Year in Review: Security Surges in 2011 from Delayed Projects
Editor / Provider: a&s International | Updated: 11/30/2011 | Article type: Hot Topics
The economic crisis seems to be largely over in 2011, but new debt concerns are sparking anxiety about a second depression. As security deals with market uncertainty, we look at the year's milestones in events, regional and vertical markets, technologies, challenges, and drivers and differentiators.
There has been no shortage of grim headlines this year. In March, the strongest recorded earthquake in Japan killed scores of people, leaving extensive destruction and a nuclear meltdown in its wake. Along with natural disaster, deliberate acts of violence took place, including the senseless Norway attacks and the Moscow airport suicide bombing. In the U.K., mass riots resulted in five deaths and widespread damage.
The past decade in security has been shaped by 9/11, with its mastermind Osama bin Laden meeting his demise in May. However, the war on terrorism is far from over, affecting a younger generation throughout the region. Across the Middle East and North Africa, Arab Spring uprisings toppled authoritarian regimes. Egypt's Prime Minister Hosni Mubarak stepped down after 30 years of power, while Libyan leader Moammar Gadhafi was killed in October. Political instability coupled with economic uncertainty has marked the past year as an eventful one.
Not all is bleak though. China hosted the successful 2011 Summer World University Games in Shenzhen, welcoming student athletes from all over the world. Projects came back online, with Asia Pacific expected to invest US$100 billion for 350 airports in the next 10 years, according to Frost & Sullivan. More new infrastructure boosted the security market, which grew in some areas due to political unrest.
Notable consolidation and restructuring activity went on in 2011, a welcome sign after the recession. Tyco International announced a three-way split in September, with security divided into two companies: ADT and Commercial Fire and Security. “One of the business reasons for splitting up Tyco was serving the customer better,” said Charlie LeBlanc, President of Security Services for FrontierMEDEX. “One of the dangers in consolidation is you start losing the customer and understanding what they want or need.”
Prior to Tyco's split, ADT Security Services acquired physical security information management (PSIM) provider Proximex in April. In the same month, Verint Systems also made a PSIM buy for Rontal Engineering Applications. As security systems handle more data, there is a clear need to aggregate it in management platforms.
UTC reorganized in September, combining security and fire with HVAC provider Carrier to become UTC Climate, Controls and Security Systems. The new business will be led by new President and CEO Geraud Darnis. Siemens also restructured in September, with a new Fire Safety and Security business unit made up of Life Cycle and Enterprise segments.
Pure-play video analytics providers were either acquired or eliminated this year. Vidient was in both categories, going under in January and then being acquired by Agilence in April. In August, Keeneo's 4-D analytics was sold to Digital Barriers for $2.8 million, diminishing the ranks of stand-alone analytics providers.
Of the VCA companies still in operation, ObjectVideo sued Bosch Security Systems, Sony and Samsung Techwin for patent infringement this year. While the defendants have countersued and the legal outcome is uncertain, the lawsuits make ObjectVideo look desperate. Even if ObjectVideo wins, it has lost credibility by alienating some of the biggest names in video surveillance.
Public spending came back in 2011, with government projects and airports being among the most active vertical markets. “Due to the large number of airports across the U.S. and Europe, there is a constant need for retrofit as terminals get updated,” said Blake Kozak, Senior Market Analyst for IMS Research.
DVTel won a project for a major European airport with 1,200 cameras, along with a contract for the Mumbai airport this year. “We see new opportunities largely in emerging markets,” said Ami Amir, Executive VP of Marketing and Products, DVTel. “We had significant success in South Africa, Latin America, Russia and Asia. For us, India has much more activity than China.”
A military site in Afghanistan was one of Delta Scientific's biggest projects in 2011, using barriers and barricades to protect it from car and truck bombers, said David Dickinson, Senior VP of Delta Scientific. Its key regions were North America and the Middle East, with a focus on areas facing high risks from vehicular bombs. Many investments have been made in city surveillance, infrastructure and government buildings. “Government spending in Asia Pacific has been one of the key drivers for security revenues in 2011,” said Susan Sahayan, Research Analyst for Frost & Sullivan. “Railways, airports, highways and in-flight security are some of the key sectors within transportation driving the growth of video surveillance, access control and biometrics.”
Rising fuel prices are increasing demand for public transportation. “As we see an almost negative situation in the economy, we see a positive situation in public transport,” said David Gorshkov, CEO of Digital Grape. “There's an increased need for monitoring, to meet the demands of public transport for both road and rail.”
Threats from domestic and international terrorists around the world remain, making transportation a major security market. “In the public sector globally, we see the increase of security systems, whether they be access control or video surveillance,” Gorshkov said. “Government buildings are increasing their security, as well as educational installations.”
The Beijing metro chose a networked access control solution with card readers to enhance access management and overall security, said Simon Siew, MD for APAC, HID Global (an Assa Abloy company).
Infrastructure and government were among the company's top verticals for 2011. “Geographically, we have grown in India and China in the past year, as their economic environments have rebounded faster than most countries,” Siew said.
Corrections saw growth this year, with OnSSI installing systems at several Texas prisons. Each system includes more than 800 cameras. “OnSSI will be standardized throughout the Texas prison system's 114 facilities in the coming years, with new installations taking place as funding becomes available,” said Gadi Piran, President of OnSSI.
City surveillance also sees greater demand for scalable management. “There is increasing interest in separate control rooms to make better use of data citywide, such as transmission,” Gorshkov said. “There's interest in the consolidation of systems in various control centers, or PSIM.” [NextPage]
The commercial sector saw good movement in the past year. “The global economy trickles down to all spending, whether the government or private sector,” LeBlanc said. “The private sector is driving the spending more so than the government sector.”
Sports and leisure grew, such as athletic venues and stadiums. Dallmeier installed a multimegapixel solution for the Olympic Stadium in Berlin, which can seat more than 74,000 spectators, according to a prepared statement from the company.
In emerging countries such as Brazil, India and China, high growth can be found. “With the World Cup and Olympics to be held in Brazil in the coming years, the country is set to increase its capacity by about 85 percent,” Kozak said. “The number of hotel rooms is also expected to increase by nearly 40 percent, increasing demand for products such as electromagnetic locks. Qatar is also seeing strong growth in sports and leisure as well as other vertical markets, because of the need to secure both established and newly constructed infrastructure.”
Financial institutions witnessed increased demand. “Banking experienced moderate growth in 2011 despite the downturn, because of consolidation and the need for logical- physical access control,” Kozak said.
Retailers are also investing in security. “Retail, certainly supermarkets, are performing quite well, with refurbishment programs for main stores and new developments with new smaller ‘in-town' stores,” said Andrew Pigram, Technical Director at Norbain. “One of the first sectors to react to the downturn was retail in 2008, but we're starting to see a gentle recovery.”
Europe and North America are seeing retail growth. “As it turns out, it has been strong as retailers have an increased need to protect their assets,” said Paul Bodell, Business Development for IQinVision. “In some places, the bad economy or threat of a higher crime rate has accelerated investment.”
Another growth market is the industrial sector, such as energy and petrol. “We've done work in Brazil, Mexico, Chile, Columbia and several other countries,” said John Moss, CEO of S2 Security. “The nice thing about servicing a number of markets in Latin America and Asia is you have some protection from difficulties in any single market.”
Integrators focused on ROI for installations, which grew in 2011. “We saw a spike in 2010 and 2011 in power and utilities, particularly remote sites,” said Mark Gally, VP of Marketing for VideoIQ.
As more markets have already reached the IP tipping point, standards become crucial to integrating multiple devices. ONVIF is by far the largest of the physical security groups, counting more than 300 members. However, the present version is limited to display. Support for each member's unique PTZ protocols, night vision controls or in-house analytics is still a way off.
Supporting generic functions is already a big step forward, but “standards” still lack a uniform guideline for image quality. “Standards provide a framework for performance criteria to be achieved by the various members,” Gorshkov said. “But ONVIF and PSIA are trade groups, not standards bodies. They are interconnect agreements between vendors.”
Installers and integrators should be more concerned about designing systems that deliver the proper imaging for user needs, rather than just looking at cost. “Integrators need to maintain an appropriate standard of quality, rather than leaving it in the hands of vendors,” Gorshkov said.
Some standards are drawn up by federal bodies, such as Homeland Security Presidential Directive-12 mandates for government identification. “The government has extended its influence on physical access initiatives, imposing tightened privacy standards and mandating secure-compound directives,” Siew said.
MANAGEMENT AND ANALYTICS
The migration to IP has yielded benefits for businesses. “The industry as a whole has embraced what technology can do to assist a corporation or entity in protecting their assets,” LeBlanc said. “It's a multiplier that compounds upon itself. There are much easier ways to integrate into a solution.”
The accessibility of smartphones and tablets is expected to drive home automation growth to reach a wider audience, according to Frost & Sullivan.
As IP yields business benefits, it sees strong growth. “We continue to see rapid adoption of IP technology across product categories,” said James Rothstein, Executive VP of Tri-Ed/Northern Video Distribution.
Edge devices did well, as the hardware and software are optimized to work together. Integrators can save time for setup and calibration, while differentiating with analytics. “It offers nice infrastructure savings and operator efficiency for search and presentation capabilities,” Gally said. “The continued adoption of analytics in the mainstream is a critical component in powering an overall system. You can optimize storage and empower people to do faster searches.”
Delivering ROI was a focus for manufacturers. VideoIQ launched its first business continuity rule for 24-hour ATM vestibules to detect sleeping vagrants, which can be a problem in cold climates. “They're concerned about customer safety and whether people can go in the ATM to do business,” Gally said. “We can track objects that go motionless for a long period of time and send an alarm. Banks are actually impacting their bottom line by making sure there's access to ATMs 24/7.”
Other providers are providing more value by offering more functionality, such as unlimited installs for VMS client software and incremental licenses by camera count. “OnSSI has reconfigured how the software platform goes to market,” Piran said. Its scalability provides upgrade opportunities for customers with cameras and severs at multiple sites. [NextPage]
Network video may have reached its tipping point in several regions, but analog is far from dead. HD-SDI provides a midway point with HD video over analog cabling. “HD-SDI is only available in the U.K. through a limited number of suppliers, so it's not really launched or established yet,” Pigram said. “However, there's a lot of end user interest, and more manufacturers will be launching products towards the end of 2011.”
For network video provider IQinVision, it consolidated its M-JPEG and H.264 product lines for greater efficiency. “In 2011 we converted all our cameras to multistream,” Bodell said. “We now have the largest portfolio of H.264 cameras and consolidated part numbers. Since the market would not allow us to increase the price of the M-JPEG cameras, we are selling the multistream H.264/M-JPEG cameras for the price of M-JPEG cameras and letting the users select the compression in the field.”
This year 's multimegapixel cameras generated plenty of buzz at trade shows. “There is a trend to use high-megapixel cameras, in standard format and increasingly more specialist 180-degree/panoramic and 360-degree fish-eye technology to capture a complete view from a single camera,” Pigram said. “This is proving to be a valuable addition to many video surveillance systems and in some cases, customers prefer to use them compared to traditional fully functional domes.”
Among the high-megapixel solutions was a 51-megapixel multisensory system with a dozen lenses, capable of displaying background objects as clearly as ones in the foreground. “This makes it possible to identify people at a distance of 160 meters,” said Roland Feil, Sales Director for Dallmeier electronic.
UP IN THE CLOUD
More hosted offerings were launched in 2011, but not all sites have the infrastructure to support large bandwidth. “For the smaller commercial and residential sectors of the market, it's just starting and will grow in the next five years and expand to larger applications as greater bandwidth becomes available,” Pigram said. Norbain introduced a hosted access control solution, targeting multisite end-user companies.
And while megapixel counts might be climbing, few networks have the bandwidth to transmit enormous video files at real-time frame rates. “Distributed storage is a key component to intelligently manage data to a cloud service,” Gally said. “HD video into the cloud will require customers to invest so much in the infrastructure that it's hard to cost-justify.”
ACCESS CONTROL AND INTRUSION
Managing access can now be done through integration with other physical security systems, such as video door phones for remote monitoring. “The integration of video surveillance with biometrics is gaining traction,” Sahayan said. “This growth in biometrics is expected to create the need for end users to utilize more advanced surveillance systems, particularly IP systems, which will be more cost-effective as a security solution.”
Mobile devices will also feature near-field communications (NFC) for access control. “HID Global sees significant opportunities in taking NFC technology beyond cashless payment into new, complementary physical access control applications,” Siew said. “The industry has made great progress in moving payment applications onto NFC smartphones.”
The global intrusion alarm market is expected to reach $2.4 billion in 2011, according to IMS Research. Opportunities were mainly in retrofit activities, as new construction has slowed.
Finding new opportunities was a top distributor target in 2011. “The economic slowdown has us focus even more on presenting ways for our customers to diversify into new product areas and revenue streams,” Rothstein said.
Network video channels have been tricky to navigate in recent years, as traditional distributors may not understand IP issues. However, IT resellers may know about networking, but lack security experience.
From the experience of 13-year-old IQinVision, security distributors are the way to go, particularly in the high-volume market or sites with less than 10 cameras. “In the early days, we focused on IT integrators,” Bodell said. “But more security channel dealers are becoming network-savvy. Three to four years ago, I would have picked IT as the channel that would win, because the security channel was not embracing IT. But with turnover, you get a younger generation of security integrators who understand networking, because they have grown up with it.”
While IP uptake is seeing more acceptance, education is still a challenge. “It's a fact that the end user and system integrators are exposed to new network solutions and don't know enough about IP,” Amir said.
Challenges in 2011 were spending and economic difficulties. “Western Europe has been greatly impacted by the recession, namely Spain, Italy, Greece and the U.K.,” Kozak said. “As governments look to balance budgets, there could be a slowdown in growth. The Americas is forecast to see slow growth in 2011 as a result of the high growth that returned in 2010 following the economic recession. Despite rebounding, the growth could not be sustained. The EMEA region is only forecast to grow by 2 percent in 2011.”
Market uncertainty forced installers and end users to reconsider their security purchases, even if they were satisfied with how they performed. “Economic pressures have forced companies to either consider whether they need to spend money on features they don't really need or conversely that the system they buy delivers more: not just in the security arena, but potentially in new areas which will drive economic growth of the end user,” Pigram said. “This has driven a trend to two different purchasing dynamics — cost-effective video and integrated IP systems.”
Regional buying behavior has further compounded market troubles. “Low levels of awareness on the importance of security and the availability of cheap manpower in emerging countries such as Vietnam, Indonesia, Thailand and the Philippines are restraining the adoption of security solutions,” Sahayan said. “However, this scenario is expected to change in the next few years, as end users begin to gain more exposure to surveillance technologies through trade shows, media advertising, as well as success stories.” [NextPage]
DRIVERS AND DIFFERENTIATORS
After a relatively calm year, companies are gearing up for a possible debt crisis. In the face of macroeconomic factors, a combination of innovation and responsiveness to customer needs enabled companies to beat the recession and weather the coming storm.
One way to survive is through continuous innovation. “The path we embarked on many years ago has proven to be correct,” Feil said. “We address all aspects of video security technology rather than concentrating on individual components.”
While R&D is not cheap, it can pay off. “Our competitors reduced their workforces during the recession,” Moss said. “We didn't do that, we hired through it. When the recession eased up, they didn't have enough people and we had a bunch of new products.”
Warranties support a highly innovative position with guaranteed quality. “Given the number of low-cost competitors, we've gotten business back from customers who had catastrophic product failures in the field,” Bodell said. “We always boasted the best products, and in 2011 we backed that up with a five-year warranty on our minidome and a three-year warranty for our professional line with on-camera recording and analytics.”
DVTel also launched a quality assurance program, providing a lifetime warranty for new products good for at least four years, Amir said.
Tailoring solutions for specific applications benefits both manufacturers and customers. “Diversification related to multiple vertical markets is one way to ensure ongoing success,” Piran said. “It helps that OnSSI has a product that is versatile and useful in a variety of end-user environments, which allows us to focus on hot verticals without having to reengineer the system when the market shifts.”
One phenomenon this year was low-volume customizations. While this was previously unthinkable, economies of scale have enabled manufacturers to adjust products to customer specifications.
The goal of innovation and customization is to satisfy buyer demands. “Companies have to be consistent and focused on execution,” Amir said. “Focus on the customer.”
Continued engagement is about supporting user needs. “Our sales guys are with integrators every day,” Bodell said. “Product management talks to customers and gets feedback. Then we make a list of things, determine what's real in the long term and we invest in that. The simple way to say it is it's just the voice of the customer. You've just got to learn to listen to it.”
Extending the value of existing customer investments is crucial. “In the recession, we solved business problems for end customers and that allowed us to grow,” Gally said. “Our strategy and advice is to make sure solutions delivers a value-add to the channel partner as well as the customer.”
Customer satisfaction is not a new concept, but achieving it is easier said than done. Providing security and convenience at an affordable cost benefits all parties. As companies with a clear value proposition witnessed growth even after the market contracted, it proves that following best practices delivers real results.