The fact that August was a good month for the UK’s security business sector would suggest the second two quarters of this year will experience a welcome acceleration of growth in security revenues as far as some vertical markets, technologies and geographic areas are concerned.
The reason for this belief is not based on the many overly optimistic forecasts by market research companies that have sprung up of late, but from qualitative and quantitative information delivered throughout the channels of distribution.
Last month, we identified that the second quarter results of public quoted security companies had shown growth in revenues and profitability, and forecast a continued although at the same time subdued improvement in the second half of the year.
This trend continued during August with March Networks, Image Sensing, Newmark and VideoIQ, for example, all reporting improved financial performances this last quarter and noting optimism for the future.
Increased levels of sales
Possibly even more convincing are the results from the integrator installers claiming increased levels of sales and a growing backlog of business.
Other indicators of confidence in the future are acquisitions, funding and alliances. Five acquisitions were announced during the combined months of July/August compared with eleven in the same period of 2009.
Yes, there was a dramatic tailing off in the volume of activity, but the purchase value of just two of these acquisitions amounted to $2.4 billion (making the value at least one order of magnitude larger).
Four companies announced funding secured in July/August compared with three during the same period of 2009, while the number of new alliances totalled nine in both years.
None of our Top 50 acquisition targets were acquired in August. We have added Exacq Technologies to the list, and taken off Plettaq Electronics.
Exacq was the highest growth security business in Inc 500 during August. The proprietor directors have sold previous companies they operated when they reached a slightly larger size.
According to a recent Reuters report L1 Identity Solutions, one of our target companies, will be acquired very shortly for around $1 billion. We fully expect some renewed acquisition activity in the next two months.
Where will the growth be focused?
We’ve shown here some solid evidence that the security market will grow over the next six months, and that the tools for its development will be provided through acquisition, alliance and funding.
Sadly, we should not expect demand to be born out of growth in the construction market or Government stimulus programmes in the developed markets of the west which were amongst the main drivers for growth in the last decade.
On that basis, then, where will growth be primarily focused? We suggest that the major emphasis will centre on an acceleration of the shift to IP from analogue and a sharp increase in a move to managed/hosted video.
Much has been written in the last six months and more about the rapid increase in IP video vendor sales as more companies have seriously taken up this technology. At the same time, the major analogue suppliers have disclosed significant falls in revenue.
Demand for managed/hosted video is being driven by both integrators and investors. Simultaneously, the number of providers launching such services has significantly increased.
This demand is being driven by IP networks’ ability to reduce operating costs while delivering real value add services that generate much higher levels of ROI.
To find out about how, where and why, click the link to the article: ‘It’s all about the Network’ (which is based on a presentation made at the recent Axis Architect and Engineers Technology Summit by Martin Gren, co-founder of Axis Communications) (see the right hand panel of this page for the link)
Consistently mapping a correct future
Gren and his colleagues have consistently mapped the correct future of network video and then steered their company to develop the products, partnerships and services that enable significant advances in video surveillance performance.
Now, with the network coming strongly into play such that channel companies can continue to grow and serve customer needs, the IP video market will surely blossom.
Gren’s presentation explains that “among the important changes in the channel that are finally driving the adoption of IP technology are the skill sets and knowledge of those that design, engineer and install security systems”.
He goes on to state: “For years, analogue was King because that was what companies knew how to install and service. IP and Cisco-certified installers were few and far between in our market just a few short years ago. That situation’s changing now. The systems integration companies that will lead in the future are those that have invested in their people as security products have become ‘IT-ized’.”
The report goes on to explain: “Among the biggest log jams being removed are the architect/engineer/consultant (AEC) companies that design security systems.”
Two major and vital changes
Gren suggests there are two major changes in this space of which we need to be aware.
“First, AECs traditionally servicing the security market is a critical part of your business eco-system. The complexity of networks require you to work with AEC firms in a constructive way to both delight and protect your customers by ensuring successful projects.
“Second, new firms from the IT channel and BICSI are being courted by security manufacturers on one side while being asked by their clients to provide security solutions on the other. They bring a different design relationship with them, either thanks to in-house AEC staff, IT architecture-centric partners or communications-centric partners (IT or BICSI).”
The presentation then asks: “What’s next for customers: cloud computing or software-as-a-service (SaaS)”.
It’s happening now. As cloud computing and SaaS emerge as a security platform (if you offer monitoring, you are already selling cloud computing), the investment in capital and operations budgets will be less of an issue.
This is yet another example of the ‘IT-izing’ of security, but this time via the Finance Department. With a cloud computing model, customers can lease their security system and budget a fixed cost/fixed maintenance program.
As Gren’s visionary statement attested, it really is all about the network. As hosted video growth accelerates, it’s the network that provides the opportunity to build these effective and efficient solutions for clients.
Allan McHale is director of Memoori
The Memoori Blog focuses on business intelligence, comment and insight in relation to the physical security and smart grid Industries.
If you’d like to read further comment, access the web link provided on the right hand panel of this page
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