What does the Orsus buy say about the PSIM market?

Market weakness, or a growing demand among end users for the technology?
Tuesday, November 24, 2009

YARMOUTH, Maine--As the first major acquisition of a pure-play PSIM (physical security information management) software manufacturer, NICE Systems' announced intent to acquire Orsus has many in the industry commenting on what it says about the state of the PSIM marketplace.

John Honovich, for example, writing on his www.ipvideomarket.info, said while "this acquisition signals that a major player believes that PSIM products can be financially profitable," the $22 million price-tag does little to validate PSIM as the next big thing. Steven Titch, writing on www.securitysquared.com, said the deal "may also fuel speculation about additional acquisitions. A PSIM player, which provides a literal window into IP-based security systems, could give an immediate shot in the arm to a legacy camera/DVR/NVR supplier stuck in a proprietary silo. All the more so if it can be acquired at a low price."

Chris Wooten, obviously close to the deal as NICE's president of its security division, said of the price-tag, "we think it's a fair price, we think there's good value there, and this situation management market, as well call it, or PSIM, it's a small but growing market. We work with some of the largest customers in the US, and they're starting to ask for this technology because they see the problem. Especially as people try to consolidate their systems, it's a great solution for consolidating command and control, instead of having to manage a lot of different sub-systems. It's a cost-savings tool as well. I think this is just the tip of the iceberg and we're very excited about going out to go and buy the best of breed solution in the industry, and we do think it's the best of breed. I think if anything it should validate, legitimize, whatever word you want to use, that this is something that's very important."

Dave Fowler, senior VP of marketing at rival PSIM-maker VidSys, agreed that the deal is good for the PSIM market. "I do think it speaks to a larger point," he said. "If we went back 12 to 18 months, there were very few people talking about PSIM as a market. They were talking about convergence and there were lots of different perspectives about what that meant. When you have someone like NICE that's played in a number of markets saying, 'I need to have a PSIM solution in order to be a player and sell my software and equipment into those markets,' that shows convergence is consolidating less around any particular technology like video and access and instead is around what you get out of those devices, what Orsus would call 'situation management.'"

But what about that purchase price, and NICE's indication to investors that Orsus would only contribute "several millions of dollars" to the revenue stream in 2010. Doesn't that say that PSIM makers aren't making a lot of sales?

"I think [the market] is very early stage," Fowler said. "If you look at the players in the marketplace [Fowler identifies VidSys, Orsus, Proximex and CNL as the four largest], we're all relatively small. And the numbers never look as big for software vendors as for vendors who are selling hardware, but there are two aspects to the PSIM market. One is the software itself, and the other is the pull through that it has for the people who are systems integrators or vendors who are supplying the software along with other products. I suspect in the case of NICE and other integrators we work with, they make more money working with the customer helping to solve their problems than they do in selling the PSIM software, but they would not be able to get those added revenues or value propositions without the PSIM software."

Is there concern, too, that PSIM might suffer from the same over-promising and under-delivering that has plagued the video analytics field?

"Without being disrespectful of other companies," Wooten said, "when we looked at their product, some of it was still slide-ware." So, clearly, there's some concern.

"Yeah, I think you're onto something," agreed Fowler. "Part of the problem is that if you go back 12 to 18 months, there wasn't a lot of talk about PSIM. Now at ASIS you saw a lot of 'me too,' or 'PSIM-like' solutions, and so what's happened is that what's truly a PSIM solution has been diluted a little bit by some of the vendors who are around the edges who can do video and maybe a few other things and they say, 'okay I'm a PSIM,' because they're worried about losing customers. But if you look at the top four players, all of us have a really solid solution. They're different in some ways in the way that they've been architected, but they solve the kinds of problems you need to solve when you want to integrate multi-vendor technologies and solve the different problems that span technologies."