CAPEX and OPEX… and the reasons why our business is doing so well
2021-09-16

Dave Stokes, Divisional Director at the specialist systems integration firm, Hall & Kay Security Engineering, explains how his customers’ attitudes towards video pricing are changing

The last five years have been busy since I joined Hall & Kay. Despite some disruption in the market, we’ve seen our sales continue to grow.

Where has the new business come from? We’ve delivered some significant projects in sectors where we see demand growing further, including social housing and public space video, mixed commercial and office developments, heritage sites and schools.

Of course, success on one project leads to more business on the next – customer referrals and reviews are a big driver for us - but one key reason for our success is the way we are meeting end-user expectations on costs, and often surprising them by demonstrating how much they can save.

A customer contacted us recently because they wanted to add three third-party cameras to their VMS but that meant buying a separate licence and paying what I call a penalty – around £100 to add each of those cameras as well as ongoing connection fees.

That’s clearly not right. Its unfair pricing, and customers are starting to catch on.

In most commercial environments buyers have been looking more closely at operating expenditure (OPEX) rather than just capital expenditure (CAPEX) for years when they compare technology. That message is starting to get through to the security sector too.

Of course, if you need a new video system, then you understand that for most viable solutions a level of capex is inevitable.

But when it comes to OPEX, the really big problem is that of so-called ‘license fees’’ – customer have been putting up with these for too long and taken them almost as a given. But quite rightly they are now starting to ask, “why am I paying high license fees to view a camera, and additional fees to connect one manufacturer’s camera to another’s system?” That’s a very fair question, particularly given the proliferation of IP and ONVIF®.

The old model is changing, and now this is something we talk to end-users about all the time. Every time a customer tells us they’re going to buy VMS from one of the most recognised enterprise vendors, I advise them to look at their OPEX and be clear about the costs they’ll be tied into paying every year, including the potential penalty they’ll pay every time they want to add more cameras.

Many buyers still aren’t aware of this, and many installers are still selling to them based on what I believe is an unfair pricing model.

And that’s before you consider that customers are also often paying for features, they don’t even need and use. When you think about this pricing model in another context it’s obvious - you would never pay a yearly subscription for lots of features on your car that you don’t use, so why accept that with a video system?

So that’s part of the reason for our current success.

We’re trying to get the message across to customers that you can buy really good quality high-definition network cameras, and have a very powerful and usable video system, without the annual handcuff.

In terms of value, what makes the perfect system for users? It’s one where every feature and function they pay for can be clearly see on the front end. Nothing that they are buying should be hidden or hard to use.

And there are other cost-comparison issues worth pointing out too, around Total Cost of Ownership (TCO).

The operational life-expectancy of your system has a direct impact on its overall value. To work out TCO, among other things you need to estimate how many years you expect to spread that initial CAPEX cost over.

The longer your system performs perfectly, the better its value becomes.

So, we tell buyers to choose vendors that have a proven track record of continuous technical support; compliance standards such as GDPR and NDAA; and protection against cyber risks – backed up by the best equipment warranties.

System flexibility and scalability are important too, because most systems need to be modified and adapted as time goes on. How easy is it to make those system improvements – to add, move or update cameras as your operational needs change? Manufacturers that are committed to forward- and backward-compatibility give you peace of mind that the system you buy today will not lead you up a ‘discontinued line’ dead end.

As an IDIS integration partner of courses we are well aware of the advantages of the end-to-end model, with single source supply of all the cameras, NVRs and peripheral devices needed for an installation. We’ve experienced first-hand the benefits that come with this approach, including plug-and-play connectivity and guaranteed compatibility resulting in faster implementation and streamlined cybersecurity. In the event of problems arising (unlikely) there’s a clear line of accountability and no buck-passing between different parties.

And when comparing manufacturers, there’s another important issue here which systems integrators are well placed to judge: how supportive and responsive is your chosen tech vendor?

Speaking personally, I’ve experienced direct support from my preferred manufacturer to the point where, on a real rush job, an NVR has been loaded into a car and driven to me personally at the site. That kind of commitment to earning customer satisfaction goes a long way. It’s another reason why our business is growing.

And when heads of security or facilities managers are struggling to maintain and operate aging systems, we are well-positioned to build a compelling business case, supported by a growing list of customer references to help get them the surveillance upgrade they need.

To contact Dave Stokes and his team email sales@hksecurity.co.uk or for more information on Hall & Kay Security Engineering go to hksecurity.co.uk 

 

 
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