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Mixed message from IP Vendors to the Russian Market

Groteck Business Media : 21 October, 2009  (Special Report)
Alexander Vlasov of Groteck gives some background to the Russian IP Video market and explains why it is receiving mixed signals from the vendor base
Mixed message from IP Vendors to the Russian Market
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Internet technologies have unexpectedly entered the list of things most mentioned recently in Russia's government speeches. President Dmitry Medvedev pays particular attention to development of broadband access, electronic government technology, electronic document management, telemedicine, distant education, etc.

In fact, if certain topics become an object of attention of the national senior management in Russia, corporate customers (both public and commercial) get much more ready to finance this, whereas manufacturers and system integrators face less obstructions in implementation of their solutions.

Still, that is not to say that overall IPzation in data transfer, corporate communications and video surveillance is around the corner.

Groteck Business Media estimates that the IP share in Russia's video surveillance market, for instance, hardly exceeds 5-7%. All the glowing forecasts that the share for IP Video surveillance would reach 15% had to be corrected due to the economic downturn.

The global crisis, however, moved end-users to pay higher attention to security, and video surveillance market in Russia (unlike other high-tech equipment markets) not only resists falling, but keeps growing. Of course, growth rates are lower than in previous years. In the latest Groteck Business Media market update was expected the market for video surveillance equipment in Russia would show 20% growth in 2009 to 2008.

It is clear that no IP based solution can be implemented without a fully featured infrastructure. The infrastructure thing in Russia is rather a confusing story. In 2008, penetration of broadband access via fiber optic lines exceeded 85% in Moscow, but hardly climbed above 50% in other million cities. Russia-wide broadband penetration is ranged between 20 to 40%.

So, the main demand driver for IP technology remains Moscow and other Russian largest cities. Still, more customers start to highly appreciate convenience during implementation of IP solutions, opportunities of integration and savings, including operational personnel costs.

Most security professionals are today focused on IP Video surveillance. This is a field where the main battle between vendors is set.

The second biggest segment where struggles for local market shares continue is corporate communications. Here we have the same contradicting picture - pure IP PBX solutions will hardly dominate during the next 5 years. Their market share is higher than that of video surveillance, but end-users are in no haste to move to pure IP PBX solutions even when their corporate PBX needs change due to its obsolescence and will rather consider some hybrid systems.

Another paradox of Russian reality has its foundation in hot discussions around VoIP technology, including its applicability, reliability and cost effectiveness. These discussions have been initiated by the largest local backbone network operators and the Ministry of Telecom & Mass Communications. It has been at least 10 years since this kind of disputes were finished in the rest of the world; Russia starts them officially only now, though most telecom operators have been using VoIP technology on their networks 'on the sly' for years.

Global IP vendors send contradictory signals to the Russian market.

On the one hand, Cisco Systems has entered the Russian video surveillance market and announced their plans to annex 100% market share for the market. We can also see the way the main market players introduce their hi-end IP products. Particularly, Sanyo intends to deliver their new 4 MegaPixel cameras in October-November 2009. Axis Communications is getting prepared to introduce their conceptually new solutions in Russia.

Bosch Security has also announced their brand new IP Video surveillance products on the Russian market. Geutebrück is getting prepared to launch their innovative IP solution by the end of the year, and Russia is among the first markets where the system will be introduced.

On the other hand, Panasonic who maintains a more conservative position claimed they prolonged the life span of their analogue CCTV products especially for Russia due local networks conditions and the users' demands. Panasonic believes they will take a lion's market share with their new low-cost series which are to be introduced in Russia this fall.

Ironic enough, D-Link that could give many vendors a really good run for their money with their low-cost fully featured products starts losing its market share, the company's marketing strategy being rather indistinct.

Russian companies consider the overall IPzation trend in video surveillance as a good chance not only to retain their market position, but also to significantly expand their market share. Obviously, most Russian companies do not intend to produce their own Networked Video cameras - they will rather focus on software for intelligent video surveillance systems. Companies that have recently claimed their plans in this area include Integra-S, Spetslab, ELVEES, Byterg and ISS. We are looking forward to response actions from traditional leaders of video surveillance software like ITV/Axxon and DSSL.

Declared monsters in the Russian system integration market that have recently been far from IP solutions do not fail to follow the current market trends. As an example, Bezopasnost Company that designs their projects with non-IP Bosch products announced plans to introduce their own IP Video surveillance solution this fall.

One of the most modern trends on the Russian video surveillance market is implementation of intelligent systems and, especially, video analysis on board of the camera. Production of cameras with Video Analytics on board has been announced by Elvees and Byterg.

Many security professionals was rather surprised to find ARMO Group (a primary partner of global IP camera vendors) leading among top 10 Russian largest system integrators.

Summary

* Groteck analysts forecast that pre-crisis growth rates of the market share for IP Video surveillance in Russia will begin to revive in 2010, despite current difficulties and temporary stepping back.

* We will return to the target market share performance of 15 to 20% for IP Video surveillance in 2012. Accordingly, further redivision of the Russian video surveillance market is expected both between the leading manufacturers and top-10 system integrators.

* All-over-IP Forum that Groteck Business Media runs for the second year in 2009 (November 19, 2009, Moscow, Russia) shows permanent and growing interest of global vendors in the Russian market. They understand its huge potential which is proven by participating of the world CCTV leaders in the event - Axis Communications, Mobotix AG and Sony. Moreover, Axis Communications and Sony are two out of the three ONVIF founding-members.
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