption of H.265; for these technologies can help reduce the amount of bandwidth the cameras consume. 2018 saw a major growth in the adoption of Smart Codecs.
One of the major value propositions for clients is that VSaaS is continually monitoring the system 24/7. Because of this they are put right in the event of a failure. Paying through a monthly service charge ensures that this is done promptly so reliability improves. This should ensure that the quality of the video is satisfactory for forensic purposes and that all aspects of usability (like how do I retrieve the video and share it) are taken care of.
These value propositions are more likely to be critical in large prestige buildings where the consequences of failure would be very costly and detrimental to operations. However some reports show a high rate of resistance here because they have already invested significant sums of money in their own equipment and have the staff on board to operate it. When this equipment becomes outdated in 5 to 10 years, they should become candidates to move over to VSaaS.
Most followers of VSaaS believe that the small and medium building sector offers the most attractive proposition for buyers because they would rather pay a monthly fee for this service than buy the system with a large upfront cost.
Major security product companies have all announced cloud services and Genetec is porting their Security Center software to run on Microsoft’s cloud infrastructure, Azure. However in 2019 we expect that the initiative to drive VSaaS in the commercial market will come from the specialist suppliers such as Arcules, Eagle Eye, OpenEye, Qumulex and Verkada. These companies now have viable technology platforms and are investing heavily in promoting VSaaS services.
We estimate that in 2018 ACaaS investment was worth $520 million and of this approximately 50% was installed in North America. Demand is expected to rise to $1.1Bn million by 2023 at a CAGR OF 16%.
Whilst ACaaS started later than VSaaS it has already achieved a higher penetration.
As more IP Network PACS are installed and the technology surrounding identity management increases its penetration, the attraction of ACaaS and Managed Services has become more appealing to end users particularly those who don’t have IT skills onboard.
ACaaS end users no longer need internal IT departments to build up and maintain the servers and infrastructure at the business facility, which incurs a very high price tag. With cloud-based solutions, onsite servers and appliances are eliminated, this should reduce the total cost of ownership while not losing any functionality.
ACaaS has penetrated the small to medium building sector where tenants favour a regular monthly rental payment rather than a one off payment, which includes service and maintenance of hardware and software. ACaaS is now an attractive proposition for end user and this is the most important factor that will drive growth.