Down Under? No, Up Above!
Editor / Provider: Hayden Hsu | Updated: 10/27/2011 | Article type: Hot Topics
While mature markets like the U.S. and Europe are bracing for a possible second dip due to long-term debt imbalances, Australia's export and economic figures are looking particularly ripe among growth markets worldwide. Security is in for a treat, as the country continues to upgrade its network infrastructure and beef up its protective mechanisms and measures.
Australia is the world's 13th largest economy, with a GDP of US$1.3 trillion. GDP grew by 2.7 percent over 2010; it is forecast to grow more than 4 percent in 2011. According to US Commercial Service, Australia's per-capita GDP of $60,000 is among the highest in the world.
Since 9/11, the Australian federal government has committed more than $4 billion to counter terrorism. Current priorities for upgrading security include border protection, airport security, port security,critical infrastructure protection, mining facilities, street safety (city surveillance), health care and educational institutes, as well as new commercial and residential establishments.
The Dollar and NBN
To thrive in the Australian security market, two things should be kept in mind: the Australian dollar and the national broadband network (NBN).
Australia has a large services sector (80 percent of GDP), but is also a significant exporter of natural resources, energy and food. Australia's abundant and diverse natural resources attract high levels of foreign investment and include extensive reserves of coal, iron ore, copper, gold, natural gas, uranium and renewable energy resources. A series of major investments, such as the $25-billion Wheatstone project and the $43-billion Gorgon project, both led by Chevron, have significantly expanded the resources sector, according to US Commercial Service.
Asian demand for minerals, metals and energy resources has been an engine for growth nationally. With many mining sites in the state of Queensland (the country's largest coal-exporting state) suffering temporary production delays due to the January floods, liquefied natural gas (LNG) projects are moving forward, such as the contract signed between Australia and China to supply China with LNG for the next 20 years.
The result is a higher-than-ever Australian dollar, pushing many local end users of high-end technology to go for only the best of breed at much more affordable price points. Physical, commercial security is no exception.
Another buzzword is the NBN. The NBN is a wholesale-only, open-access data network initiative. A trial rollout of the fiber-to-the-premises (FTTP) network began in Tasmania in July 2010. The FTTP rollout is planned to reach approximately 93 percent of the population by June 2021. Construction of a fixed wireless network is planned to begin in 2011, delivering its first services in 2012 and to be completed by 2015; two satellites will also be launched by 2015, with an interim agreement with Optus and IPStar to provide satellite services to some customers from July 2011. The network will gradually replace the copper network, owned by Telstra and currently used for most telephony and data services. As part of an agreement with the NBN company, Telstra will move its customers to the NBN and lease access to its exchange space and extensive network ducting to assist in the rollout.
This nationwide broadband initiative is very well-received by security solution providers, as most transmission and streaming headaches with IP-based systems will be alleviated. It could also help yield more business opportunities and open up possibilities for different business models
According to the Australian Security Industry Association, expenditure on security hardware and software (video surveillance, access control and intrusion alarms) in 2007 amounted to $690 million. For this year, consensus was that recovery has been rampant, but the overall projected market size is still shy of the 2007 peak, only at roughly $450 to 500 million.
Distributor Pacific Communications estimated that the Australian video surveillance market could be worth $150 to $170 million this year. “We're seeing a lot of demand from street surveillance, transportation, mining, health care and education,” said Rob Rosa, National Sales Manager. “We, therefore, need proper product coverage with a good cross-section range as the largest distributor in Australia and New Zealand.”
Bosch Security Systems' projections for video surveillance were higher at $200 to $230 million. “Leads are mostly from mining, defense, commercial and street surveillance,” said Sean Borg, National Video Systems Manager.
For Sony Corporation, more than 90 percent of new tenders opt for IP-based systems. “People's understanding is improving, from pure cost considerations to picture quality and accessibility,” said Steve Charles, Sales and Marketing Manager for Security Solutions, Australia and New Zealand. “For my region, the video surveillance market is estimated to be worth $220 million, with IP sales expected to outweigh analog by 2015. Confidence in IP has increased noticeably.”
In terms of growth , Axis Communications is seeing 40 to 70 percent, depending on market segments. “While the overall market size here in Australia is not the biggest in the region, it does generate the most revenue for us,” said Oh-Tee Lee, Regional Director of South APAC. “Five years ago, some installers and integrators wouldn't listen and were scared to change (to IP). It's not that case any more. We now focus our education efforts on the building blocks of IP-based video (beyond cameras), such as storage and capable channel partners.”
For Lan 1, key market segments include government buildings and departments, residential buildings and retail outlets. “Education is good as well, but a bit slower; you get one or two projects from universities per year, and then a few smaller but ongoing projects from K-12,” said Basil Delimitros, Project Manager of IP Video and Access Control.
In physical access control and intrusion detection, a similar transition to IP can be seen as well, thanks to the NBN. “More hybrid converters and wireless transmitters are being demanded,” said Brett Lancaster, Sales and Technical Support for Security Distributors Australia. “While average prices are coming down, support and warranties are getting more comprehensive; now, you can see products with 10-year warranties and iPhone support very easily.” [NextPage]
While IP is gaining a lot of attention, analog is not “dying” anytime soon, Rosa said. “In terms of sales, analog and IP are about 70 versus 30; we are still seeing good growth on analog products. For bigger projects that require more than 100 cameras, IP gets specified, but it still depends on project type and available infrastructure.”
For existing establishments that require replacements or upgrades, local consultants and end users prefer devices or systems with hybrid capabilities that allow existing analog infrastructure to transmit signals over IP networks. “It is a strong selling bonus,” Charles said. “We tripled our sales in the first quarter over the same period last year, and we continue to work with more IT-level system integrators to service the entire spectrum of the market.”
To Borg, Australia is indeed in dire need of better IT and IP infrastructure. “While the economics around the NBN don't make much sense, we can definitely use newer, more reliable networks.” Analog technology is still robust, though. “A lot of system integrators, consultants and real-estate developers still ask for analog products, so we are still seeing singledigit growth; overall, sales figures split between analog and IP at 50/50.”
Started as an IT specialist 18 years ago, Lan 1 provides advice and support on network infrastructure. “Australia is a tech-savvy country, and growth in IP has accelerated for the last two to three years. With dollar appreciation and a number of budget offerings, users are enjoying 20- to 30-percent discounts (if not more), getting the biggest bang for their dollar,” Delimitros said. And more training is available today, further lowering t h e market's entry barrier.
For EOS Australia, the smartphone market is a good indicator. “We were a late adopter of smart cellphones, but look where we are today,” said Jeff Perrey, National Sales Manager. “The same goes for IP-based security systems; we are now seeing more organizations running multiple networks in parallel to support bandwidth requirements. The market is about solutions, not single products; Australians will use it if it is a robust, easy and open solution. It is a growth market beyond what people realize.”
With greater IP capabilities come both opportunities and challenges. While easier access and mobility are granted, the initial installation, integration and configuration can be very complicated, at least for the traditionally analog channel community in security. “Education is critical,” Rosa said. “It's our job to help the marketplace understand how to better leverage added benefits from IP-based systems. Product features and system limitations should also be made clearer.”
Keeping up with market growth and momentum is also a concern for Lan 1. For example, a number of Tier-1 suppliers are reevaluating and looking for more IT/IP-savvy distribution, installation and integration partners. “Aside from infrastructure shortcomings, we also need to think about our location. We live in isolation here, and not all manufacturers have local representation and support. So, we take device and system reliability very seriously, and we need more partners to help deliver that consistently,” Delimitros said.
Altech Computers, an IT distributor carrying brands such as Vivotek and GeoVision, has had similar observations. “The market has turned 180 in one to two years,” said Adam Storo, Surveillance Manager. “We need to keep up with different demands and requirements from various verticals, such as government, transportation, education, residential and SMBs. Having an IT background is, therefore, a massive advantage. With technology rapidly changing, it does take delivering functional hardware, software, solutions and services to a whole new level.” And “converting” integrators and installers and making them grow with you are no small feat.
Another IT distributor, ACA Pacific, deems end users having fully functional IP networks as the biggest challenge. “It's a slow process, as is training,” said Henry Patishman, Sales Manager. “On top of that, everyone wants control within an organization.” As a result, channel partners have to take it upon themselves to demonstrate to their end users that having open APIs and interfaces does not mean giving up departmental turf.
The IT cusp and bubble a decade ago could serve as a good reminder and lesson. “Support, beyond warranties, is critical. When faced with market pressure and ‘leveling' of real value and prices, we need to think about real-life implementations and implications,” Perrey said. “Our biggest challenge is having futureproofed solutions and partners.” [NextPage]
Depending on whom one talks to, the Australian security market has experienced growth between 5 to 70 percent over the last year or so. Political and financial brouhaha aside, the fruition of the NBN will level the playing field for many, catapulting Australia into a new digital age. From one camera or entry point to thousands of cameras, doors or detectors, the market will need to be serviced by professionals of different calibers. “Just like the Internet provided new access to trade, the NBN will enable service providers to cover all corners of the country with the same level of quality and efficiency,” said Kobi Ben-Shabat, MD of Open Platform Systems. “The direction and future of physical security have also been redefined. Being able to provide open but unified platforms and effectively manage explosive growth will be one of the defining factors of any business' success.”
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