As technology and market status are always in flux, Security 50 offers the perfect opportunity for a total checkup. Gazing into the financial ups and downs of this industry's movers and shakers, A&S unearths some noteworthy trends from the stacks of financial reports we received.
Walk the floor of any security trade show in the world, and you would see that video surveillance is still the topic du jour. Year 2006 certainly saw some interesting developments, such as video analytics, central management and increased convergence/integration. The top 10 revenue growth companies in this year's Security 50 ranking also confirm the fact that most of the activity is taking place in the video domain, constituting phenomenal growth curves for some.
IP and EASE OF USE
There is little doubt that the most demanded specification today is IP connectivity as it can bring various systems together to make convergence reality and maximize security. First-time Security 50 entrant Hikvision had an impressive 88.6-percent revenue increase between 2005 and 2006, and the company attributed such growth to the growing demand for networkenabled products. "Since 2006, we have launched a number of new network DVRs and IP modules, some of which incorporate next-generation technologies and interfaces to meet diverse customer needs," said Hu Yangzhong, President of Hikvision, who then acknowledged the importance of continuous research and development and the advent of H.264 compression for easily retrievable and storage-friendly high-definition imagery.
Korean CNB Technology, a manufacturer of zoom and dome cameras with 32.8-percent revenue growth and high-quality production facilities in China, is eyeing the IP market with great interest as well, even though it currently does not have an IP line. "Sixty percent of our product sales are own-brand," said Bong Suk Yoo, CEO and President of CNB, "and our customers find our products having great price-performance value. We are catching onto the IP trend by releasing a new network camera in the first quarter of next year."
Discussions surrounding convergence and IP were also brought up by other vendors like Verint Systems, Nice Security Group, Visual Defence, Vivotek and Axis Communications. Verint has been enjoying double-digit growth largely driven by the success achieved in key markets such as retail, critical infrastructure, financial and transportation (including airports, seaports and mass transit). "Key to this growth is our ability to leverage the IP convergence wave, as our portfolio is specifically designed to bridge the gap between analog and digitally networked video," explained Mariann McDonagh, Executive Vice President of Global Marketing at Verint Systems.
Verint's strategy is to offer the industry's most comprehensive portfolio of networked video solutionsNextiva. The Nextiva portfolio includes video management software, intelligent DVRs, a wide array of encoders and wireless edge devices, integrated analytics and SDKs for easy integration with other security and business systems.
According to the company's financial statement, fiscal year 2006 non-GAAP earnings per share of US$1.42 was a record for Verint, and an increase of 34 percent from fiscal 2005. "Our strong earnings growth was driven by the demand for our actionable intelligence solutions, improved operating margins and the focused efforts of our employees," said Dan Bodner, President and CEO of Verint. In fiscal 2006, Verint's non-GAAP gross margins and operating margins reached 61.0 percent and 13.4 percent, respectively.
Over the last year, Nice introduced three product lines into the security world. NiceVision Net is a major addition to Nice's IP video portfolio that offers an enterprise-class, open-platform IP solution, including encoders, NVRs and decoders. NiceVision ControlCenter enhances the company's IP video management solutions, including advanced, real-time, collaborative event management. And finally, Nice Inform is a multimedia incident information management solution, as an application layer integrated with Nice video and audio recording platforms to allow for full-view scenario reconstruction for investigation and forensic purposes.
"Our remarkable 47.3-percent growth was due to the strong demand for our solutions across the board, in the different market segments and regions in which we operate," said Israel Livnat, President of Nice Security Group of Nice Systems.
Security convergence is a trend with incredible momentum and promise, and the Canadian company Visual Defence's software offerings seem to be on the right track. "Our software is a critical tool specifically designed to enable security convergence. As a result, our revenue and profit grew more than 230 percent and 650 percent, respectively, over the year between 2005 and 2006," said Dagan Sadeh, CEO of Visual Defence.
Command and Control Center (3C) is the company's common management software platform for comprehensive security management, converging physical and IT security components. Mobile Digital Video Storage Solution (DVSSm) is a mobile DVR designed for rugged environments, with unique IP, PoE and remote video tagging capabilities. Intercom Management System (IMS) is an integrated audio and video platform designed to interface with an enterprise's telecommunications infrastructure. The IMS solution provides a voice, image and data link to the user v i a s t and a rd Ethernet network architecture, integrating three unique streams into one cohesive solution.
"The flexibility, scalability and crime/risk mitigation inherent within our solutions are always a huge selling point, and we can usually meet all the pre-established security requirements while offering the lowest price," boasted Sadeh.
The Visual Defence flagship product, 3C, has the ability to be easily integrated with cameras, DVRs and security subsystems from nearly any vendor requested by the client and works seamlessly with both analog and digital components. "3C is designed to handle over 2,000 events or alarms per minute and over 100,000 events or alarms per day," Sadeh continued. With pre-defined, best-practice procedures incorporated into the system, decision-making requirements are removed from operators, thereby reducing the risk associated with human errors. Additionally, the convergence of multiple systems into one brings all relevant information into a central location to support responding to security events. "This reduces the risks and time associated with gathering individual pieces of data."
Sadeh then elaborated on how Visual Defence solutions can be used in other applications. "The use of our technology to streamline operations has already started to positively affect our financial figures, examples being Air Canada, City of Mississauga and Societe de Transport de Laval." Other projects are expected to begin to make an impact over the next 12 months.
"For instance," said Sadeh, "Air Canada uses our platform solely in an operations capacity. This includes aspects such as monitoring of aircraft and ground crew at the gate and airside locations, ensuring that staff and equipment are positioned correctly, and real-time viewing of all aircraft arrival/departure processes."
For network camera market leaders Axis Communications and Vivotek, wireless and mobile surveillance are on their radar as airports, airlines, train stations, commuter trains and other transportation depots/ vehicles around the scrambling to beef up their security measures; and wireless, real-time connections have become their No. 1 priority.
With 3GPP/RTSP media streaming servers becoming available, Vivotek cameraswith self-developed systems on chipscan be accessed via Internet browsers and mobile phones. "With our cameras, remote and real-time surveillance is no longer a dream," said Owen Chen, Chairman of Vivotek. Not only is live video readily available, but Vivotek's 24-hour turnaround guarantee also ensures that customers worldwide can get technical/product support whenever they need it.
"Vivotek educates and trains its channel partners on products and technologies, and expects that knowledge be disseminated and communicated clearly to customers and end users," Chen said. When expanding, the company also takes the differences in different industries into consideration. "We would then choose different, specialized partners in IT, security surveillance or telecomm industries based on these factors."
One thing Axis would like to remind the reader is that convergence does not necessarily mean more money. "The overall operation and maintenance can be a lot cheaper and return on investment greater; more and more people are beginning to appreciate the benefits and true value of whole systems, and that is what Axis will continue to work on," said Anders Laurin, Corporate Executive Vice President at Axis Communications.
The company has launched approximately 20 new products so far this year, including one specifically for the transport vertical and one megapixel camera. "Mobile surveillance is also picking upnot only are event-triggered video signals transmitted wirelessly, but real-time traffic information and landmark-related advertising can also be received and displayed on board public transit vehicles."
As of today, worldwide adoption of network cameras is at roughly 10 to 12 percent. The rate is higher (20 percent) in Scandinavia because there were no analog installations prior to the recent regulatory changes. "Asia is an important market that Axis will continue to watch and develop because a lot of infrastructure there has been built with IP backbones already in place," said Laurin.
Axis is taking all actions possible to grow. For the second quarter of 2007, its sales in Asia have increased by 57 percent when compared with the same period of last year.
This kind of success cannot be achieved without strong local support. Axis divides its channel partners into two tiersdistributors and resellers/system integrators. The Axis Channel Partner Program provides three levels of partnership designed to recognize and reward its partners' investment in the sales of Axis products. "The investments they make in training and selling of Axis products will determine their level on an ongoing basis (like a frequent flyer program); margin benefits are aligned with those investments and the results they achieve," explained Laurin.
Solution Partners deliver the highest value to customers and demonstrate expertise in consulting, implementation and total integration solution models; these partners have completed Axis Academy second level training and maintain a number of highly qualified sales and technical staff for advanced implementation. Premium Partners have achieved proven success in the marketplace with Axis products, and has consistently achieved revenue targets; they have completed Axis Academy first level training.
Authorized Partners are interested in taking the first step in building a relationship with Axis; this membership level does not require revenue targets and provides an introduction to the broad array of program benefits that Axis offers to help them get off to a successful start. "All training involves both technical and marketing aspects so that Axis' partners get to teach users how to use Axis products and how to buy or finance," said Laurin.
Network video is so promising that even companies like fiber optic specialist Optelecom-NKF and perimeter expert Magal Security Systems are also reaping benefits from rapid market growth. "We have followed closely the technology transformation occurring in the security/ surveillance space as digital video techniques have redefined the structure and capability of video surveillance installations," said Edmund Ludwig, President and CEO of Optelecom-NKF. "The dramatic and rapid acceptance of digital video content, compressed and networked using IP/Ethernet technology, has led to a paradigm shift in the way customers deploy and use their systems."
Overall, Optelecom-NKF's sales performance can be contributed to its ability to design, manufacture and sell superior technologies that meet a growing need for sophisticated surveillance systems and provide great value to its customers. "Our industry's move to digital surveillance infrastructure is transforming video surveillance into a large data analysis and management challenge, and it is a challenge we are working hard to help our customers overcome," said Ludwig. "We plan to continue executing our core strategy of delivering profitable organic growth, developing products and services that end users want, incorporating analytic software and seeking additional growth by adding to our product lines through partnerships and potential acquisitions."
Consumer electronics giant LG Electronics is viewing the various advances in IP technology as exhilarating and feels that both growth possibilities and marketing challenges are looming, expressed John Ahn, Senior Manager of Security System.
MEGAPIXEL AND PLUG-AND-PLAY
Two other much-demanded features are easy of use and high definition. Although systems are getting bigger and more sophisticated, users are specifying simpler interfaces for easy and intuitive operation. And high definition goes hand in hand with video analytics which requires high-quality imagery.
"Intelligent video analytics is a rapidly growing field, and our Dreambox platform has the processing capability to perform leading-edge video analytic applications as they continue to be developed," said Izhar Dekel, CEO of Magal Security Systems. "One of the leading applications is the camera-tocamera tracking of targets as they move throughout a facility; this represents a growth area for our business."
Magal has a strategic interest in applications related to seaports, airports and military sites, not only because they represent potentially large volumes of business, but because Magal is uniquely qualified to address these security needs.
Magal is the predominant perimeter security company globally to have successfully completed the application of security sensors to a large-scale border project in Israel. "This experience together with the broadest technology it offers these industries and continued research and development of new security technologiespositions Magal at the top of its niche perimeter security solutions marketplace," said Dekel.
Leading German player Mobotix also fits the high-definition profile perfectly. Mobotix's figures, at the end of June 2007, are showing a dynamic 50-percent sales growth, with 60 percent of this in exports. "This can be attributed to Mobotix's history of meeting and growing with the increasing global demand for high-resolution, intelligent surveillance solutions," analyzed Dr. Ralf Hinkel, Founder and CEO of Mobotix.
Founded in 1999, Mobotix has hadfrom the very beginninga deep commitment to technical development and global market expansion. "We set our own standards to develop a robust, weatherproof network camera with dual digital image sensors and an integrated PC. By including a computer in the camera, we were able to accomplish the image processing, recording, storage management and many other functions directly in the camera itself," explained Dr. Hinkel.
This inclusion of an on-board PC saves users from installation headaches and opens up a world of software functionality and possibilities.
"We have taken the product from that original weatherproof camera to an extensive range of decentralized intelligent camera systems," said Dr. Hinkel. "Mobotix is now a market leader in new IP video technology, highlighted by our innovative surveillance solutions incorporating the latest high-resolution, megapixel image technology with state-ofthe- art video management and alarm control software."
Since 1999, the company has expanded from its original home market of Germany to having offices throughout Europe, the U.S. and U.K., Japan and Australia as well as being actively represented by business development managers and qualified distributors, system integrators and solution partners in more than 70 countries.
"As of today, Mobotix is still the only network camera provider capable of storing smooth, high-resolution video streams with 960 lines instead of the usual 288, with integrated audio," stated Dr. Hinkel.
For example, D22M FixDome is the new Mobotix line of very compact, attractively- priced dome cameras with 960-line resolution, integrated video sensors and designed specifically to be used indoors; the PoE-enabled camera has a 90-degree, wide-angle lens, and the whole unit only costs about $600," said Dr. Hinkel.
The weatherproof D22- IT and D22-Secure models are equipped with additional software functionalities, andthanks to their fiberglass-reinforced housing and the 1.5-mm polycarbonate domethey are also approved for outdoor use under IP-65 rating (minus 30 to 50 degrees Celcius or minus 22 to 122 degrees Fahrenheit).
The high-end Secure model is priced approximately at $1,000 and includes the lens, integrated weather protection, year-round PoE power supply and MxControlCentera professional control center software package with a license for an unlimited number of users and cameras.
"The camera software includes event-controlled recording with up to 30 frames per second for each camera as well as an extensive range of alarm functions via E-mail and VoIP telephony. At 1280x960 pixels, the resolution of recorded imagery is 12 times higher than in the conventional CIF format, which is still used in 95 percent of all surveillance systems today," said Dr. Hinkel. As Mobotix has demonstrated, user-friendliness, analytics and high definition are definitely here to stay and can still be easily affordable.
THE WORLD AT YOUR FINGERTIPS
The events of Sept. 11, 2001, and subsequent regulatory and policy changes in the U.S. and other countries have heightened interest in the use of biometric security solutions. Two market leaders are in this year's Security 50 ranking: L-1 Identity Solutions and Cogent.
L-1 Identity Solutions and its portfolio of companies have a 20-year history of delivering a full range of offerings targeted to manage human identity and of serving domestic and international governments, law enforcement and border management agencies, military branches and large commercial businesses.
Because of threats to national security and significant economic loss resulting from identity-based fraud and theft, the market is requiring a more secure and tamper-proof means of validating a claimed identity as well as issuing credentials that grant privileges for travel, physical and logical access to facilities and networks, and performing financial transactions.
According to L-1's official financial statement, "we believe that the best means available today is through our end-to-end, integrated, multi-biometric (finger, face, iris) recognition solution." L-1 registered a 79-percent revenue growth and 172.6-percent profit growth between 2005 and 2006. Not everything is sanguine though as company representatives did voice their concern that high-end segments like government and missioncritical facilities are rather saturated at the moment, and that there may be a shift towards mid- to low-end markets, such as enterprise time and attendance and mobile devices, in order for biometric players to sustain further growth.
Bioscrypt, a smaller but definitely formidable Canadian player, is also quite positive about the future of biometrics. "There is a growing demand for all of our product offerings, which include logical and physical access control solutions that can be combined to create a unified authentication strategy that brings together several aspects of security under one umbrella," said Matthew Bogart, Vice President of Marketing for Bioscrypt.
According to Bogart, there are a number of drivers pushing organizations to adopt biometric readers, including the U.S. Homeland Security Presidential Directive 12 which mandates that government buildings use FIPS201-certified biometric finger readers to authenticate employees. "Regulated or mission-critical industries are also looking for more secure ways to identify or verify users both at the door and the desktop. VeriSoft is a single- or multi-factor authentication solution that provides enterprises with secure access to systems, helping companies meet compliance regulation requirements," explained Bogart.
Today, fingerprint authentication is the most popular type of biometric authentication because it is fast, easy and accurate. "Our comprehensive identity management solution for logical access, VeriSoft, is able to accurately authenticate users on the network and track who accesses which files and applications, and it is critical for organizations in regulated industries." Currently, the U.S. is still Bioscrypt's biggest market, though expansion plans for the rest of the Americas and EMEA are already in the works.
On the other hand, competitor Cogent was a bit more conservative about large-scale projects and future growth, and cautioned that the market for biometric solutions is highly competitive and fragmented, and subject to changing technology, shifting customer needs and frequent introductions of new products and services.
When asked which countries or regions contributed the most to their sales, a lot of Security 50 participants pointed to Russia and the Middle East. The Russian security market is estimated to be worth $5.4 billion in 2007, with an average growth rate of 30 percent per annum. Some CCTV components, for example DVRs, are experiencing growth exceeding 50 percent. Upon entry into the WTO, Russia has undergone a lot of policy and organizational changes which have been helping more and more market segments to open up for freer business transactions. The most notable one is transportation as rail networks and airports can now be privatized, which can be translated into more infrastructural upgradesincluding security systems. Other burgeoning and promising segments for electronic security include banking, real estate, retail and petrochemical, and these are quite reflective of other fast-growing regions' growth patterns.
To LG and Vision Hi-Tech, a Korean company with specialties in infrared LED bullets and dome cameras, the Middle East appears to be quite prosperous but more sensitive to price. Nevertheless, the Gulf countries aloneaccording to Construction World account for more than 2,100 existing and planned projects currently valued at $1.2 trillion, and this figure will rise as the Middle East continues with its enormous infrastructure and expansion plans.
Some projects that are grabbing international limelight include the Burj Dubai Tower, the Palm Islands (including "The World") and a number of supersized airports.
The Burj Dubai skyscraper is currently under construction in the new downtown district of Dubai, United Arab Emirates. Although not yet complete, it is currently the tallest high-rise building in the world. When completed, it will be the tallest man-made structure in the world. Scheduled for occupancy in 2009, the building is part of a two-squarekilometer development located at the first interchange along Sheikh Zayed Road at Doha Street. As of July 21, 2007, the tower's developers reported the Burj Dubai's height as 512.1 meters, with 141 completed floors surpassing the Taipei 101.
The Palm Islands, also referred to as the Palm Dubai and the Palms, are the three largest man-made islands in the world, which are being built on the coast of the emirate of Dubai. Its concept was announced in May 2002, and the three resort islands are expected to maintain Dubai's position as a premium tourist destination.
The Palm I s lands are al so the self-declared "Eighth Wonder of the World." Each of the islands is being built in the shape of a date palm tree and consists of a trunk and a crown with fronds, and is surrounded by a crescent island that acts as a breakwater. The islands will support luxury hotels, freehold residential villas, unique water homes, shoreline apartments, marinas, water theme parks, restaurants, shopping malls, sports facilities, health spas, cinemas and various diving sites. The World will comprise between 250 to 300 smaller private artificial islands divided into four categoriesprivate homes, estate homes, dream resorts and community islands.
And all these massive development projects across the region are undoubtedly equivalent to a growing demand for advanced security equipment.