After the global financial crisis, 2010's recovery allowed security providers to breathe a sigh of relief. However, the market is still a long way from 2007 sales levels. We examine key figures, verticals and drivers that marked the past year.
In the wake of a recession, a number of optimistic market estimates were revised. The tipping point for network video was pushed back to 2013, as buyers tightened their purse strings.
Europe is expected to be behind North America, with 2014 or 2015 being the European tipping point, because users do not understand the benefits of IP video for medium or small installations, said Matia Grossi, Research Manager for Physical Security EMEA, Frost & Sullivan. A larger base of legacy equipment is also a restraint, along with lack of consultant knowledge.
The video surveillance market is expected to be worth US$10 billion for 2010, including equipment and software, Grossi said. It is expected to reach $18 billion by 2015, making it the strongest growing product segment.
Technologies that add convenience, such as wireless video, will drive growth. IMS Research found the market for wireless video surveillance was worth US$175 million in 2009 for the Americas and EMEA. Both regions are forecast to grow at a rate approaching 20 percent in 2010.
Globally, intrusion detection will grow, although it is flat in Europe and North America.
Market Conditions
2010 was considered better than 2009, after the recession hit hardest. “Compared to 2009, global business has improved a lot this year,” said Denis Hébert, President and CEO of HID Global (an Assa Abloy company). “We have noticed that investment in business infrastructure to be more robust and scalable has returned.
Networked solutions buoyed this year's sales activities. “Despite the recession, our sales of encoders, network cameras and NVRs have been on steady climb since last year and account for more than 23 percent of our revenue this year,” said Vincent Chen, Assistant VP of Product Marketing at GeoVision.
The migration to IP in security is comparable to the consumer still imagery industry, which replaced film with digital cameras in the 2000s. “Today, according to IMS Research, Axis is the second largest camera manufacturer in the world — including network and analog surveillance cameras — even ahead of companies such as Pelco,” said Fredrik Nilsson, GM for North America, Axis Communications. “At the beginning of the recession, people thought that analog would make a comeback because of a perceived lower cost, but IP simply offers better quality, greater scalability and lower TCO.”
Vertical Growth
While spending halted in 2009, it started to come back in 2010. Promising vertical segments include critical infrastructure and banking, Grossi said. However, the government sector was affected by budget cuts in North America and Europe.
Not all regions are cutting back. “APAC and the Middle East are the strongest growing regions, with double-digit growth in virtually every segment,” Grossi said.
Government Projects
Public safety and law enforcement were top markets for OnSSI, which had a number of installations. “North America was really our sweet spot this past year,” Piran said. “North America, namely Canada and the U.S., is where we saw most of our business.”
Sensitive government locations continued to require top security. “Delta's top vertical market for crash barriers, bollards and gates continues to be government agencies, such as embassies, military bases and local governments as well as government-related projects like water dams, transportation hubs and biohazard depots,” said David Dickinson, Senior VP of Delta Scientific. Conflicts in the Middle East increased Delta's business in that region, with Asia growing closely behind.
A number of security players saw growth in the transportation market. “We have done a few projects for city surveillance as well as bus transportation projects,” said Sean Wong, Business Director for Security Systems in Asia, Anixter.
Large transportation projects are deploying management solutions. “While our solutions are suitable for many applications, we have been focusing on airports, seaports, city surveillance and oil/gas projects,” said Kim Robbins, Director of Marketing Communications for DVTel. “We are quite stable in the U.S. and the U.K. In APAC, we exploded in India and Australia this year. We are starting a South American office in Mexico soon.”
Harbors and airports continue to be successful areas for Siemens Building Technologies. “Growth is in BRIC countries and the Middle East,” Pedersen said. “Based on independent research, we are the No. 1 security provider in Brazil, with the highest market share.”
Private Projects
Education
Schools and institutions are populated by bright young minds, making it a vibrant market despite the downturn. Delta Scientific's perimeter solutions were installed at several colleges and universities with high foot traffic, Dickinson said.
Newcomer FutureSentry launched in April, expecting its key markets to be in energy and transportation. “Our biggest surprise was the higher-education market,” said Stephen Whitten, founder and CTO of FutureSentry. “Security at US colleges is focused both on protecting property and people from harm, and convincing parents that they are sending their sons and daughters to the safest possible campuses.”
Children are a valuable investment, making K-12 security a continued priority. “We weathered the recession pretty well, as security investment in people and assets is always the last to be cut,” said Rajesh Venkat, VP of Marketing for Ingersoll Rand Security Technologies. “Our key verticals, K-12 and health care, are also more shielded; plus, we offer financing programs, so customers' choice of technology can mature and advance more efficiently.”
Commercial
Banks are starting to increase their security spending, as Sony did well in the financial vertical for Vietnam, said Yoshikazu Hirano, GM of Security Solutions, Business and Professional Products Asia Pacific, Sony Electronics.
Casinos were another bright spot, as Ademco Far East completed work on Singapore's swanky Resorts World Sentosa, said Patrick Lim, Director of Sales and Marketing.
Macau's major casinos are investing in Dallmeier video solutions, which featured prominently at this year's World Cup in South Africa, said Georg Martin, Marketing Director for Dallmeier electronic.
Retail
Retail was Genetec's fastest growing market in 2010 as well, C?té said. It was followed by transportation, education and banking.
Solutions with good functionality go a long way. “We have seen strong growth in both the private and public sectors, in particular areas such as retail, commercial transport, public space and industrial applications,” said Jake Kim, MD of Europe, Samsung Techwin. “Many end users have been looking at ways to get more from their systems.”
Far and Wide
The recession affected each region differently. While some countries such as China, India, Australia and New Zealand are more cushioned, others got hammered. “Despite some hot spots of activity, all regions were generally down — and it was mainly those larger organizations with a ‘critical mass' that have weathered the storm best,” McKay said.
Some providers saw a marked improvement in the U.S. “For Bosch, orders overall are increasing every month and exceeding the prior year's month,” said Daniel Gundlach, VP of Marketing for the Americas, Bosch Security Systems. “The pipeline of projects continues to be encouraging, especially from the Central, Northeast and South regions, which have experienced a more rapid recovery than the West.”
America and emerging nations in Brazil, China and Eastern Europe saw strong demand for network-enabled products. “The recession has brought about more convergence, not just in technologies, but in channel structure as well,” Venkat said. “More ‘copetition' — cooperation and competition — can be expected.”
Some parts of Europe, such as Germany, weathered the year well. “We had a very interesting start because the 2010 spring was fantastic,” said Michael Zabler, Marketing Director for ABUS Security-Center. “It was very good especially for wireless alarms.”
Geutebruck echoed that Germany saw strong growth in 2010. “We had a very minor drawback in Spain and France,” said Katharina Geutebrück, MD of Geutebruck. “Australia was strong. This year will be, again, growing quite healthily.”
In Asia, more road and freeway projects adopted megapixel surveillance. “In the Middle East, city surveillance projects are springing up all over the map,” Caldéron said. “In Europe, transit systems still grew.”
Government facilities, along with utilities and critical infrastructure, were major markets in the region. “We have identified development opportunities in various Asian markets and, as a result, have extended our business development team in the region,” said Peter Francis, Regional Manager for Asia, Gallagher Security Management Systems.
Market Drivers
2010 played host to several large events, including the World Cup, the World Expo in China and the Commonwealth Games in India. Security featured prominently for the events to take place safely and peacefully. Several homeland security mandates drove markets, such as contraband-scanning systems, perimeter protection systems, advanced biometrics and video analytics, Lim said.
Local regulations will also affect product development. “The European marketplace for security is complex, with many different rules and regulations, which can sometimes prove difficult for a company such as Samsung who makes global products,” Kim said. “We are very good at feeding back information to our R&D teams to ensure that the products are fit for purpose wherever we sell them, and take into account specific requirements from specific countries.”
School of Hard Knocks
The financial downturn was unexpected, with long-term effects. Looking back on the past year, some companies felt they would not have done anything differently. “Don't panic,” Wilson said. “Stay ahead of technology would be our advice to all.”
Genetec felt it was on the right track. “We learned that forecasting is a difficult job at best, and it is quite important to remain geographically diverse,” C?té said.
Other vendors used the downtime to be introspective. “Recession is an opportunity to review structure and strategy — are we still on the right track?” Francis said.
DVTel used the recession to carve its niche. “We always ask ourselves to think outside the box, but the recession has taught us to be more focused, more innovative and more careful with strategic planning,” Robbins said. “Also, always align and ally yourself with partners that understand and believe in your technology.”
Newer players were able to compete with better value propositions. “The recession has taught us complacency and SOPs will always lose out to innovation,” Whitten said. “For those who deliver value and solve problems, recessions are a great ally in the competition against complicated products that do not deliver results.”
Regardless of the financial climate, offering customer value is the timeless hallmark of a good business. “The most important lesson is to be in it for the long run,” Piran said. “You can suffer a minor setback because of the economy, but if you stand by your customers and keep showing them value, they'll be with you when times are better.”
Find more information about 2010 Industry Review:
●2010 Industry Review: Value Holds the Key to Future Technology