IP-Based Systems Promise Savings… but How Much?

In the years prior to 9/11, the corporate security department was commonly relegated to a corner space in the headquarters building that few ventured into besides contracted security personnel.

Clients at the senior level never paid much attention to security. In fact, they issued directives to hold down department costs with the aim to channel investments into IT systems that were supposed to bring about “the era of paperless management.” With the passage of time even IT investments came under cost pressure in view of the fact that the promised overhead reductions were difficult to identify.

Now, IP networks are taking over, and fiscal considerations are no less of an issue. One of the strategies used to promote them is to talk up the potential for long-term cost savings.

Cost Savings Hard to Pin Down
The issue of quantifying the financial contribution that security makes to an enterprise is a longstanding question involving the reduction of risk.

Users have tried to develop return on investment (ROI) models that, unfortunately, have been difficult to understand, if not vacuous, for those who run a profit center instead of a cost center.

Regardless, integrators are now presenting IP systems in many cases with a total cost of ownership (TCO) argument that attempts to justify the outlay of upgrading or replacing the user’s legacy analog system.

The TCO statistics are meant to account for all phases of the upgr-ade or replacement, such as acquiring, installing and managing a company’s computers, networks and applications.

To try and describe this issue, we pointed out two years ago in our first report on “Intelligent Video & Smart Cameras” that, based on data from a supplier, savings definitely do exist. Because senior management is inclined to approve capital expenditures that can be shown to reduce operating expenses, we wanted to look further into this matter.

Size of Installation Matters
In our research, we asked both IP manufacturers and integrators about the true impact of TCO presentations on today’s users. We found, surprisingly, that there is no overriding conviction that a TCO model is the best way to sell an IP system.

What can be shown is that an IP system can generate cost savings in large installations. Conversely, there is little economic incentive to change out an analog installation if the system is on the small side.

The actual operating cost of various security operations is gaining more attention today since many more dollars are being committed in the wake of 9/11. And the use of the IT main line is all too inviting now that everything is going digital.

Manufacturers often urge integrators to discuss TCO when selling IP systems. We may see that next year’s chart will show more votes in the “Most” column (see chart), which for now is a resounding 0 percent.

Consider, though, what a security executive in one of America’s largest corporations recently said to me: “We know we can save money going to IP because of our size, and although we don’t know just how much, we made a management decision to go ahead and do it.”

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