North America: Growth to continue despite short-term downturn concerns
Source: William Pao
Overall, growth is seen in the North America market as end users continue to spend on security, and this trend is expected to continue despite concerns of a recession in the short-term, as some have suggested.
Economically speaking, North America has seen growth in recent years, with the World Bank citing the US economy grew 2.9 percent in 2018 and is forecasted to grow 2.5 percent this year.
The performance of the North American security industry, then, is pretty much in line with this growth trend. “North America is traditionally one of the largest regions for security players. Recently, the economy in North America has been strong, driving investments in security equipment. Growth rates of 5 to 7 percent are anticipated for this market,” said Daniel Gundlach, GM and VP of Security at FLIR Systems
“We continued to see strong growth in our business in 2018. Top line, we grew over 25 percent, inclusive of both organic and acquisitive growth. The feeling in the market overall was one of continued growth,” said Mike Mathes, Executive VP of Convergint Technologies
Threats, regulation trigger spending
Security concerns are still a major force driving end users to spend on security, regardless of verticals. “Most companies continue to spend at a high rate, and government and state projects are steady,” said Thomas Cook, SVP of Sales at Hanwha Techwin
America. “The largest vertical is K-12
. This sector is growing rapidly, due mostly to the urgency to secure these locations from shooting attacks. This is an epidemic in North America, so schools use increased security as a preventive measure.”
“Our high-end perimeter protection customers – airports, data centers and utilities – are investing in long-range thermal cameras and radar solutions for redundancy and expanded coverage to identify threats before they reach the fence line. Our commercial customers are investing in remote video monitoring and video verification solutions to better protect assets and reduce loss,” Gundlach said. “Norman Y. Mineta San José International Airport in Silicon Valley is a notable project using FLIR solutions for its perimeter intrusion detection system.”
Regulation also plays a major role driving demand in various verticals, from critical infrastructure to even cannabis
. “Highly regulated markets continue to be big drivers of security investments. Airports, ports, financial institutions, and utilities are markets that are highly regulated in a manner that security systems can impact. These users are looking to not only meet their regulatory requirements, but to do so in a productive manner and with systems that are more cyber-aware as well,” Mathes said.
“We see an explosion of business as cannabis becomes legal in more states across the U.S. and in Canada. Stringent security regulations in this sector is also driving business growth,” Cook said.
Meanwhile, North American end users are also starting to use security equipment for non-security applications, seeking to maximize return on their security investment. This trend is particularly noticeable in retail.
“End users are increasingly searching out advanced solutions that they can leverage for not only security, but to provide them insight to their operation. AI is having an impact in retail, allowing for a closer understanding of customers, as well as threats to the business,” Mathes said.
“The main vertical that wants to use security with business intelligence is retail even though there are others interested in this like shipping, manufacturing and processing plants. Retailers are increasingly using analytics to dynamically improve their customers’ experience while they are shopping,” Cook said.
Transportation, meanwhile, is another vertical where security equipment is integrated with other systems to help with traffic management and smart parking. “We’re seeing examples of cities deploying our thermal cameras with Acyclica, our traffic management software, to improve mobility. While the thermal cameras detect vehicles, the software analyzes destination statistics, travels times and arrival on red or green lights. All of this data helps cities understand traffic patterns and congestion so that steps can be taken to improve traffic flow,” Gundlach said.
As for next year, North American security players will be operating in an uncertain economic environment where growth may be impeded by the ongoing China-US trade dispute as well as the US presidential election.
“2020 is a presidential election year in the U.S. Historically, there has always been a downturn in business during this year. The main reason is many larger corporations are conservative with their overall spending until the election is over, which isn’t until November,” Cook said. “Even without the election, most financial analysts have predicted a recession. We are in the longest timeframe of not having a recession, so if it happens, it will affect the overall economy.”
However, most players are optimistic that, at least as far as security is concerned, its current growth path will continue. “While we have heard concerns of an overall slowdown — perhaps in 2020 — we aren’t seeing any of our customers behaving in a manner that would indicate a slowdown of their spending next year,” Mathes said.
“Economic sanctions are one area that can significantly impact growth. At FLIR, we design and manufacture the majority of our products in house, and do not use components that are impacted by current or anticipated sanctions,” Gundlach said.