The surveillance industry has seen a massive amount of innovation in the past decade. New technologies, revised efficiency requirements and an information-centric workforce all continue to demand new approaches. However, in most cases, these innovations – ranging from IP networks and remote access to intelligent search technology – lag several years behind similar advancements in the IT sector.

The promise of video surveillance in the cloud, or VSaaS, is no different. While seemingly every facet of the enterprise – from storage, word processing and mail to voice, procurement and customer relationship management (CRM) – is benefiting from the disruptive nature of the cloud computing model, surveillance has taken only half-hearted steps in this direction. Thus far, the industry has missed an opportunity to reinvent itself for the better.

Right now, only the barest fraction of video surveillance – a few hundred million dollars, at most, out of a market that’s valued at more than $15 billion – ever reaches the cloud. That’s rather interesting when you consider that every other kind of video has found a home on YouTube, Skype, Vimeo, UStream or various other forms of software-as-a-service (SaaS) offerings. These video companies have done more than simply repackage the same-old service and business models in Web architecture. Instead, they have used the cloud model to create new applications, connections and value never before possible. And that’s a major reason why they’ve been successful.

In the security industry, the promise has been less clear and thus less compelling. Sure, there’s a storage benefit to putting video off in the cloud rather than storing it locally, but what about the bandwidth to get it there? Beyond vague promises of improved storage, no clear benefit to VSaaS has been described; certainly nothing that would warrant most security directors paying more per camera for their systems.

If VSaaS as a whole, and the dozens of entrant companies competing for a piece of the market are going to exceed the current tepid growth projections (only about a 10 percent penetration of an almost $40 billion market by 2015), they will need to address some core infrastructure issues, start thinking out of the box and take a page out of the playbooks of successful cloud service companies from the IT world. Until this happens, the future of VSaaS is cloudy at best.

Let’s take a look at some of most important issues currently affecting surveillance video’s migration to the cloud:

1) Recording Policies and Bandwidth: While available bandwidth to businesses has certainly increased in recent years, expanding capacity while decreasing costs, it still has not kept pace with the full demands of the current explosion in video. At the same time as our ‘pipes’ have gotten bigger, so too have the requirements of more cameras that push more megapixels at increasingly higher frame rates.

Big applications require big bandwidth. For most enterprises today looking to switch to cloud-based solutions, a hybrid approach of local storage with off-site backup or access may be the only option available right now. The notion of switching wholesale to the cloud is simply not possible, and if present trends continue, we won’t see the day where the bandwidth available to surveillance networks exceeds its total requirements any time soon.

One way to potentially get around this problem, however, might be through the application of video intelligence. The truth is that all frames, pixels and bits are not created equal; some contain much more information, and are much more important than others.

Motion-based recording is the most simplistic example of this. We now all take it for granted that motion-based recording – recording that only turns on when something is moving – is as good, or even better, than continuous recording of video. This wasn’t always the case, however. Until recently, most businesses enforced continuous recording policies that specified minimum surveillance frame rates and even specific compression algorithms. Before then, countless VHS tapes were employed to store mostly meaningless footage. Some still do.

Infrastructure expenditures – in this case, video storage – have forced a rethinking of what is really necessary to save and for how long. So too, achieving the promise of the cloud in the context of bandwidth constraints requires a rethinking of what is really important to stream. Video intelligence-enabled recording policies that emphasize informational content over bit and frame rates are central to the growth of video surveillance in the cloud.

2) Free and ‘Fremium’:One big reason that SaaS organizations have been so disruptive in other sectors is their low price point compared to existing on-premise solutions. Applications are often based on the “freemium” model, with companies offering a free, low-level service with the option of paying to upgrade to access more features. Companies like file-hosting service Dropbox, music recommendation service Pandora, note-taking and organizational application Evernote and email marketing company MailChimp have proven the success of this model.

Today, the VSaaS marketplace lacks both a meaningful free option to entice converts to the cloud and the additional features and value required to support the conversion of these converts into paying customers. Instead, everyone is simply charged anywhere from $10 to $50 per camera – for what is essentially just storage.

Succeeding with a free offering is not always easy – even for a SaaS company, ultimately, it’s the ability to attract paying customers and scale that makes it possible for a cloud business in the IT space to offset the fixed and infrastructure costs of its free product with other revenue streams. This is especially true when it comes to something infrastructure-intensive like video surveillance, and explains the notable dearth of free offerings among VSaaS providers.

What surveillance in the cloud is facing is a bit of a ‘chicken and egg’ problem. A solid free offering is required to rapidly scale cloud adoption and a large customer base; and a large customer base is probably required to pay for a free offering. Ultimately, this dilemma will only be resolved when cloud service providers take on the risk associated with financing the market’s transition from on-site appliances to online services.

The economies of scale that cloud technologies offer companies are only achieved when using a shared infrastructure. It’s the ability for public cloud deployments to show faster ROI and lower total cost of ownership while providing unmatched scalability and innovation that in-house deployments will ultimately struggle to compete with.

3) Open Integration:The most successful SaaS companies today are not just enterprises unto themselves, but hubs for a much larger ecosystem of partners that continually consume and add to a SaaS company’s content and value. Video surveillance companies have recently begun to open up their application programming interfaces (APIs) and communicate with other on-site systems that companies may already have deployed, but cloud service companies have been slow to match these features and let outside audiences expand on them.

In food service, we’ve seen surveillance connect with existing point-of-sale (POS) solutions. In retail, we’ve seen integrations with exception-based reporting (EBR) and electronic article surveillance (EAS) systems to help prevent shoplifting, employee theft and identify questionable transactions. In financial services, we’ve seen work with existing bank platforms to connect teller operations data with surveillance footage in order to tag and pinpoint video footage from individual transactions or accounts.

These examples are really only the tip of the iceberg in terms of what should be possible for cloud-based offerings. New companies like Silicon Valley-based Square, an emerging company that uses mobile devices to bring POS and payment systems to the cloud, are already proving the potential for solutions that easily integrate data that once required expensive and clunky on-site interconnections. More and more companies add to this disruption and opportunity with cloud-based solutions each day – for everything from attendance and accounting to reservations and countless other applications once thought to be extremely difficult to integrate.

Ultimately, continuing to silo surveillance from other systems means less value and additional investment necessary for customers to get the intelligence they need to run their businesses successfully. In the world of SaaS, integration is critical. The goal for VSaaS should be to enable the meshing of all kinds of data sources and applications to drive the most intelligent services possible.

4) New Cloud Applications: The primary focus of surveillance in cloud businesses today is replicating features from existing video solutions instead of inventing new ones. To some extent customers’ needs and expectations demand this. But the question that remains is this: Why simply record video when the economics of centralized processing and the proximity to global data enable new business offerings and applications that go well beyond surveillance?

How does the usefulness of video change when any number of people can have access to it anywhere and on any device? How much more can we learn from video when it is aggregated not only across the enterprise, but also across regions and entire industries? How else can this unique set of information about the places we care about be useful to people outside of security?

The answers to these questions will become clear over time, and eventually there will be a new generation of cloud-enabled applications that do more than simply move in-house systems to a datacenter. These applications will not only drive the adoption of video in the cloud, but may also hold the key to a workable business model for cloud service providers that will ultimately need to do much more than simply charge customers for off-site storage.

There are multiple reasons that so little of video surveillance data ever reaches the cloud. The challenges to success for those who might offer VSaaS range from infrastructure costs and business models to a failure to truly appreciate the opportunities in front of them. Looking at examples of successful cloud-based business in other industries, however, can provide clues to what it might take to disrupt current approaches to video surveillance and create new value and drive new innovation. The rewards for clearing up VSaaS’ cloudy future go well beyond the current projections and expectations for the market and may provide the most important innovations to come out of surveillance in decades.