Traditionally, this is the time for reflection on the past year and forecasting the trends over the next 12 months.
Our annual report on the world’s physical security industry showed that, in 2011, despite a troubled economic climate it increased revenues and profitability while mergers and acquisitions surged by more than double in the last two years to reach $9.847 billion in value terms.
The security industry looks like a safe port in the current economic storm, then, with two main factors contributing to its robustness. The first is the continued growth in emerging markets (particularly Asia, where they shrugged off the global economic downturn), while the second is the growth in network video surveillance solutions.
The latter will certainly continue to increase its market share despite poor economic trading conditions and the former, likewise, will increase their share.
The question now on everyone’s mind is will the problem of sovereign debt in the Euro zone receive the political action necessary to solve it? The jury is still out on this one.
Growth in demand “a little fragile”
Our report showed that, in the last quarter of 2011, growth in demand looked a little flaky: the dynamic companies delivered high-tech products with a balanced exposure to emerging markets maintaining a solid performance, while those with less innovative mainstream products were far less confident about the future.
On the basis of this we forecast an annual growth of 2.4% down from an aggregate 4% in the previous two years. This time around the aftershock from the financial meltdown in 2008 has left us with less ammunition to fight off a recession. The public sector budget will be trimmed to help pay off the sovereign debt resulting in an almost certain decline or no growth in GDP in many developed countries.
Even allowing for a decline in growth our forecast would be optimistic if it were not for the fact that the industry is in a much healthier state, with a product portfolio that can deliver more attractive opportunities for clients to improve security and, at the same time, profit from it.
The only way to reduce the impact of poor economic trading conditions is to continue with the innovation programme of delivering more effective systems at lower prices. Now has to be the time to dig even deeper and increase all efforts in delivering against five developing and emerging technology trends that can drive up demand.
Our report shows that this may be best achieved through mergers and acquisitions and alliance: these activities have (in both volume and value terms) increased significantly in the last couple of years.
Wireless technology gaining traction
Wireless technology is now gaining traction with the highest penetration of wireless communication being in commercial and transportation verticals. Banking and finance are still concerned that these security systems can be breached.
Education and health buildings look to be the next growth markets.
The main drivers for the emergence of the wireless culture – namely staying mobile, reducing investment cost and improving productivity – have seen estate managers leveraging wireless throughout their organisations.
IP network products – whether for access control or intruder alarms but particularly for video surveillance – grew rapidly in 2011, and they are believed to be on the verge of a long and strong run.
Falling IP prices together with much easier to install products and improved performance have all conspired to increase the Return on Investment (ROI) and total cost of ownership of this fast-growing technology.
MSaaS and VSaaS are becoming attractive solutions to the physical security industry : they delivera lower point cost because providers can host multiple customers on a shared infrastructure.
The cloud economies of scale and flexibility also offer both the user and supplier a better deal. The prevalence of broadband along with 3G and 4G connections is making video accessibility easier than ever, so we expect the market will be looking up to the cloud to provide further cover.
Video analytics: the laggard
Video analytics is the segment of the market that appears to be the laggard. I
n 2010 there was a distinct lack of new products coming to market. 2011 was more promising with more developments. It remains to be seen if the patience of the investors will continue long enough for them to succeed and/or if a new generation of companies enters the fray.
In the last 18 months there has been a rapid rise in demand for both Physical Security Information Management (PSIM) and Physical Identity and Access Management (PIAM)-based systems. Both are examples of emerging software solutions designed to remove inefficiency and manual process within security operations.
Physical Identity and Access Management (PIAM) enables common policy, workflow, approval, compliance automation and life cycle management of the identity/badge holder across disparate physical security systems. PIAM solutions also offer operational cost reductions that can be delivered through this platform providing a bridge between the disparate systems without stripping out and starting again.
PIAM is currently receiving a lot of exposure. We are now seeing the emergence of PIAM to join together with PSIM in driving strategic and operational value for physical security departments in large operations.
All of these technologies embrace a wide divergence of skills and expertise. Clearly, it will require large research and development budgets to take them forward. It’s unlikely that any one company in the security industry will master them all.
One thing is for sure, though. The security industry is going to ride out this turbulence because it’s in a healthy state and has the confidence that it has overcome financial turbulence before.
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 (access the dedicated web link below)
