2010 Market Review: Market Dynamics Pick Up the Pace
Editor / Provider: a&s International | Updated: 12/11/2010 | Article type: Hot Topics
After the global financial crisis, 2010's recovery allowed security providers to breathe a sigh of relief. However, the market is still a long way from 2007 sales levels. We examine key figures, verticals and drivers that marked the past year.
In the wake of a recession, a number of optimistic market estimates were revised. The tipping point for network video was pushed back to 2013, as buyers tightened their purse strings.
Europe is expected to be behind North America, with 2014 or 2015 being the European tipping point, because users do not understand the benefits of IP video for medium or small installations, said Matia Grossi, Research Manager for Physical Security EMEA, Frost & Sullivan. A larger base of legacy equipment is also a restraint, along with lack of consultant knowledge.
The video surveillance market is expected to be worth US$10 billion for 2010, including equipment and software, Grossi said. It is expected to reach $18 billion by 2015, making it the strongest growing product segment.
Technologies that add convenience, such as wireless video, will drive growth. IMS Research found the market for wireless video surveillance was worth US$175 million in 2009 for the Americas and EMEA. Both regions are forecast to grow at a rate approaching 20 percent in 2010.
In access control, the global market is expected to exceed $1.8 billion in 2010, according to IMS Research. “Future trends in access control are centered on the ideas of flexibility, scalability and integration. SaaS, Web-based access control and electronic cylinder locks will certainly be at the forefront as the market emerges from the recession,” said Blake Kozak, Market Analyst, in a prepared statement. Biometrics is growing strong but underperforms compared to expectations, Grossi added.
Globally, intrusion detection will grow, although it is flat in Europe and North America.
2010 was considered better than 2009, after the recession hit hardest. “Compared to 2009, global business has improved a lot this year,” said Denis Hébert, President and CEO of HID Global (an Assa Abloy company). “We have noticed that investment in business infrastructure to be more robust and scalable has returned.
Business seems to be picking up. “At the end of 2009 and the beginning of 2010, we saw an increase in the number of orders but a decrease in the size of each order,” said Gadi Piran, President of OnSSI. “To us, that meant higher operational costs, but it also meant a promise for more business down the road. Our end users did not drop their commitment to improving their security systems; they just scaled back what they were doing immediately. In the long run, those projects will be carried out in full.”
Networked solutions buoyed this year's sales activities. “Despite the recession, our sales of encoders, network cameras and NVRs have been on steady climb since last year and account for more than 23 percent of our revenue this year,” said Vincent Chen, Assistant VP of Product Marketing at GeoVision.
The migration to IP in security is comparable to the consumer still imagery industry, which replaced film with digital cameras in the 2000s. “Today, according to IMS Research, Axis is the second largest camera manufacturer in the world — including network and analog surveillance cameras — even ahead of companies such as Pelco,” said Fredrik Nilsson, GM for North America, Axis Communications. “At the beginning of the recession, people thought that analog would make a comeback because of a perceived lower cost, but IP simply offers better quality, greater scalability and lower TCO.”
Siemens Building Technologies observed soft markets in 2008, which made 2009 even harder. “We are hopeful that the world is on its way out of the recession,” said Frank Pedersen, CEO of Security Solutions, Siemens Switzerland. “I, unfortunately, do not see the world becoming safer. I see, therefore, a growing market in security solutions.”
While spending halted in 2009, it started to come back in 2010. Promising vertical segments include critical infrastructure and banking, Grossi said. However, the government sector was affected by budget cuts in North America and Europe.
Not all regions are cutting back. “APAC and the Middle East are the strongest growing regions, with double-digit growth in virtually every segment,” Grossi said.
Public projects continued in 2010, having been awarded before the recession. “Our largest projects resided primarily in the public and military sectors,” said Timo Jauhianen, VP of Sales and Marketing, Idesco. “We continued experiencing our sharpest growth in Northern Europe and the U.K., although our customer base is truly worldwide now.”
Public safety and law enforcement were top markets for OnSSI, which had a number of installations. “North America was really our sweet spot this past year,” Piran said. “North America, namely Canada and the U.S., is where we saw most of our business.”
Sensitive government locations continued to require top security. “Delta's top vertical market for crash barriers, bollards and gates continues to be government agencies, such as embassies, military bases and local governments as well as government-related projects like water dams, transportation hubs and biohazard depots,” said David Dickinson, Senior VP of Delta Scientific. Conflicts in the Middle East increased Delta's business in that region, with Asia growing closely behind.
Government was Genetec's most significant market for 2010 sales, with North America being its best region. “We saw a strong accent put by governments in many regions on citywide surveillance as well as video surveillance and access control in public-housing projects,” said Alain C?té, Executive VP of Genetec. “There was also a significant component of our government sales that was for correctional institutions.”
A number of security players saw growth in the transportation market. “We have done a few projects for city surveillance as well as bus transportation projects,” said Sean Wong, Business Director for Security Systems in Asia, Anixter.
Large transportation projects are deploying management solutions. “While our solutions are suitable for many applications, we have been focusing on airports, seaports, city surveillance and oil/gas projects,” said Kim Robbins, Director of Marketing Communications for DVTel. “We are quite stable in the U.S. and the U.K. In APAC, we exploded in India and Australia this year. We are starting a South American office in Mexico soon.”
Government projects in transportation require experienced providers who have a complete range of solutions and services. “In EMEA, the government sector generally and the Middle East geographically were two areas that that were comparatively buffered from the ill effects of the recession,” said Ross McKay, Director of Product Marketing for Lenel Systems International (a UTC Fire & Security company). “In Asia airports, stadiums, power/energy, city surveillance and transportation have continued to blossom due to government stimulus investment and major events.”
Harbors and airports continue to be successful areas for Siemens Building Technologies. “Growth is in BRIC countries and the Middle East,” Pedersen said. “Based on independent research, we are the No. 1 security provider in Brazil, with the highest market share.”
Health care fared well, as patient and staff safety remains a top priority. One such project involved 130 network cameras at a large project, said Peter Brissette, owner of www.cctv-security-camera-systems.com.
Schools and institutions are populated by bright young minds, making it a vibrant market despite the downturn. Delta Scientific's perimeter solutions were installed at several colleges and universities with high foot traffic, Dickinson said.
Newcomer FutureSentry launched in April, expecting its key markets to be in energy and transportation. “Our biggest surprise was the higher-education market,” said Stephen Whitten, founder and CTO of FutureSentry. “Security at US colleges is focused both on protecting property and people from harm, and convincing parents that they are sending their sons and daughters to the safest possible campuses.”
Education and transportation were key focuses for training and technical support at Infinova. “Geographically, we are doing very well in India, the Middle East, China and Latin America, especially Mexico, Argentina and Venezuela,” said Mark Wilson, VP of Marketing at Infinova. “Projects span across airports, railways, highways, toll stations, petrochemical facilities and so on.”
Children are a valuable investment, making K-12 security a continued priority. “We weathered the recession pretty well, as security investment in people and assets is always the last to be cut,” said Rajesh Venkat, VP of Marketing for Ingersoll Rand Security Technologies. “Our key verticals, K-12 and health care, are also more shielded; plus, we offer financing programs, so customers' choice of technology can mature and advance more efficiently.”
Education was Arecont's biggest vertical in the U.S., along with Fortune 100 corporate campuses, said Raúl Caldéron, VP of Marketing for Arecont Vision.
Banks are starting to increase their security spending, as Sony did well in the financial vertical for Vietnam, said Yoshikazu Hirano, GM of Security Solutions, Business and Professional Products Asia Pacific, Sony Electronics.
Casinos were another bright spot, as Ademco Far East completed work on Singapore's swanky Resorts World Sentosa, said Patrick Lim, Director of Sales and Marketing.
Macau's major casinos are investing in Dallmeier video solutions, which featured prominently at this year's World Cup in South Africa, said Georg Martin, Marketing Director for Dallmeier electronic.
Retail markets are picking up, especially in developing countries. “The retail segment in India is transforming from small local stores to organized, multioutlet chains, which translates into the increased need for security,” Hirano said.
Retail was Genetec's fastest growing market in 2010 as well, C?té said. It was followed by transportation, education and banking.
Solutions with good functionality go a long way. “We have seen strong growth in both the private and public sectors, in particular areas such as retail, commercial transport, public space and industrial applications,” said Jake Kim, MD of Europe, Samsung Techwin. “Many end users have been looking at ways to get more from their systems.”
Several US states permit medical marijuana, bringing unique retail-security concerns. “There are a lot of new retail locations that are opening up,” Brissette said. “All of them need strong security systems — not just video but physical security, alarm systems and so forth.”
Far and Wide
The recession affected each region differently. While some countries such as China, India, Australia and New Zealand are more cushioned, others got hammered. “Despite some hot spots of activity, all regions were generally down — and it was mainly those larger organizations with a ‘critical mass' that have weathered the storm best,” McKay said.
Some providers saw a marked improvement in the U.S. “For Bosch, orders overall are increasing every month and exceeding the prior year's month,” said Daniel Gundlach, VP of Marketing for the Americas, Bosch Security Systems. “The pipeline of projects continues to be encouraging, especially from the Central, Northeast and South regions, which have experienced a more rapid recovery than the West.”
Other vendors saw more growth on the coasts. “In the U.S., we oversaw implementations in New York, New Jersey, Connecticut, Virginia, Florida, Minnesota and California,” Whitten said. “Internationally, we had great success in the Caribbean, where multiple units were deployed at the region's largest seaport.”
America and emerging nations in Brazil, China and Eastern Europe saw strong demand for network-enabled products. “The recession has brought about more convergence, not just in technologies, but in channel structure as well,” Venkat said. “More ‘copetition' — cooperation and competition — can be expected.”
Some parts of Europe, such as Germany, weathered the year well. “We had a very interesting start because the 2010 spring was fantastic,” said Michael Zabler, Marketing Director for ABUS Security-Center. “It was very good especially for wireless alarms.”
Even the rest of Western Europe fared well for some, making up the bulk of Nedap's business in 2010, said Hans Schipper, GM of Nedap Security Management. Its international approach outside of Europe and the Middle East is mainly customer-oriented for MNCs.
Geutebruck echoed that Germany saw strong growth in 2010. “We had a very minor drawback in Spain and France,” said Katharina Geutebrück, MD of Geutebruck. “Australia was strong. This year will be, again, growing quite healthily.”
In Asia, more road and freeway projects adopted megapixel surveillance. “In the Middle East, city surveillance projects are springing up all over the map,” Caldéron said. “In Europe, transit systems still grew.”
The transportation vertical allowed Arecont to survive the recession relatively unscathed. “While our sales did not grow 80 percent like we did in 2008, we still managed to achieve more than 40 percent in 2009,” Caldéron said. “And we are expecting to significantly outpace the megapixel market growth rate of 50 percent in 2010. The U.S. and Asia were of our fastest growing regions, and the Middle East and Europe also did quite well.”
Government facilities, along with utilities and critical infrastructure, were major markets in the region. “We have identified development opportunities in various Asian markets and, as a result, have extended our business development team in the region,” said Peter Francis, Regional Manager for Asia, Gallagher Security Management Systems.
Governments worldwide are investing in infrastructure, which is spurring spending on video security. “Developing markets such as China and India, where the governments are increasing investment into infrastructure and public-security projects are showing accelerated growth for us,” Hirano said. “In India, most of the spending will come from the central government, with demands mainly from the upcoming development of the transport infrastructure.”
2010 played host to several large events, including the World Cup, the World Expo in China and the Commonwealth Games in India. Security featured prominently for the events to take place safely and peacefully. Several homeland security mandates drove markets, such as contraband-scanning systems, perimeter protection systems, advanced biometrics and video analytics, Lim said.
Singapore has regulations which govern the installation, operation and maintenance intrusion alarms, Wong said. This drives the local market's standard, requiring the relevant companies to be compliant.
Local regulations will also affect product development. “The European marketplace for security is complex, with many different rules and regulations, which can sometimes prove difficult for a company such as Samsung who makes global products,” Kim said. “We are very good at feeding back information to our R&D teams to ensure that the products are fit for purpose wherever we sell them, and take into account specific requirements from specific countries.”
School of Hard Knocks
The financial downturn was unexpected, with long-term effects. Looking back on the past year, some companies felt they would not have done anything differently. “Don't panic,” Wilson said. “Stay ahead of technology would be our advice to all.”
Genetec felt it was on the right track. “We learned that forecasting is a difficult job at best, and it is quite important to remain geographically diverse,” C?té said.
Other vendors used the downtime to be introspective. “Recession is an opportunity to review structure and strategy — are we still on the right track?” Francis said.
DVTel used the recession to carve its niche. “We always ask ourselves to think outside the box, but the recession has taught us to be more focused, more innovative and more careful with strategic planning,” Robbins said. “Also, always align and ally yourself with partners that understand and believe in your technology.”
Value was an emphasis. “It was an opportunity for us to focus on business and deliver what was best for our customers,” Hirano said. “Our customers wanted to get more value with smaller budgets; subsequently, they wanted technologies that could deliver more value, were compatible with existing systems and had the flexibility of being expanded and upgraded.”
Newer players were able to compete with better value propositions. “The recession has taught us complacency and SOPs will always lose out to innovation,” Whitten said. “For those who deliver value and solve problems, recessions are a great ally in the competition against complicated products that do not deliver results.”
Regardless of the financial climate, offering customer value is the timeless hallmark of a good business. “The most important lesson is to be in it for the long run,” Piran said. “You can suffer a minor setback because of the economy, but if you stand by your customers and keep showing them value, they'll be with you when times are better.”
Find more information about 2010 Industry Review:
●2010 Industry Review: Value Holds the Key to Future Technology