SEN editor John Adams speaks with Axis Communications CEO Ray Mauritsson about business trends, new developments in technology and the challenges and opportunities of the future.
JA: How is the Axis business going right now?
RM: I think over the last 2 years we’ve seen a little bit of a slowdown in our growth rate. There are 2 components to this – one is that the market is more mature – more companies have already made the transition from analogue to digital – the other reason on a global basis is that we have seen on a geographical level a couple of areas that have slowed down.
There are variations in performance between countries and regions. Important to bear our growth rate has gone from a 25 per cent level to a 15 per cent level, still strong. In general we have started to see a bit of a shift in the rankings of some of the players in the market – you see new Chinese players growing up based on their huge home markets, while some of the existing players are not gaining ground for a number of reasons. Some of the big names are not really performing and I think this is because some of the newcomers are challenging them.
JA: What are the strongest geographical regions in terms of new business at the moment?
RM: The U.S. is definitely the biggest and most robust market for us right now. China is strong too, but it’s a more challenging market being more protected. Those 2 represent the biggest markets for us. And the U.K. which had been lagging behind a bit on technology is beginning to come on more strongly now.
JA: What about the weakest region, or the most uncertain region from your point of view?
RM: The biggest challenge at the moment in Europe is the uncertainty surrounding Russia and Eastern Europe. This uncertainty means people are holding back from investing. When it comes to Russia, it’s gone from being one of the BRIC countries with high growth potential like Brazil and China, to having a negative impact on all of Eastern Europe from a business perspective.
JA: Given these factors and current technological trends towards networking and more proactive camera technologies, how do you see the future playing out?
RM: It’s such a fragmented market that in some ways the future is a big question mark. It has been fragmented historically but will we have the same fragmented market after the market shifts completely to IP? That’s a big question. It doesn’t really make sense to have so many network camera manufacturers out there – I think it needs to narrow down.
As the market becomes more mature you start to look at what opportunities are left. We certainly see opportunities in the low camera-count market. The requirements are slightly different in that segment. It’s a market addressed by smaller system integrators with a lower knowledge level than larger integrators that employ network engineers.
These smaller integrators are looking for complete end-to-end solutions so we are looking at that segment from an internal perspective. We think there are 3 different target markets – the low camera-count, the medium and the enterprise markets.
For a long time we looked only at verticals like banking or retail or mining but now we are looking at the size of the installations as well. Size has a huge impact on the nature of a networked solution and no matter where it is installed there will be consistencies.
JA: Most IP video manufacturers are reaching out to the IT integration market. Do you see that as being a separate market from security integration?
RM: No, I don’t see it as separate. We see it as a potential opportunity to expand the market. I think at the enterprise level this is already decided – you can’t do a big IP video solution without involving the IT manager – it has to be a joint effort.
With smaller installations, you may not have a security manager or an IT manager. That’s why it often comes back to the IT integrator channel as a fishing ground for smaller IP video solutions as well as coming back to us as a manufacturer to package our solutions in that direction.
JA: We certainly see many larger systems and there’s always IT involvement, which may be as shallow as providing rack space and supporting a subnet, or as deep as providing ports in existing network room switches or creating virtual servers in a shared environment. You see this increasing?
RM: Yes, and this is quite natural because so many of the complexities of IP video are in the knowledge area of IT managers and their IT engineering teams.
JA: What are the key areas of technological development that Axis is looking at right now?
RM: One area is solution orientation of smaller systems. That means we are looking at doing more on the software side. We started with the Axis Camera Companion with the mission to include all the functionality of a DVR in a piece of software. You will see use taking further steps in that direction.
You’ll also see us put more effort into our own VMS. We are strong in the enterprise market and we see a need to further target the low camera-count market but there is also the mid-sized market to consider. Some of these mid-sized solutions have requirements similar to the small camera-count market but some are more enterprise-like. So you will also see us selling and promoting more of our own software towards the mid-sized market.
We have also launched in some geographical markets a complete solution with a server, software and cameras. We see some competitors really breaking into that market and finding a sweet spot there, so we will be targeting that area of the market, too. The market is telling us that there are some mid-sized customers who prefer to buy their entire system from the same vendor.
It’s a mixed message, when you consider our open platform enterprise message but the market has different layers and I think it’s up to us to adopt solutions that meet the needs of each of these layers. Some integrators are so skilled on the network side that they want to select each different component, while other integrators want something that they know will work with the minimum of fuss.
JA: And some installers and end users have brand loyalty, they prefer to buy a complete solution from one manufacturer, just as consumers often prefer to do?
RM: Yes, there’s that, too. I think this is a natural step, for us. As a market matures you see more pre-packaged solutions and that’s what you will see more of from us.
JA: Tell us about access control. It’s only early on in that process but how is the access control side of the business coming along?
RM: We have just released access control through all our dealers in Europe and we have 12 months experience in the U.S. market. Access control is another fragmented market but also a locked market. End users and integrators are locked into end-to-end solutions manufactured by a small number of vendors.
Axis Communications’ access control offering has been very well received – people feel it’s time for a change towards more open systems. And there are the obvious benefits of a tighter integration with video – people want that – customers who have both types of systems want them to interact in a better way.
When it came to access control, we launched a product that’s open platform so while it can be used for larger installations it’s also an integrated solution for smaller installations where it’s supported by management software similar in simplicity to our Axis Camera Companion.
So, overall I think there is absolutely an opportunity for us in access control. It’s going to be a slow moving thing. We’ve seen general interest – integrators and end users feel locked in and they want to get to this flexibility. But given the nature of the access control market, it can be hard for customers to move from their providers so we are focusing on open minded customers and Greenfield sites.
JA: Axis has always had a strong commitment to R&D. One of the things I’ve always liked about the company is that at trade shows there are always many powerful new releases.
RM: We will keep that up. We have around 1900 employees – 900 are in sales and 800 are in R&D and there are also contractors supporting product development. Given this, the development team is roughly the same size as the sales organisation. Our R&D team is divided into groups looking at product for the next 12 months and others looking at the longer term.
It’s always exciting to take a tour of the labs and see what’s being planned for release in a couple of years’ time… I think that’s a promising thing. We talk about the maturity of the market but there is still a lot of innovation to be done. The market shift from analogue to network video has happened but that’s a beginning, not an ending.
JA: Looking at the overall product range – there are always more people buying more affordable solutions – but is there strong interest in the high end products right now? Are installers and end users still sometimes motivated by outright performance, by image quality?
RM: Yes, there definitely are customers with higher security requirements who use the best solutions that they can find, particularly at the enterprise and government level.
JA: What sorts of new things do you think will be coming from Axis in the medium term?
RM: As an industry there are areas with potential. We can certainly improve on video compression and we can improve image quality – or what Axis calls image useability. And if you want to automate, if you want your systems to be more proactive using algorithms to detect what’s happening, then you have to think about improving the image for the algorithm. That may mean cameras that make images that are less attractive to the human eye but incorporate more information useful for an algorithm. We are taking steps in this direction, including the development of an IC?new generations of our ASIC platform.
When you are talking about development a key thing to consider is ensuring consistency with APIs. We’ve seen competitors coming onto the market leveraging the latest platforms and some building blocks but they tend to forget backwards compatibility and consistency of APIs and this makes their solutions a challenge for system integrators and vendors. It’s important to carry a back-catalogue of interfaces. Customers don’t want to change things if they don’t have to.
JA: Do you have anything shiny and new that’s just about to come out we can mention?
RM: There are new things that I can’t mention. But if we look at the market here in Australia, there are a couple of initiatives that will show up here – access control is one. And there are some solution-based initiatives you will see here, too.
In some ways these developments are driven by infrastructure. In countries with good network infrastructure we are seeing good uptake of cloud-based solutions. We’ve started to see a move to VV and hosted solutions and we think cloud will play an important role – we think it will be a natural part of any networked solution. Whether the storage is on the edge, or in the cloud, it’s a matter of cost and security level.
It’s efficient for the low camera count market and it does demand end users have good bandwidth connections to meet this and other needs. It’s an interesting opportunity. It does depend on infrastructure though. Some countries broadband is high quality and low cost. In places performance is poor and services are expensive, you see less take up of cloud-based solutions. In Sweden, every household will have fibre very soon.
JA: So, you are seeing a trend towards video verification of alarm events in your business?
RM: Yes, we are seeing moves in that direction. As an example Securitas a swedish based guarding company operating in many countries operates in Sweden and they have a strong ambition to use video verification to improve their alarm response efficiency. This may impact on how the low camera count market buys in the future. Maybe they will buy more services and less hardware, systems that are remotely monitored and serviced by large providers.
JA: Are there any challenges to widespread video verification?
RM: Certainly – many of the operators we talk to are hesitant to push video verification to domestic customers because they don’t want to have the signal integrity discussion. In that area we are focusing on SMB clients but there are developments in the domestic market with Dropcam and others. Will it be a Google and Apple choice in the future? It will be interesting to see.
JA: What are the camera qualities that most integrators want globally?
RM: What integrators want most is low light sensitivity and wide dynamic range. I’m expecting the megapixel race to slow down and for most users to stick with 1080p and focus on low light performance, WDR and the useability of the images. Compression is another issue for integrators and end users. There’s a need to keep storage costs down.
JA: When it comes to HVEC/H.265, where are we at with that? Is this something we’re going to see in the near term?
RM: Everybody is expecting H.265 to be the next big thing in compression. Unfortunately there are still a lot of things slowing that down. From a development point of view, it’s not that promising in terms of savings – about 25 per cent – which is significant but not revolutionary. H.265 is a little way out, maybe 2-3 years. We’ll have to see how much of an improvement it will be.
JA: Finally, when it comes to system integrators, what is something you think integrators should pay more attention to in order to get the best out of their IP cameras?
RM: I think lens choice is the key thing and it’s certainly an issue we face in the market – getting everyone to understand that lens choice has such a big impact on image quality. Many integrators and end users don’t understand that a significant percentage of the cost of a camera is the lens – it might be 50 per cent of the cost. Given this, the way to make a competitively priced product is to cut corners on the lens.
That’s something that’s really hard to get across and it’s not something you can include in a specification sheet. We look hard at lenses but what we do is not an established empirical measurement used by every manufacturer. Sometimes people will do a shootout with one lens and deliver the camera with another and this makes a big difference. Getting lenses right is the key and Axis sells its cameras with a quality lens attached for very good reasons.♦
John Adams with Ray Mauritsson
