Security Consolidation Shows No Abatement for 2009-2015

Editor / Provider: Submitted by Memoori Business Intelligence | Updated: 6/8/2009 | Article type: Hot Topics

Allan McHale, Director of Memoori, assesses the impact of the global recession on M&A activity for 2009 through 2015.


In two previous articles on mergers and acquisitions in security, Memoori reviewed consolidation from 2000 to 2008 and benchmarked the value of companies purchased against high technology and growth. In the January issue, we reviewed entrepreneurship in the IP video sector, by company, age and country of origin. For this article, we assess the impact of the credit crunch and global recession on the consolidation process. In light of recent events, we forecast merger and acquisition activity in 2009 through to 2015.


Figure 1 shows the volume of deals increased threefold from 2000 to 2007. Activity fell off in 2002, coinciding with a short recession in the economy. For 2006, the figure is distorted by two previous years of frenzied activity by the major companies.


While the value of deals fell 30 percent in 2008, the last quarter was down 50 percent compared to the same period in 2007. The reason for the fall in activity is the credit squeeze, which became apparent in August 2007. There is general consensus that the current recession will not be short or shallow.


It is noticeable that acquisitions by the major companies fell off in 2008 before the worst of the economic mire was realized. UTC Fire & Security spent US$5 billion on purchases in the previous five years, while Schneider Electric spent $2.3 billion. Stanley, Honeywell Security and Bosch Security Systems were active in 2008, but no mega deal was completed. Could these companies be building up their cash reserves for major buys at lower exit prices in the next two years?


Mirroring Market Trends
The situation of the security industry mirrors the global merger business, which dropped about a third in 2008 and ended five years of deal growth. A lack of available credit, plunging stock markets and a worldwide financial crisis undermined companies' ability to make acquisitions.


With regard to the security industry, our database on mergers and acquisitions only has macro data for the last eight months of 2008. However, we have tracked the major suppliers since 2000 and a cursory appraisal suggests the reduction in deals was hardly noticeable until the last three months. Virtually all the 56 deals recorded since April 2008 have been cash purchases. But with the lack of finance available to the industry — particularly from equity partners — this suggests the nadir of cash acquisitions for the next few years. Finance from venture capitalists will be strained and although it is not the right time to go public, some may be forced to cash in their chips.


Driven by the need to continue high levels of investment in product development, most providers will be obliged to merge with a suitable peer company. The December 2008 announcement of the Panasonic-Sanyo deal, along with the proposed merging of SCM Microsystems and Hirsch Electronics, lends support to our forecast for more mergers in 2009 and beyond.


Consolidation in this fragmented business has a vital part to play. It requires companies to be over the minimum size to make a contribution for a stable future, and too many are well below it. However, as present economic conditions show in Figure 2, we expect deal activity to fall another 30 percent in 2009 and remain atthat level for 2010, before returning to growth. For that scenario, deal activity will reach its 2007 peak by 2014. We forecast deal activity will grow about 20 percent for the next few years, based on the value of deals. However, we have entered uncharted waters, as the number of mergers and acquisitions over the next five years could significantly increase. The chart forecasts that the importance of cash deals — constituting up to 90 percent of business in the past seven years — will fall to less than 50 percent in 2009 to 2010, as mergers become the main driver of consolidation.


We invited three companies to give their views on how they see the consolidation process developing over the next few years. The first is John Monti, VP of Marketing at Pixim, a young dynamic U.S. IP video supplier. Next is Israel Livnat, President of Nice Security, a well-established supplier of access control and video surveillance systems. Finally, Bosch Security Systems offers insight as one of the major players in the security industry.


Pixim
Due to global economic conditions, Monti expects M&A activity to affect a number of smaller companies with no or modest revenue. These companies will not be able to secure external funding, and thus will have to look for acquisition. Two recent examples are Mobilygen (bought by Maxim) and W&W Communications (bought by Cavium).


While Pixim does not plan to acquire, there is the possibility it could pick up small technology providers to complement its base image capture and processing technology. Monti said it was unlikely that Pixim would be acquired.


Memoori expects the credit crunch to have a significant impact on acquisitions with the major companies, which will seize the opportunity to acquire valuable assets at bargain prices. Small companies with minimal revenue may have no other choice, given the lack of external financing, but to seek refuge.


Monti said the downturn in demand will have a particularly adverse effect on specialized startups. In some cases, it may oblige startup investors to bring about an early exit. Private equity capital is much scarcer than a year ago. Venture firms are choosing winners and losers in their portfolios, so only the top 25 to 33 percent of companies can expect continued funding.


"These economic times are unprecedented," Monti said. "The companies that adapt quickly will have the best chance of success."


Nice Systems
Israel Livnat, President of the Nice Security Group, Nice Systems, said, "Over the years, Nice's growth and strategy have been combination of both organic and external growth, supported by acquisitions."


Nice feels it has what it takes to survive the credit crunch. "We believe that the company's very solid financial standing of more than $500 million in cash and equivalents as of the end of December 2008 will enable Nice to seize new and exciting opportunities and emerge as an even stronger company," Livnat said. "2008 was a successful year for Nice. Our strong performance in both the enterprise and security sectors, coupled with the company's strong financial position, demonstrates our growing market share."


Bosch Security Systems
Bosch investigates possible M&A opportunities on an ongoing basis. It confirmed "our preferential focus is not based on current market prices but rather on our fundamental strategic approach, which is to selectively expand our portfolio in 2009 to acquire a technological know-how complementary to ours rather than to increase sales." Bosch expects the amount of acquisitions in 2009 to be lower than 2008, due to the current economic situation.


Over the last four months, Memoori has identified a growing trend of alliances formed between smaller players to create end-to-end solutions and share the cost of developing vertical markets and overseas markets. This will continue in 2009 and has extended to medium-sized players. The industry will be incumbent on alliances and mergers to fight off the worst of the financial crisis and ride out the storm.

Convergence and Integration (Part I)

Editor / Provider: Submitted by Memoori Business Intelligence | Updated: 5/22/2009 | Article type: Hot Topics

Allan McHale, Director of Memoori, reviews the business case for convergence and integration in buildings, and explains why this will change business models and have a significant impact on mergers, acquisitions and alliances. This is part one of a two-part contribution.


This is a complex subject because it involves so many different stakeholders in the supply chain, with some being protective of the status quo and seeing integration as a possible threat. The technology is not well understood by all and is not bound by common standards, and it requires collaboration among organizations that have never had to work together. This article examines a set of tools to explain the linkages between building control infrastructures and communications and IT, and then evaluates the benefits in order to establish if customers' value propositions are met. Three case studies from different vertical markets are then reviewed. Part two to be published next month will focus on the security industry aiming to deliver total solutions and explain the need to change business models through partnerships, impacting mergers, acquisitions and alliances on the supply side.


In the mid 1980s, building controls started to go digital. For safety reasons, there was a need to transfer information from different technical infrastructures, and digital systems were more cost-effective. To understand the complexities, the author developed a model in 1989 (see Fig 1). The left-hand face shows the individual building services, progressively moving up to integrate subsystems that provided more comprehensive control. The right-hand face contains the communication functions and similarly brings these together. At the top of the pyramid, both integrated systems can be linked together to create an intelligent building.


Over time, the various stages of integration on the left came about, starting with stage one where the functions were hardwire-linked. Stage two integrated subsystems through a serial link connected to a common supervisory computer. Stage three connected systems on a higher level LAN that allowed information to be delivered to any PC on the system. Stage four was peer-to-peer connection across all the different control systems, possibly using a common communication protocol.


Most large buildings constructed in the last five to 10 years were integrated at stage three, and this was the first sign that using TCP/IP over Ethernet would play a major role in bringing about integration with the right-hand face that had been using this technology. It was not until 2005 when, through advancements in digital technology and adoption of XML and Web services, eureka — a holistic solution — was realized. One could now satisfy the value propositions of building owners and operators by delivering improved performance and operation of the building and enterprises within.


Progress over the last 20 years has been slow, despite technical improvements; there was little coordination among the many different stakeholders. Therefore, in 2004, the model was extended (see Fig 2) to show the other two sides of the pyramid, performance and value, in order to develop a tool to investigate the benefits of integration and intelligence in buildings. The base of the performance face is made up of three prime drivers: economic, social and environmental. Economic issues include cost (both first-time and lifecycle), adaptability/ flexibility, increased productivity and operating cost. The economic drivers may carry more weight than social and environmental ones, but certainly not in all instances. Environmental factors include meeting future legislative needs (for example, the European Energy Performance in Buildings Directive, or EPBD), building regulations, government incentives and tax schemes. On the social scale, there is increasing pressure on corporate bodies to include green issues as just one part of their social responsibilities, along with providing the right air quality, temperature, and safety and security for their employees. These can have a direct impact on improving productivity in the workplace, and are vital in some environments like hospitals.


At the next level of analysis, four other sieves are introduced that will evaluate the benefits to be unlocked from integration, information and intelligence in buildings. These are Efficiency, Effectiveness, Threat/Risk and Opportunity, and these can be measured across the full spectrum of demand drivers. For example, a hospital owner/operator could unlock economic, environmental and social benefits by using a patient communication system to operate local lighting and temperature control while delivering other services such as nurse calls and entertainment. This could reduce first-time cost, improve productivity, reduce energy cost and reduce a patient's time spent in a hospital. It is technically feasible, and one of the case studies mentioned shows how this has been achieved.


If one now looks at the value face of the pyramid, one must ask "value to whom." Although it is quite clear that without it being of value to the owner/end user integration will not take place, if it is not also of benefit to other parties in the supply chain, then they are likely to put up barriers.


The base of the value face is made up of 10 different stakeholders involved in the building supply chain. Integration will, at the very least, mean change for all in the supply chain, and this for some could derail them from their present power base. For others, new opportunities will result from integration. In all cases, it is possible to evaluate through qualitative measures but much more difficult to quantify. The suggested criteria to measure are efficiency, effectiveness and threat/risk; these will decide profit and opportunity, which are shown at the pinnacle of the pyramid.


In 2006, a test on IT convergence in buildings was carried out in the United States. The report shows that proving performance and value was vital for users to change their buying habits and adopt the new integration. To convert pragmatists, one has to prove performance and value of IT convergence through real-life cases and demonstrate the ROI(details at: ebbasedbuildingtechnologies.blogspot.com). Though three years old, these case studies are still relevant because they are based on real numbers.


ROI is key in convincing building owners, and most are looking for a quick return. Most of the respondents from the real-estate business were looking for a return of no more than three years. However, the ROI can be influenced by other factors than reducing operating costs, such as increasing rental value, reducing vacancy rates and adding new revenue streams. These drivers can be significant, depending on whether the building is rented out or occupied by the owner, and whether the tenant or building owner is responsible for maintaining and paying for utilities.


Thus, the differentiators that will have impact on the relative importance of demand drivers will vary, dependent on ownership, type of building, complexity and process, and whether it is a new construct, major refurbishment or retrofit. The case studies identified clearly illustrate the importance that these different factors have had on influencing the investment decision for installing converged systems. It should be mentioned that they have all been delivered through partnerships.


The digital hospital in Omaha, Nebraska delivers to its patients a much more effective level of care while reducing medical and operational costs. This is a good example of how connecting the technical infrastructures to the business enterprise has brought about true synergy. The health care business across the developed world is now undergoing some fundamental changes to meet changes in patient demographics, advances in drugs and medical treatments, and provide a holistic social model of health-gain. This requires the adoption of patientcentered approaches to the delivery of health care; despite the considerable inertia to change, the challenge is being taken up. Good building design, based on patientcentered requirements, is gradually being adopted, and this has brought about the need to integrate building technical services, or further, to interface with patient administration and medical care services. Other building types that have benefited in a similar way are airports, science and high-tech buildings, educational establishments, and retail and hotel chains.


The move toward an IT-centric approach and the role that XML and TCP/IP are playing in convergence and integration in intelligent buildings will have a major impact on the way business is conducted in the future. What makes convergence important is that XML is incorporated in IT Infrastructures both within major companies and across the Web. IT infrastructures will eventually carry all the information that management will analyze and act upon to both improve building and estate performance and provide holistic solutions that will also affect the operations being carried out in the building. Building owners will seek out suppliers to partner with them to ensure that they get robust and reliable solutions that are cost-effective and appropriate for their needs. Understanding and making the business case will be key to winning business in this new environment where more business will be conducted directly with the client, instead of the traditional contractual procedures.


For this market to really expand, it requires the backing and commitment from large companies that have the technical and financial muscle to inspire customers to adopt robust solutions that will add value and performance to their buildings. These players will come from IT, network/communication, technical infrastructure and infrastructure integration backgrounds.

Germany: Steady Flow of Opportunities

Editor / Provider: Hayden Hsu | Updated: 2/23/2009 | Article type: Hot Topics

In a highly regulated country like Germany, safety and security are not to be joked about. Although the electronic security market in Germany is only growing at a single-digit rate, the sheer size of the country and its infrastructure development can be easily translated into needs worth hundreds of millions that can only fulfilled by high-quality products and support services.


The German economy is the world's third largest (likely to be surpassed by China soon) and accounts for nearly one-fifth of the European Union's GDP. Germany is the United States' largest European trading partner, according to U.S. Commercial Service, and is the sixth largest market for U.S. exports. Germany's social-market economy largely follows free-market principles, but with a considerable degree of government regulation and generous social welfare programs and protection.


Overall, the European electronic security equipment market (including Eastern Europe) is estimated to be worth US$4.63 billion: video surveillance $1.95 billion, access control $1.03 billion and intrusion alarms $1.65 billion, based on research done by Archana Rao, Senior Research Analyst at Frost & Sullivan (EMEA).


Annual growth rates are 5 percent (30 percent for IP-based solutions), 7 percent and 3 percent, respectively. "For Germany alone, the electronic security equipment market is pegged at $740 million, which can be broken down as: video surveillance $350 million, access control $140 million and intrusion alarms $250 million," Rao said. Annual growth rates are lower than the European averages, at 3 percent (25 percent for IP-based solutions), 5.9 percent and 1.7 percent, respectively.


Tyco Fire & Security, known as ADT/Total Walther in Germany, and ZVEI ( the German Electrical and Electronic Manufacturers' Association) have different projections. "The video segment accounts for $700 million, whereas intrusion alarms are valued at $800 million," said Roland Billeter, General Manager of Tyco Fire & Security Germany. According to ZVEI, the video market in 2008 is estimated to be worth $540 million, access control $345 million and intrusion alarms $977 million.


"Of the total revenue, 40 percent is generated from video surveillance," said Felix Schrimpf, Manager of EMEA Sales Support, Bosch Security Systems. This year, 24 percent of all Bosch security systems sold are IP-based.


As the largest market in the European Union, Germany is not easy to break into, especially for foreign companies with no local, German-speaking partners or support systems. "The German market demands system-oriented solutions and readily available support," said Andrea Bergerhoff, EMEA Sales Director for Honeywell Security & Data Collection. "That's the reason why we only sell to and work with well-known, local value-added resellers and system integrators."


Growth Opportunities
For Bosch Security Systems, its top five European countries in terms of sales are Germany, Britain, France, Italy and Spain. "Bosch has been active in Germany, Austria and Switzerland for more than 100 years," said Hanno Vogels, VP of Sales for Germany, Austria and Switzerland, Bosch Security Systems.


Transportation is currently the most dynamic vertical in Germany, with many subway systems and airports undergoing major upgrades, which require state-of-the-art safety and security solutions, said Vogels. "Given the current state of worldwide economy, Bosch remains optimistic as the basic need for security is still there; vertical markets with great potential may change slightly, but Bosch will shift its investments wisely and accordingly to sustain further growth.


Nice agreed with Bosch in saying that the public transport sector has the most potential, due to several bus bombing scares and violent incidents on metro lines. "Retail is another growing vertical, as incidents of shoplifting increase with tougher economic conditions," said Tim Giles, EMEA Product Marketing Manager, Nice Systems.


Other opportunities, brought up by Tyco and Honeywell, include banking, gaming, critical infrastructure, oil/gas/pipelines, land and sea borders, city surveillance, production plants and commercial buildings. "Vandalism at schools is also getting a lot of attention," said Fredi Reschke, CEO of FRS.


Legal Issues
Germany is a highly regulated market. "For example, both products and installers have to be certified to be used in commercial establishments or projects that require insurance," said Vogels.


There are also strict data security and privacy laws that call for development of unique access control products.


VdS is likely the biggest entry barrier for foreign companies to penetrate the German market. VdS guidelines and regulations are comprehensive, covering testing procedures and benchmarks for different product types and system integrators/installers, and different vertical markets also have different standards.


UVV Kassenzulassung is another legal requirement applicable to solution providers that sell into the banking sector. "No matter if it is for physical or logical security, all hardware and software must be UVV-certified before a bank opens for business," said Bruno Jentner, Head of Marketing and Product Management for Funkwerk.


Product Needs
The most successful market entrants are those that offer innovative products featuring high quality and modern styling. Germans are responsive to innovation and high technology, based on U.S. Commercial Service's observations.


Price is not necessarily the determining factor for the German buyer, given the German market's demand for quality. The German market is decentralized and diverse, with interests and tastes differing dramatically from one state to another. Successful market strategies take into account regional differences as part of a strong national market presence.


The country boasts one of the highest Internet access rates in the European Union, and this helps increase adoption rates of IP-based security solutions tremendously.


Video Surveillance
"In Germany, IP video is at least growing at 50 percent per year," said Michael Zabler, Marketing Director for ABUS Security-Center. On the other hand, most German users demand reliability and have strong doubts about open systems.


"Who will be held responsible when a system fails?" asked an industry source. "Analog systems still fare better in a typical system integrator's or installer's mind." As a result, he thinks that IP adoption is no more than 20 percent in video surveillance.


There is no doubt that Germans wanted high-quality, relatively expensive products five years ago. "Now, people are starting to feel the financial pinch and are accepting imports from Asia with open arms," said Bj?rn Westphal, Media Specialist at Monacor International.


Features in demand include high-definition resolution, analytics and management software that brings about geospatial, situational awareness.


Access Control
As employee tracking is legally prohibited in certain German industries (automotive, for example), access control and information management require advanced hardware engineering and software algorithms.


"Some customers ask for high-end solutions that allow for masking based on authorization levels," said Nicole Huffer, Corporate VP of Marketing Communications for SimonsVoss Technologies. "Sometimes, even time/attendance data can only be accessed by lawyers and courts."


Intrusion Alarms
Alarm systems are usually the first ones that go into a building before completion, said Bergerhoff, and these products are the most heavily policed by law in Germany.


"Currently, only 0.3 percent of German households are equipped with intrusion alarms," said Zabler, "so there is still plenty of potential for growth in the residential sector, a long with small-to-medium enterprises. Depending on insurance requirements, customers can choose approved products at different price levels."


One industry source pointed out, though, one noticeable change: the increased demand for wireless systems, requiring less expensive, labor-intensive installation work, and integrated intrusion/access/fire solutions.


Challenges and Outlook
Real German GDP expanded by 2.5 percent in 2007 despite the increase in value-added tax from 16 to 19 percent in January 2007, according to U.S. Commercial Service. Consumer demand, which had been sluggish for several years, is picking up. The economy continues to be strong on exports; consumption and investment have started to pick up since 2006 and are expected to compensate for some of the world economic slowdown.


Business confidence indices rose in early 2007 and show signs of optimism, despite uncertainty in financial markets. The German economy continues to suffer from structural problems, including over-regulation in labor markets, taxation and business establishment, as well as high social-insurance costs.


Experienced representation is a major asset to any market strategy, given that primary competitors are domestic firms with established presence. Firms can overcome such stiff competition, said a U.S. Commercial Service representative, by offering high-quality products, services at competitive prices, and sales backup, as well as establishing a local network of support. For investors, Germany's relatively high marginal tax rates and complicated tax laws may constitute an obstacle, although deductions, allowances and write-offs help move effective tax rates to internationally competitive levels.


The German government has recognized the need for reform and is pursuing a series of initiatives. "While many observers regard these programs as a useful start," one source said with caution, "most expect that additional reforms to enhance Germany's global competitiveness will be required while consensus will become more difficult in the run-up to federal elections in 2009."


German firms focusing on exports, especially in the automotive, chemical and high-tech sectors, recently have enjoyed healthy profits and have exported more goods and services than firms from any other country.


Persistent high unemployment, particularly long-term (longer than one year) unemployment, has long been among Germany's most serious political and economic problems. The economic growth Germany has experienced since 2006, however, has reduced in a rapid fall of unemployment to levels not seen since before the German unification.


Since the beginning of 2006, what had been an export –led recovery has begun to expand into the domestic economy. Investment in machinery and equipment has grown rapidly, and business confidence has risen.


The latest survey results from the Munich-based Ifo Institute show that optimism prevails despite the uncertainty resulting from the sub-prime mortgage crisis in the United States.


The strong revival of the German labor market continued in 2007. Registered unemployment fell by 15.7 percent to below 3.8 million on an annual average, according to U.S. Commercial Service. This corresponded to a decline in the unemployment rate from 10.8 percent in 2006 to 9 percent, the largest year- to - year decline in Germany's history.


In eastern Germany, the unemployment rate stood at 15 percent and was still twice as high as in the western part of the country, based on CIA's World Factbook research. The Federal Employment Agency's Institute for Labor Market Research has projected an average of 3.5 million unemployed for 2008, provided the current demand for labor continues. While much of the improvement has been the result of an expanding number of temporary or low-paid jobs, more significantly, the number of socially insured and self-employed jobs has risen, too.


Germany has pressed the new EU Commission to reduce regulatory burdens and promote innovation in order to increase the EU member states' competitiveness. The Merkel government has talked about the need of regulatory reform in Germany as well, said a U.S. Commercial Service representative. Germany's regulations and bureaucratic procedures can prove baffling. While not directly discriminatory, government regulation is often complex and may offer a degree of protection to established local suppliers.


Safety or environmental standards, not inherently discriminatory but sometimes zealously applied, can complicate access to the market for foreign products. Companies interested in exporting to Germany should make sure they know which standards apply to their products and obtain timely testing and certifications.


German standards are especially relevant to exporters because Europe-wide standards are often based on existing German ones.


Conservative buying behavior can still be regularly witnessed, said Billeter. This could present challenges to the transition to and adoption of converged hardware and software solutions.


The biggest challenge for promoting IP is the knowledge of the system integrators in IP technology, said Vogels. "But this has improved as a result of training over the last two years." All major players will continue to focus on partner training and user education.


Despite some of the challenges listed above, Germany continues to be attractive in numerous sectors and remains an important element of any comprehensive export strategy to Europe.


More information on VDS.

Global Digital Surveillance Forum (GDSF) China Highlights Central Management Systems

Editor / Provider: a&s International | Updated: 1/12/2009 | Article type: Hot Topics

The 2008 GDSF China seminars explored smarter security solutions, such as intelligent buildings, as the trend toward situational awareness heated up worldwide.


GDSF China has become one of the most high-impact security events in China, allowing vendors to communicate with clients directly. Attendees were almost security professionals, making the forum an ideal platform for in-depth networking.


The forum is China's only event dedicated to network security. It offered a platform to IP's elite buyers to communicate with vendors. This focus on IP had increased benefits, according to several vendors. They were only 7 percent satisfied with results after exhibiting at general security shows, but GDSF China increased that satisfaction level to 80 to 90 percent. As buyers at other shows were not necessarily looking for networked solutions, GDSF China's emphasis on IP allowed vendors to lock in on their target audience.


GDSF China showcased the latest products and technologies in IP from exhibitors and speakers. The forum also covered relevant solutions for users and installers. For global IT distributors and integrators eager to break into the security industry, GDSF China presented a unique opportunity to meet the right people. As for traditional security integrators, the forum offered ways to transform their business and grasp user needs, making it a can't-miss event.


All About Integration
Looking back on industry trends for 2007, convergence clearly emerged as a central theme. With more security threats, the need for a unified response from access control, surveillance and other systems put central management software front and center. Simply receiving alerts was not enough, as physical and logical security merged for smarter responses through situational awareness. With a clearer understanding of events, intelligent central control brought all systems together a unified whole.


Integration played a major role in several key security projects in China. Guangzhou City will host the 2010 Asian Games, with demand heating up for converged security solutions in southern China. To respond to audience requests, GDSF China was moved to Shenzhen; the last two forums had been held in Beijing and Shanghai.


This year's speakers included IT giants, Internet communications companies, multinational security manufacturers and CMS providers. The event attracted users in various vertical markets to understand the latest in digital security. This made GDSF China 2008 the most representative IP security event in Asia.

Opportunities for Guangdong Security Industry

Editor / Provider: a&s International | Updated: 12/29/2008 | Article type: China Corner

The Chinese electronic security industry started out when international brands made contact with local distributors. Agents in Guangdong, in particular, benefited given its close proximity to Hong Kong. Today, these electronic security players come in the following three varieties: local manufacturers, those with foreign investment and R&D support, and distributors.


Vendors with strong R&D capabilities in Guangdong province are improving solutions to remain competitive. ATI, for example, produces video doorphones and CCTV equipment; NPE features products with Australian and Japanese technology; Linbell benefits from Hong Kong connections; and Lan Castle and Goldenlan combine the best of what both China and Taiwan have to offer.


According to Zhang Yeling, General Manager of Linbell, up to 50 percent of digital light processing (DLP) products are made in China. To further improve quality, Linbell has partnered with Mitsibushi.


Lan Castle is enhancing competitiveness with Taiwanese IC chips. "We are the only DVR supplier that makes our own IC chips," said General Manager Yang Yanfei. To provide quality products at a reasonable price, Lan Castle has fully automated production. This has also made it possible to offer greater customization of housings and software interfaces.


Goldenlan, which specializes in IP networking solutions, is looking to advanced audio and video coding standard (AVS) transmission to provide better image quality when bandwidth is limited. "Chinese manufacturers have their own algorithms so there are no legal problems when exporting," explained Hu Wei, General Manager of the company's Technical Support Center.


Goldenlan has also teamed up with a Taiwanese company, a digital media institute at Beijing University and the Shanghai Institute of Computing Technology to promote AVS in video monitoring applications. The new solutions include software management platforms and AVS system on chips (SoCs).


Function ATI Telecommunications has been manufacturing electronic security products since 1995. Today, it has R&D centers in the U.S., Taiwan and Shenzhen. According to Teddy Li, Chief of the Marketing Department, the U.S. center provides the R&D direction. "We are targeting domestic vertical markets like the military and campuses," said Li. "Our new solutions feature WiFi to enhance flexibility of applications and transmission efficiency."


Video doorphone systems, said Li, are usually purchased by real estate developers rather than installers or home owners. "Some functions may not be practical for overseas markets, but Chinese real estate developers want fancy products to earn bigger profits."


Protruly understands that intrusion alarm systems with stylish appearances are more profitable. It launched its latest intelligent door lock to target value-added applications. "We offered US$7,500 to anyone who could force the lock, but no one succeeded," said Chen Daoqing, Marketing Director of Protruly. "Some visitors even tried interrupt the alarm control panel to open the door; nothing that they tried, however, worked." The only way to open it, he said, is via a key embedded with a chip.


According to Chen, the advanced mechanism lock features intelligent functions to trigger alarms for vandalism and illegal copying of keys. To enhance safety, it works with Daunting home safety alarm systems to disarm itself for home owners. Furthermore, not only is quality guaranteed but also owners are protected by China Pin An Insurance up to $15,000 for losses stemming from intrusions.


New-Tech Protective Electronics (NTP) has incorporated Australian technology to deliver video monitoring and multiple access management suited for crucial areas. "Our company hired a Japanese research professional with expertise in optical technologies," said Luo Cheng, an engineer in the Technical Support Department at NPE.


This, he continued, has enabled NPE to promote cameras with Sony third-generation wide-dynamic-range solution and blaze-retraining for harsh lighting conditions on roads. The cameras are also equipped with Tamron lenses for better image quality and stability.


According to Huang Jing, Manager of Aony, many products on the market fall into the me-too category. Aony is planning to set up a dust-free factory to enhance IR LED assembly for its IR cameras. "We do not want to get involved in price wars; that is why we are working only on high-end IR cameras." Huang pointed out that while Chinese manufacturers provide excellent products, the major bottle neck is the huge investment required to perfect manufacturing facilities.


Take Chinese-made speed domes. "They perform well only with specific camera modules because the housings do not offer good ventilation," said Huang. "Chinese manufacturers lack prowess in product finishing; they are not able to drill perfectly smooth ventilation holes like the Japanese.


" Eagle is working on sophisticated alarm sensors with high-quality optical lenses and light filters, among others. Its patented connections, for example, reduce installation time and effort, thus driving down installation costs. Kewang and Jianbiao are tailoring equipment cases for central monitoring systems. Even though these products are mostly for the Chinese market, Jianbiao has developed a desk with an embedded two-drawer space on the top to enhance user-friendliness.


TBL is promoting intelligent IR chips that offer better performance over IR LED arrays. The design enables nighttime viewing with regular box cameras. Bestech has launched IR speed domes with nanometer technology to ensure water-proofing in outdoor environments. Finally, Dikai, Xierli and Jiali are marketing anti-lightning and anti-strike devices.


Key Distributors
Major distributors in Guangdong include Aoxing, Baoshijie, Billion Technology, Ding Li, JWS, Qihan, Ruixun, VisionCom and WinHi. Major partners include Bosch, JVC, Panasonic and Samsung. Agents also provide key feedback.


Many find it easier to introduce international brands since image and reputation are well-established. "Almost 90 percent of alarm products sold in richer cities like Guangzhou, Shanghai, Beijing and Qingdao are foreign brands, even though they cost twice as much for the same functionalities," said Peter Yu, General Manager of VisionCom.


Most distributors find much to like about Chinese products as well. "One developed a fluorescent intrusion sensor," said Yu. "When it detects suspicious targets, a light flashes and a buzzer sounds.


Another example where Chinese products outdo the competition, he continued, is wireless alarm control panels. "Imports support only short-distance transmission. Chinese suppliers, however, are customizing products to reach distances up to one kilometer."


Chinese video doorphones impress with CAT-5 transmission and IP functions, said Xia Bing, General Manager of Aoxing. "Also, international brands do not respond as quickly when it comes to differentiating themselves or keeping up with the latest trends."

Consolidation Strengthens Security

Editor / Provider: Submitted by Memoori Business Intelligence | Updated: 12/22/2008 | Article type: Hot Topics

There are two major forces reshaping the security and safety industry. The first is a rapid consolidation process that is inevitable but is particularly powerful when any business is young, immature and growing fast. The second is a heady cocktail of converging technologies from the fast-growing Web services, IT and digital electronic industries that have only been introduced to our industry in recent times.


In recent years, new alliances and partnerships are taking place in the security industry. To leverage R&D cost, there is a need to rapidly scale up and establish a global presence. This can be best achieved through the acquisition of companies that have either the technology, financial resources and/or the distribution networks in place.


The monthly report, "Executive Brief — Mergers and Acquisitions in the Security and Safety Industry," details acquisition activity across the globe, benchmarks the consolidation process and performance, and identifies target companies for acquisition based on the future direction of technology and buyer requirements in particular vertical markets.


Both Schneider Electric and UTC commenced business in the security and safety industry in 2003 through the acquisition of major players. Since then, they have both pursued a policy of buying companies with a very significant share of the business and geographic spread. They have both made a heavy investment in a series of acquisitions in this business and are among the top 10 world suppliers in 2008.


Stanley Works is another company that has spent heavily in the electronics security market since 2003, making its first change in future direction from mechanical to electronic systems with the purchase of  Blick. Since then, it has built up a countrywide network in the United States.


Siemens and Bosch, both well-established leaders in this market, have not pursued an aggressive acquisition policy, favoring a more selective acquisition of strengthening technology and geographical gaps in their portfolios.


Tyco and GE Security have, in the last few years, slowed down their policy of  acquisition, but the former made a couple of acquisitions in the retail sector in recent months, further establishing its worldwide dominance in this vertical.


One of the most powerful indicators shown through the analysis in the monthly report is the correlation between value benchmarks and the capability and adoption of leading-edge technology of the target company. Relatively small companies in IP video, analytical software and communications exist at ratios of three times annual sales, and those with biometric technology can exceed this.


Some argue that the buyer is paying too much, but a quick check on L-1 Identity Solutions, who has acquired around 10 companies in recent years, shows that it is a very profitable operation working on high margins.


Acquisition activity is taking place right across all applications; video surveillance is making the largest number of deals followed by access control and then intrusion alarms. Major players in the business have strong balance sheets and no restrictions on financing suitable acquisitions, but medium and small companies will find it more difficult to finance — and this will also apply to management buyouts.

Asia 25 Discuss Target Regions for 2009 (Ⅵ of Ⅵ)

Editor / Provider: by a&s International | Updated: 12/5/2008 | Article type: Security 50

While some Asian manufacturers have robust domestic business, most focus on opportunities abroad. Target regions included mature and emerging markets seeking effective solutions.


Hikvision did not specify its target regions for 2009. "For international markets, we are a newer player, we can't afford to focus on one single market or region," Yang said.


CSST has a global outlook, focusing on emerging markets and its domestic business. "Dubai is a trade point for the Middle East, and the African and Indian markets," Yap said. "Emerging markets provide opportunities, as they are looking for good products at a cheaper price."


Other emerging regions that providers will target include Latin America and Eastern Europe. Major mature markets for 2009 are Europe and North America, with the United Kingdom and the United States being key countries.


Vertical Markets
All vendors, Asian or otherwise, agreed public projects would be a focus in 2009, as private budgets shrink. Some of them expected growth from commercial markets.


"We have seen more growth from government projects — road safety, police use or public facilities — education, retail with PoS, and entertainment," Tai said.


China's Safe City public security initiative will be a continued focus for local providers Hikvision, CSST and Dali. Government spending is expected to increase, making public surveillance a key vertical for 2009.


CSST is betting on convergence for city monitoring. "We are going for a more comprehensive solution," Yap said. "Before, we were mainly in surveillance. Now we offer traffic, disaster recovery and response as well. In addition, we are now exploring the application of surveillance solutions in detecting and tracking pollution levels."


Hikvision will expand into multiple verticals. "The financial and transportation markets have a lot of opportunities, which changes for different countries and regions," Yang said.


VIVOTEK will look to commercial verticals. "Market segments to be focused on are small and medium businesses, the retail industry and education applications," Chen said.


Home users will be targeted by Hitron. "Commercial and residential markets are expected to grow more in the next year," Choo said.


Company Challenges
Increased sales causes growing pains for Asian providers, ranging from product development to stereotypes. "We have to move quickly to meet with more safety and environmental regulations," Ho said.


Enforcing those regulations is important. For China, its international image has suffered from tainted exports. "The 'Made in China' perception is the main challenge for export," Yap said. "China is where Japan was 50 years ago, where Korea was 20 years ago. We are trying to break the mold."


Industry Weaknesses and Threats
The economic panic, cutthroat competition and lack of standards were cited as industry weaknesses. "The major challenges to Commax's future growth are the current worldwide financial crisis, the rise of oil prices and the real estate recession in the domestic market," Byun said. Other weak areas included "extreme and fierce" price competition and limited IT infrastructure, hampering the uptake of network solutions.


Competition continues to heat up, with Hitron seeing rivals from China and Taiwan. "With the rapid shift of the technology trend from analog and digital to network applications, the market has constantly allowed for new competitors from different industries to come into this market," Choo said.


Nearly identical products are another weakness. "Products on the market are excessive, cluttered and difficult to distinguish," Pang said. "This limits company development and industry standardization."


Hikvision is watching for network video specifications, which are undecided. "For hardware vendors, it depends on end users and what protocol they want to use," Yang said. "Manufacturers have to be ready for all kinds of protocol."


While no one knows how the economic meltdown will affect security, it is a threat CSST perceives as an opportunity. "I don't think a lot of companies are expanding, as they try to shore up their position," Yap said. "We see it as an opportunity to develop, penetrate and increase our market share."


Asia's manufacturers face a number of hurdles, but some are ready with a long-term plan. With innovation, affordable prices and targets, 2009 promises to be an exciting year.

For the whole picture on the report, please visit  here.

Spotlighting Top Growth Regions (Ⅲ of Ⅵ)

Editor / Provider: by a&s International | Updated: 11/30/2008 | Article type: Security 50

With a mix of established and young companies in this year's ranking, some focused on existing markets and looked into emerging ones. Newer providers looked to overseas partners and opened branches to find opportunities worldwide.


Honeywell reported great potential in emerging markets. "We see opportunity in every region, but our fastest growing markets include India, China and the Middle East," Roth said.


Bosch's target regions for the coming year paralleled Honeywell's growth zones as well. "We are continually increasing our presence in countries with emerging markets, including Russia, the Gulf States and China," van Iperen said.


Axis — a comparatively new security provider — aimed for a larger footprint, including in emerging markets with the infrastructure for network video. "We are, through our partners, present worldwide," Mauritsson said. "There's more uptake in emerging markets." New Axis offices opened in Moscow, Beijing and SaoPaolo in 2008.


Europe remained a key region for Electronics Line 3000 and Geutebrück.


Belgium-based Zenitel plans to continue its European business as well. "France and Germany are the two biggest contributors to Zenitel's business," Dàstol said.


Northern America will continue to be a major market in 2009. "The United States is driving the security market and Zenitel is seeing growth in the United States again," Dàstol said.


Vertical Markets
Government and infrastructure projects requiring security are key market segments manufacturers are watching for 2009. As the financial downturn squeezes private spending, public installations hold promise.


Large installations are Axis' targets. "Transportation and public surveillance are where we see great opportunities going forward," Mauritsson said. "Retail is an opportunity. However, based on the financial situation, we've seen retailers hold back."


Honeywell focused on both the public and private sector. "The specific segments we watch varies by region, but the top three in general are critical infrastructure, public safety and retail," Roth said.


Zenitel's prestigious portfolio includes the U.S. Navy and Microsoft, which is mirrored in its target verticals. Dàstol said it would focus on building security, transport and infrastructure, and marine applications.


Company challenges
The industry's top manufacturers encountered some challenges, ranging from information sharing to service. "One of the major challenges is the education of installers and end users," Geutebrück said.


Understanding customer needs is a continual challenge Honeywell anticipates. "To he lp ensure we focus on the right products, Honeywell uses a robust voice of the customer process to help us answer customer needs and help solve their problems," Roth said.


Industry Weaknesses and Threats
Identifying weaknesses and threats in the industry, rather than for each company, revealed how security providers saw the market. Some are specific to technology and product categories. Others are factors that cannot be controlled, with nearly all vendors voicing concern about the economic downturn.


A lack of standardization makes true convergence difficult. "Zenitel is concerned about a lack of agreement on what technology standards should be used for integrated solutions," Dàst0l said. "There are many competing standards such as OPC, CIA, BacNet, XML which can be used for integration. IP has not yet delivered the promise of ‘plug and play' integration."


For Axis, its network video solutions face resistance from an industry fixed in its ways. "The conservatism is a weakness or challenge in our industry," Mauritsson said.


Axis summed up how the manufacturers saw the credit crunch — a cautious optimism. "One threat is the general market situation," Mauritsson said. "With the financial crisis, a recession type economy, that will slow down the technology shift (from analog to network video) as well."


However, the company's strengths are expected to pull through. "A slow market will affect our growth rate, but we're quite well prepared for some tough times," Mauritsson said.


Looking ahead
As security providers hunker down for lean times, they depend on their strengths to seek new opportunities. Innovative technology, responsive customer service and trend awareness are strengths security players must possess to be competitive.


The ability to apply these strengths in a range of installations will be necessary for survival, as larger projects — such as public surveillance — are targets for the near future. A willingness to expand internationally and develop new networks is required, as emerging markets heat up. With these traits, industry's leaders will be prepared for threats and challenges ahead.

For the whole picture on the report, please visit  here.

Management Software Makes Strides Into Security

Editor / Provider: a&s International | Updated: 11/18/2008 | Article type: Tech Corner

As technology becomes more IP-based, more integration between systems is possible. Stimulated by new technology, security software platforms are now more comprehensive and complete. A&S looks at how management software has matured and its current/future developments.


"The development of management software allows the security system to become more intelligent. The introduction of IP allows security systems to include more advanced functionalities," said Catherine Gason, Corporate Communication at SYAC.


There are two groups of management software. The first software controls one to two security systems. The second central management software (CMS) integrates all security and building automation systems. The market for management software is growing rapidly, with IMS Research expecting it to reach US$728 million by 2011.


One type of CMS is the physical security information management software system (PSIM), handling the conversions between physical security devices and information management devices. Market for PSIM is estimated to reach $10 billion by 2012, said David Fowler, Senior Vice President, Marketing and Development at VidSys.


For video management software (VMS), the global market grew by more than 40 percent to reach $230.2 million in 2007. In 2008, the expected growth rate is around 35 percent, said Simon Harris, Senior Research Director at IMS Research. However, the outlook for next year is less encouraging. "The U.S. and European markets will be hardest hit, but we expect strong growth in countries like Russia and China," said Harris.


Market Potential
Popular applications of CMS are for large sites with distributed assets. Critical infrastructure, health care, public transportation, government, military and public venues are the top verticals, with education and finance being next. Private enterprise, gaming, retail and the chemical markets are also potential verticals for management systems. Cost hinders adoption in retail, and delayed facility regulations slowed down deployment in the chemical vertical.


Verticals for VMS include critical infrastructure, military, retail, gaming and education. "During the last few years, critical infrastructure industries have increased the budget for expenditure into security more than other industries," said Frank Calipari, European Union Sales and Account Manager at LuxRiot.


In retail, video is used to increase profits. "In order to maximize revenue, retailers need to attain flexibility and cost effectiveness in adapting video surveillance solutions to meet frequently changing business demands without disruptions," said Oren Feldmann, Vice President of Marketing and Sales at EVT. The ability to integrate with a variety of devices traditional analog cameras, IP solutions and video analytics is the key. The integration with RFID system can prevent theft in retail.


Technique Facets
Currently, management software can integrate with alerting technology, such as biometrics, access control, video and different sensors. It enables the exchange of personnel information between access control, human resources, visitor management, time and attendance, and other systems.


Most security solutions enabled security personnel to become more proactive as procedures taken were being recorded and analyzed, Fowler said.


"CMS is not just a product. It is a platform that allows all alerting technology to coordinate and execute the work flow," said Eli Gorovici, President and CEO at DVTel. Internet alerts, other IT systems or manual procedures can be received by the management software. Preprogrammed rules and response plans can manage different events automatically or on command, making security procedures more efficient and user-friendly.


PSIM platforms become more open, said Fowler. Spatial recognition for the geo-location of devices, situation mapping and video management applications were developed. Event and policy information from multiple sources can be analyzed for decision-making. In response, communications infrastructure is integrated to initiate external transmission of messages, data and commands. Some platforms also allow the system to be run remotely. A solution for situational awareness was thus created to effectively managing any security, business or emergency situations in real time.


The most advanced VMS must manage real-time video recordings, said Udi Segall, Senior Product Marketing Manager at Nice Systems. A powerful video solution should include analytics and integration with relevant systems, such as panic buttons. It should also automate the standard operating procedure manual, enabling more efficient security procedures.


Other CMS features include integration with color filtering detection, alerts on line crossings, smart and fast forensic search, object trajectories and changes in object attributes, said Jan-Bart Mul, Product Marketing Manager for Digital Recording at Bosch Security Systems. Features of the latest management solutions include automated video installation tasks, such as automated discovery and configuration of hardware, Calipari said. VMS needs high performance and easy adaption to diverse scenarios, such as environmental and operational challenges. It must have a proven record for reliable, versatile, live and recorded video management.


Challenges and Solutions
Most CMS suppliers are small local companies, making it difficult to meet worldwide market demand. "Since the security market for integrated systems is still immature and highly fragmented in companies and technologies, few operators have the ability to offer cross-border solutions," Gason said.


Lack of user education hinders the deployment of CMS. Many users are unaware of CMS and leave off their initial budgets, resulting in a lack of funds when they realize its benefits. "This difficulty should be resolved over time, as more people know about CMS," Bhonker said.


Communication between different departments of a facility is a challenge. "No two users or organizations have the same command and control needs," said Brandon Arcement, Manager for Global Security Technology at Johnson Controls.


Interests between departments in a facility differ, with privacy being a concern. "For some verticals, different departments do not want to share certain information with other departments," said Nicolay Moulin, CEO at Lenco Systems. "Challenges in security market always exist; however, over time it will be resolved."


Having a versatile support team is crucial. "Our engineering service teams provide professional services from different fields of security to assist our integrators and end users," said Gorovici. "They are the engineer, the developer and the consultant, who are stationed in various locations around the world, ready to help."


The flexible nature of CMS can fulfill the needs of numerous vertical markets, said Adlan Hussain, Marketing Communications Manager at CNL. However, marketing becomes a nightmare, as each sector requires specific marketing messages.


To provide a more comprehensive service to customers, manufacturers and system integrators are cooperating with security professionals. "Currently we have two sales teams the technical sales professionals, who specialize in specific offerings, such as security or building automation; and the solutions account managers, who are aligned with specific vertical markets," Arcement said.


More effort needs to be made for physical security standards, allowing different systems to work together. Some vendors tend to be protective of their installed base, Bhonker said. With their systems being more exclusive, it creates a challenge for interoperability.


Several bodies have formed to address the lack of CMS standards. The Physical Security Interoperability Alliance (PSIA), led by Cisco Systems, formed in February 2008 to promote the interoperability of IP-enabled security devices. "Members of the PSIA are working together to identify existing and emerging standards relevant to the physical security industry, work to enhance them to support industry requirements and encourage their adoption by member companies and the industry," Fowler said. The PSIA will review and vet specifications that are submitted for consideration as open standards.


Other organizations include the Security Industry Authority (SIA), which has been around for the longest time. The most recent body was the Open Network Video Interface Forum (ONVIF), formed by Axis Communications, Bosch Security systems and Sony Corporation in May 2008. As long as there is a standard, it provides more opportunities for systems to be open for integration,〃 Bhonker said.


For VMS, the main challenge is keeping up with market trends, while delivering innovative solutions and incorporating third-party integration, Feldmann said. The resiliency and stability of a system is a challenge. When hardware is integrated with a management system, the controlling software has to provide unified access to a range of components and allow for execution of commands.


As more hardware can be integrated into a system, the technologies that lie behind the products become more complicated. A truly open and resilient system should provide the functionality requested by the market and keep the system deployable in a growing number of locations, said Calipari. To solve this issue, market standards for video streaming and analytics need to be developed for providers to integrate third-party hardware into a proprietary system.


Selection Criteria
When choosing a CMS software system, one should look for a system that is truly open to integrate all security devices and customized non security sensors. "Interoperability with existing and future security applications is crucial to getting a long-term solution," Hussain said. To be truly cost-effective, the systems should integrate with technologies from adjacent industries, backward compatible with older systems and suited for future expansions.


It is important for users to select experienced system integrator to execute the deployment plan, Gorovici said. All phases of the security projects, from the design and development to post-implementation, should be followed through by a professional security provider who takes total system responsibility. Buyers need to ensure their supplier is not tied to specific manufacturers.


For VMS selection, one should make sure the system is reliable, designed for future expansion and have at least five years backward compatibility with existing analog systems. "User-friendliness , flexibility and scalability are among the most important deciding factors when choosing software," said Hechtbauer.
A proactive system can better assist operators when responding to security breaches. "Solutions should be tailored to each and every vertical, with customized features," Segall said. One should consider all possible technical and operational issues related to the system, such as the physical positioning of the cameras within the site and the available bandwidth of the network.


Having an experienced installer can ensure smooth operation. "Over the past years, as user education increased, customers are gaining in-depth security know-how, and they are asking for modular and scalable solutions that are tailored to their needs," Gason said.

Product Demands in Italian Residential and Banking Markets

Editor / Provider: a&s International | Updated: 9/3/2008 | Article type: Hot Topics

In Italy, the banking and residential sectors are major customers for electronic security products. IP is proving hot in large government and industrial projects.


The fastest-growing vertical markets in Italy are banking and residential. "It is not a standard market," commented Aldo Punzo, Product Marketing Manager of Bettini. "If you want to sell a DVR, you can make it in Taiwan or Italy, and it is the same. In Italy, however, the features that banks need are different, especially in terms of central management system (CMS) software that allows users to centralize all DVRs."


"Ninety percent of Italian banks are using domestic products; the quantity for each is very small," said Punzo. "Banks have many separate rules and DVR requirements." There are different rules, he said, regarding privacy, legal compliance, cost issues and technological specifications. Each bank has a lot of unique requirements that it wants for security and DVR operating systems. This means that the DVR product has to operate on a platform so banks can centralize everything.


Another issue is that not all bank branches have ADSL lines; they may have only analog phone lines. "Equipment must be able to connect to everything from analog to advanced devices," said Punzo.


IP surveillance is not growing much in the banking sector because end users are not keen to supply the needed bandwidth. "Banks do not want to share bandwidth with security because it is needed for other purposes," said Punzo. "It will take three years before bank managers start thinking about IP. In the meantime, the industrial segment is going for IP in a big way."


Residential market is also a rapidly growing vertical that has different requirements in terms of security demands. According to Andrea Hruby, Managing Director of HESA, a couple of passive infrared (PIR) or magnetic contacts were sufficient for most homeowners. "Now, however, everyone is installing a detector on every window to prevent intrusion." In Italy, there are a lot of condominiums and detached houses with gardens. "In the past, security systems were turned on only when people left for holidays. Now, houses are being armed even when residents are home," said Hruby.


Furthermore, the wireless market is quite large compared with other countries. Customers do not want wires or holes so they use wireless detectors for perimeters. They are going for wireless because of easy installation, system upgrades and cheaper price.


Other unique features sought by Italian end users are voice dialers for house alarm control panels. "Voice dialers are dialers that are more and more often integrated with control panels. They send voice messages over PSTN or GSM telephone networks to relatives, neighbors or friends' phone numbers, instead of connecting to monitoring stations," said Hruby.


He attributes the popularity of such products to the lack of a sufficiently large market for monitoring stations in Italy. "People prefer to have an alarm and voice rather than connection to a monitoring station. The market in Italy is not big and the cost is very, very expensive. That is why very few can afford to pay monitoring station service," said Hruby.


IP Trends
According to FlavioVenz, Managing Director of Nexxt, 70 percent to 80 percent of large projects are based on IP and open architecture. Italy, however, still has an important analog market, and these small businesses are not installing IP solutions.


"In general, the IP market in Italy is still quite small and mainly for big projects; IP is not yet used in the commercial sector, but only by large industrial companies, government agencies and banks," said Hruby.


Another obstacle is the highly fragmented market. "Most of Italy's 5,000 installers are not familiar with IP," explained Venz. "End users are not asking for IP solutions. This is something that has to be pushed a bit more before it takes off in Italy. What happens often is that IT managers are jealous of who gets access to the network; they do not want to share their networks with security. In the next five years, though, I expect IP to become more common."


Redo Bezzo, EMEA CCTV Product Manager of Honeywell Systems Group, also suggested that 90 percent of new projects developed in Italy are now looking for IP solutions. "Since everyone talks about IP, end users are keen on it; they are the ones that keep asking for IP."


According to Bezzo, installers will offer their customers IP solutions, but may also recommend an alternative analog solution where there may be specific functional requirements or system benefits which are better suited to analog. "Installers are looking to provide their customers with the correct solutions, using the right technology for the job" said Bezzo.


Buying Behavior
In South Italy, buyers are more price-sensitive when compared to the North. South Italy is less industrialized and the cost of living is lower. The standard of living is also lower than in North Italy, consequently, cheap products are popular.


The northern and central parts of Italy are more industrialized and business-oriented. In the North, there are many supplicated installers who prefer not to sell inexpensive DVRs. "We are selling very high quality DVRs in Central and North Italy," said Venz, "because professional installers are trying to differentiate themselves from the electricians who also deal in electronic security products and systems. Low-cost, low quality products are sold mainly by electricians," said Venz.


Another unique buying behavior is that Italians take special notice of aesthetics. "For alarm control panels and other visible parts of the system, such as the keypads, Italian consumers ask for a lot of variety when it comes to design, much more than in other European countries," said Hruby.


Advice for Manufacturers
The Italian market is fragmented with many small installers. Venz pointed that there are more than 5,000 installers, most of which have no more than five or 10 employees. It is, therefore, very important to work with local distributors, suggested Venz. "Only local distributors can support manufacturers in efficiently distributing their products in such a fragmented market."


Many small installers in Italy need support, so manufacturers must work with local distributors. "This is very different from the U.K., France Germany and Spain, where the size of individual installer is much bigger; they have large networks, encompassing logistics, finance and technological support," said Venz.


Hruby agreed that manufacturers need to approach big national distributors or otherwise limit sales to the local market. "Since there are no major national installation companies, such as ADT, HESA created a network with about 100 of the biggest security installers in Italy called Gruppo Italiano Telesicurezza (GIT)."


"We created a network of installers throughout the nation," said Hruby. "Customers in one city may need service in another city; we can refer them to another installer via our network. To encourage installers to join, we reserve a specific range of products in a given area so that others will not be competing with them directly."