Canon merges Axis and Milestone

Canon is now a major player.

The move raises so many questions, that my poor feeble brain struggles to cope. Did Milestone tell Canon to go buy Axis? Did Canon realize that buying Milestone was not going to increase sales of Canon hardware? Did Canon plan on this all along?

I am not sure it makes sense for Canon to continue the “open platform” spiel. Canon can offer a very wide range of cameras and VMS as one unified solution, just like Hikvision, Avigilon and a bunch of other players. I guess that Milestone didn’t have the money/knowhow/courage to build their own cameras, and Axis didn’t have the knowhow/courage to do a proper VMS. I am told that If Milestone was to carry their own camera-line, the fear was that camera vendors would become hostile, and simply not recommend the Milestone platform (or worse, advise against it). Axis, by the same token, feared that with a proper VMS, the big, independant VMS vendors would be hostile towards them too.

Another (less dramatic) theory is that they’ve stuck to their core competency, and for Milestone it is software and for Axis it is hardware (let’s not forget they made print-servers in the past) and they had no desire to branch out.

I think it is safe to say that Axis was under some pressure from the cheaper players. Basically, good enough is good enough, and to a lot of people, price becomes the dominant factor. All the VMS’s allow you to add a camera, set it up, record the video, and when shit goes down, you can export a neat little clip for the cops (who, in some cases don’t really care about it anyways – at least in Denmark). It’s really hard to charge a premium if the free entry level stuff is simply good enough.

A tired analogy would be that you have this nail sticking out, but no hammer. You go to the store, and they have 4 different brands of hammers. One of them cost 40% more than the others, but the 3 cheaper ones will do the job just fine. Which one do you pick? If the expensive hammer comes with a 30 page manual, and probably requires one or two phone-calls to the manufacturer, how long do you think the store will keep offering that hammer to their customers?

It may very well be that all “hammers” require a lot of pain to get them up and running, but they all accomplish the same task in the end. And in many, many cases it’s a simple task at that. Record, Play and Export. Why pay extra for a hammer that also works as a screwdriver and a bottle opener, when you know that you’ll never use those features?

It remains to be seen if Canon can make the Milestone/Axis combo work in the low end segment. I am not convinced (I am a perpetual pessimist). The culture of both companies is very much “more options are better”, “advanced is good” which is in stark contrast to the products that succeed in the low end today. DropCam is truly plug and play. It’s a niche product for sure, but it just works. I think it would be easier to get Milestone/Axis to kill a puppy, than to remove a feature that just 0.1% are using.

In the high end segment, I don’t know if the Milestone/Axis combo will offer any meaningful synergy. A high end client ought to look for something that isn’t chained to one manufacturer. It’s hard to buy into the idea that Milestone will be as faithful to Panasonic cameras as they are to Axis and Canon. We saw how Tyco/Exacq decided to remove support for Avigilon cameras, and so if you are going for a truly open solution, I am not sure I would buy into the siren songs of Milestone and Axis about how “nothing will change”.

The lure of Milestone was that they were NOT married to anyone, but now that they are, that selling point is gone. The same applies to Axis. So that means that Canon placed themselves pretty squarely in the Hikvision, Dahua and Vivotek camp, and it might be profitable to Canon (it better be!), but it also means that it will be harder for Canon to capture the high end market.

Milestone is looking for “burned out consultants”, so perhaps that’s the strategy for the high end market. Consulting, highly customized solutions etc. but I think the fact that Milestone and Axis are now Canon, and not an independent vendor may be a hurdle that is not easily overcome.

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2 thoughts on “Canon merges Axis and Milestone

  1. shockularis says:

    —I am told that If Milestone was to carry their own camera-line, the fear was that camera vendors would become hostile… Axis, by the same token, feared that with a proper VMS, the big, independant VMS vendors would be hostile towards them too. Another (less dramatic) theory is that they’ve stuck to their core competency, and for Milestone it is software and for Axis it is hardware (let’s not forget they made print-servers in the past) and they had no desire to branch out.—

    No desire or, more importantly, -who- had no desire to? As you know well, Prescienta, these companies were owned by indviduals who may or may not have really any particular interest in the security industry. When these individuals were offered X million (for Milestone) and over a billion dollars (for the shares of the main owners) for Axis, they win! That’s their end-game. Their end-game wasn’t to be the biggest player in the surveillance industry; it was to cash-out.

    Axis, if you anthropomorphize the company as a whole into a single entity, probably could have / should have branched out into creating their own true full VMS; they certainly have already dipped their toe into that water (actually, a whole leg at least) and developmentally could have had a full-blown VMS out anytime. But that’s assuming “Axis” was this single entity wanting to stay alive and grow, and this purchase clearly shows that it wasn’t / isn’t – there were owners with their own (understandable) agendas that diverged from the organization-as-single-entity.

    Exactly as soon as Axis’s growth potential peaked without branching deeper outside of essentially the single-mind focus of edge video processors (i.e., cameras and encoders), they sold. Once it was clear that it was a risk that Axis’s valuation could go lower unless they risked forking deeply into one or all of 1) VMS, 2) VMS/NVR boxes, 3) access control hardware, 4) cloud video solutions, 5) end-to-end packages, and/or 6) a surveillance services / consulting company, they sold. They sold on top, or at least when the opportunity for higher valuation versus the risks required to increase their growth passed its tipping point.

    Axis makes their own VMS; being generous, let’s say it’s 10% better than Milestone/Genetec/ONSSI/ what have you on Axis cameras right off the bat. How much does that increase Axis’s valuation? The risk, as you rightly state, of enough of the channel being turned off and enough investment being wasted that the bloom is off Axis’s rose, and suddenly a 40-times-earnings valuation (or whatever it was) isn’t happening, even if Axis’s maintained its size or even grew.

    The owners sold at pretty much the ideal time for them. Axis wasn’t going much higher without deeply changing, and the owners probably don’t even care so much about surveillance anyway. The game would have changed, and so they stopped playing while they were way up.

    Incidentially, Axis creating a VMS may not have been that hard at all for them (with complete respect to your skills and understanding that developing a VMS is not simple). But their sales system, quite honestly (at least Stateside) is, shall we say, lacking, when it comes to VMS knowledge. They don’t know it, don’t understand it, don’t care to understand it. Sure, they would have been trained and incentivized, but it would have taken a lot of time and a learning curve to get their sales teams (and sales engineering teams, training staff, et. al) all ready to make that play work.

    And it’s not dissimilar on the Milestone side, too, I’d suspect. Milestone wasn’t going to survive alone – an IPO probably would have only been a stepping stone to increase value to get sold, and they just skipped that step – without stepping into new ways of business. And, whatever you think their sales system, their product, what have you – they’ve been very good at what they do, but I’m not sure there was/is a lot of “talent flexibility” for them to branch into hardware / access control / cameras / whatever else. They hit their max, and it was time to cash out. Were any of those early Milestone employees really into the security industry? (I ask genuninely – you’d obviously be a person to know!)

    Either company or both could very well have thrived alone – Axis with a VMS or a hard push into access control and other security appliances, Milestone as a software-and-services company (like a security version of IBM) – but it would have taken a very different shift, and I just don’t think any of the principals were interested in taking on that challenge, at least not when they could call it a day with this kind of money. I don’t necessarily blame them.

    Canon diversifies into an industry that seems a reasonably natural outgrowth, while being able to point to a healthier growth industry than much of their current main business. Cameras / surveillance fits the Canon theme and they use their considerable cash resources on a business they see as growing and sustaining. I’m sure there were passionate people within Canon making the argument that “security cameras can’t be displaced by cell phones!” A lot of management / executives at Canon probably just extended their “results leash” by years, positioning these moves as something that will take a while to bear fruit. Like a sporting director for a football club making a bunch of transfers of the top players to invest in young prospects – they’ve now bought themselves a lot of time before the results can be evaluated.

    —In the high end segment, I don’t know if the Milestone/Axis combo will offer any meaningful synergy. A high end client ought to look for something that isn’t chained to one manufacturer.—

    I very much respect the sentiment, but, it’s a mess out there for a lot of end-users, and a lot of is the fault of the “open” manufacturers (not just just Axis and Milestone by any means, but everyone that’s a component in these solutions). So many customers just want a surveillance system that works, and, wow, the “open ecosystem” has done a really poor job of making that happen.

    In some ways, I feel this deal may be bad for the really competent integrators, because they’ve already been doing a good job putting together solutiions for high-end customers. But so many of the “big” integrators, the ones that have really just been turning the ship to IP in the last four or five years, are doing really mediocre work for their big big customers. They just don’t seem to have the skill sets to “integrate.” If this kind of consolidation means Canon can offer not just high-quality products but offer them in a unified way, it’s going to help these big integrators that can’t seem to do it themselves.

    There’s a reason why Avigilon has come on so strong, and it’s not quality of the components, it’s stability of the end result.

    And, ultimately, your point about most customers wanting surveillance to be “just good enough” is a huge one. The dirtiest little secret in surveillance is that once the system is up and running, so many customers care so little about it. So reliability, ease of understanding, ease of troubleshooting, that becomes a massive part of the equation. And the ‘open’ companies, because of their job silo-ing internally and lack of clear, easy processes to actually implement and use their systems, they’ve allowed the ‘closed’ end-to-end solution to look more favorable.

    But was their approach wrong? Well, for the handful of people that have cashed out over the last year, I can’t say no. For the developers and sales people and all of them who have made careers over the last 5-10 years, I can’t say the approach was wrong either. But for customers, and those perfectionists who might treat security system design as a kind of “art” or craft, this approach has been a mixed bag at best.

    • prescienta says:

      Naturally, the division between low, mid and high is pretty crude. But some of the pieces that high-end installs look for are just not plug and play, and probably never will be.

      For example, Point of Sale integration. Some have registers with a serial printer. You can split the cable, and analyze the data sent to the printer, but then others use a much more complex setup. At one client, we reconstructed a receipt from their backend system. The backend in this case was Navision, but Navision systems have different database schemas, so we probably would not be able to re-use the receipt generator.

      Integrating with an existing access control system is not plug and play either, and please don’t get me started on analytics.

      But I completely agree that there is a lot of unnecessary complexity in the systems that just don’t make sense to 99% of the users, yet it is kept in the system. I guess it is often used as a means to ensure that you win bids (an odd feature is made a requirement, even if the feature is completely meaningless, thus pushing out companies that don’t have it).

      The question is – is it too late to disrupt this business with a radically different NVR?

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