Ever since the security technology shifts towards IP, the structure of the channel-end has undergone some drastic changes. The first problem surfaced when the channel players showed their insufficient knowledge of IP technology, and when the existing infrastructure turned out unsuitable for the IP technology. All SIs were highly dependent upon distributors’ planning and technical support for a system, but when distributors could not handle the problems, the manufacturers are forced to involve more extensively in the projects.
Ever since the security technology shifts towards IP, the structure of the channel-end has undergone some drastic changes. The first problem surfaced when the channel players showed their insufficient knowledge of IP technology, and when the existing infrastructure turned out unsuitable for the IP technology. All SIs were highly dependent upon distributors' planning and technical support for a system, but when distributors could not handle the problems, the manufacturers are forced to involve more extensively in the projects. As a result, the tighter and the more direct cooperation between manufacturers and the SIs squeezed the distributors out of the system. Those distributors, who wished to survive, were quickly turning themselves into value-added service providers. This consolidation trend at the channel-end will become ever more noticeable in 2014.
Another force restructuring the channel came from the Chinese products. Chinese products usually come with a cheaper price tag--- a massive disruption to the existing game rules. I was told by many installers, that under the circumstance where product price is lowered and the amount of work carried out remains unchanged, they are really yielding less profit to survive. The installation work is still as complex as no steps of a project should be reduced, and the man power and time needed are not cut down either. With a diminished total capital to begin with was so much less than what it had always been, hence yielding a much smaller margin and a greater amount of management pressure.
I have also heard from a big Russian importer/distributor that when he did not have Chinese products to offer to the market, his business was so quiet as he would not get any enquiry phone calls. In order to stay competitive in the market, he decided to import some Chinese products. However, he then found out that as soon as he stocked up with one batch of products, he would need to sell them as soon as possible to avoid a desperate clearance sale because newer versions would be launched soon. It seems that there is just no win either way with Chinese products.
Yet we cannot deny that Chinese products have made security more affordable for the entry-level market. As if the Pandora box were opened up, you just need to play by the new rules to survive in this new world.
When talking about Chinese products, we cannot avoid Hikvision and Dahua. In the Security 50 rankings of 2013 assembled by a&s magazine, these 2 Chinese trendsetters both moved 1 rank up from last year's ranking, and are among the top 10 competing with others scaled above $ 500million. These 2 companies are still growing robustly in China at a pace way above the average. Their growth means the loss of market share by other smaller companies. Therefore, we can expect that the Chinese security industry will soon be consolidated. Those smaller in scale or those without a clear vision will be out of the game in 2014. Soon, this restructuring of the industry will be expanded to Korean and Taiwan. We can also expect that in the next 2 years, the diversity of Asia manufacturing will disappear. Only those bigger in scale or those with distinct positioning, technology, or service, and can quickly adapt to the market, can survive.