American security experienced a meteoric rise after the 9/11 attacks, as awareness and demand for security measures spurred tremendous growth. However, the recession changed how the industry did business. The U.S. enjoys unique strengths in security, with its own challenges to overcome.
The American dream invites everyone to its shores to reinvent themselves. Anyone can make it in this nation of immigrants, as long as they work hard to earn their keep.
However, dreams of success became an obsession for some. Well-documented instances of greed defrauded countless victims, such as Enron's auditors covering up gross corruption. As Wall Street's fat cats cashed in on the American dream, the recession sent the global economy into freefall.
The US spirit of optimism is well-meaning, but not always able to accept failure. As the market boomed, there was no tolerance for “weak” performance, until lending spun recklessly out of control.
In flush times, America's greenbacks are welcomed — its market demands a never-ending supply of resources and finished goods. However, befriending the U.S. requires playing by its rules. The image of a self-seeking American cop bullying uncooperative nations into submission with trade sanctions and embargos illustrates how unpopular its foreign policy can be.
While foreign policy may have stoked the ire of America's enemies, it does not justify the deliberate attacks in 2001. The violent strikes on US soil increased security spending significantly, as the country sought to defend itself against further threats. In a country where anything is possible, America has to face the reality of an uncertain world that does not always go her way.
MADE IN THE USA
The can-do spirit of America encourages entrepreneurship. Top institutions attract the brightest minds from all over the world, with a clear immigration process to retain the crème de la crème. “The U.S. is unique for containing the high end for innovative R&D and utilizing Asian production capability,” said Bengt Christensson, Senior Marketing Director for Ambarella.
A commitment to innovation is what makes a company unique. “Manufacturing has the same costs, so the differentiator will be innovation, quality, and support and services,” said Fredrik Nilsson, GM for the Americas, Axis Communications. “That takes a lot of R&D and service.”
The U.S. is home to the most cutting-edge technologies, such as biometrics and video analytics. However, domestic production is not cost-effective, resulting in global partnerships. Even local players have their eye on overseas targets. “What's unique about US companies is they look more toward the global marketplace,” said Lance Holloway, Director of Technology Strategy, Stanley Convergent Security Solutions. “Before, they were content to be regional players, but a global outlook is now an understood expectation.”
Biometrics is an area where the U.S. has advantages, from iris recognition to multispectral fingerprint imaging. The latest multispectral techniques used red, green and blue lights to capture images 2-millimeter deep of capillaries that match the fingerprint, even through wet latex gloves, said Bill Spence, VP of Transaction Systems, Lumidigm.
Intelligent video is another strength. “Analytics were discovered in the last 10 years, which ushered its reach into the mainstream,” Christensson said.
Analytics have moved from military applications to being baked into mass-produced components. The latest Texas Instruments network camera and DVR reference designs both include intelligent features, placing smarts directly at the edge.
Security went from being “recession-proof” to “cautiously optimistic” in the wake of the financial downturn. “The U.S. is rebounding quicker than Europe, except for intrusion,” said Paul Everett, Research Director for Access Control, Fire and Security at IMS Research. “The U.S. was impacted before Europe.”
As the US economy suffered the Lehman Brothers collapse first in 2008, it has had more time to recover. “The recession eradicated a lot of companies,” said Roger Decker, Director Solutions and Marketing, Siqura Surveillance Solutions (a TKH Group company). “Now, it's picking up.” Optelecom-NKF was acquired by TKH Group in November 2010, going to market as TKH in the U.S. and Siqura in the rest of the world. Its business is “going through the roof” in the U.S. this year, compared to 2010.
Some players managed to beat the market, particularly smaller and more nimble IP companies. “The recession did affect our business, and some customers were considering purchases more carefully,” said John Szczygiel, Executive VP of Business Development, Brivo Systems. “Brivo still grew 40 percent in 2010, which was faster than the industry.” Its cloud-based access control economic model allowed users to pay for only the services they needed instead of purchasing equipment upfront, making it an attractive option in tough times. Larger companies were able to fall back on more diverse portfolios. “We changed our emphasis 24 months ago to focus on the government sector,” said Matt Barnette, VP of Sales and Marketing, AMAG Technology. “We had an early move into that, so it backfilled any loss of revenue from the commercial sector.”
Federal mandates are essential in the U.S., the world's third largest country by population and land mass. Comprising 50 states, central directives help keep US systems consistent, if not always funded. Smart-card shipments in the Americas will increase due to government initiatives to introduce smart cards in various industrial segments, said RNCOS in a report.
Streng thening homeland security encompasses significant legislation, from Homeland Security Presidential Directive 12 (HSPD-12), Federal Information Processing Standard 201 (FIPS-201) to the First Responder Authentication Credential (FRAC). Both FIPS-201 and FRAC address personalidentity verification (PIV) of federal employees and contractors authorized to access government buildings and other sensitive locations in the event of a crisis. The American market is highly standards-driven, making it a business challenge to grow, said Denis Hebert, President and CEO of HID Global (an Assa Abloy company).
Many projects strive to protect critical data. “Under HSPD-12, the government classified things as critical infrastructure and made specific recommendations,” Szczygiel said. “These include places such as hospitals, schools and food supplies.”
Compliance with federal mandates is not optional. Mandates require certification for equipment, such as IP controllers, before they can be specified for government projects, said Karen Evans, President and CEO of Sielox.
The exacting nature of the US industry is a welcome challenge to some newcomers. Gallagher Group worked on access control management for the Australian Intelligence Services — crucial experience as the company goes through US certification. “The U.S. is a market of specialization,” said William Gallagher, CEO of Gallagher Group. “It is the most sophisticated and demanding market.”
Government edicts drive agencies. One example i s a memo issued on Feb. 3 by the Office of Management and Budget, telling federal agencies to comply with HSPD-12 requirements by December 2012 or risk losing their funding. “As of December 2010, agencies reported that approximately 5 of 5.7 million federal employees and contractors have completed background investigations, and 4.5 million have PIV credentials,” wrote Gregory Schaffer, Assistant Secretary for Cyber Security and Communications, Department of Homeland Security, in the memo.
INTO THE CLOUD
Cloud services are generating interest, with federal groups looking a t how to remotely host and manage systems. “The government has a big initiative,” Barnette said. “Whether deployed or not, some IT security issues are resolved through standard committees.”
The cloud strategy emphasizes service, or paying for what you consume. Using native IP infrastructure saves on hardware costs through a hosted service, Szczygiel said. It also offers a unified platform, similar to Google for search. To conduct access control, hosted services provide a portal to anyone in the world.
Video surveillance is floating into the cloud as well, with Next Level Security Systems and Axis Communications launching hosted services or managed video as a service (MVaaS) in the U.S. Hosted solutions allow users to view multiple sites through one interface, with little or no upfront capital investment — an advantage over traditional surveillance with closed video systems that are not interlinked. MVaaS leverages video as a productivity tool, translating video-based data into actionable intelligence.
Vertical-specific mandates such as the chemical facility anti-terrorism standards (CFATS) are among the alphabet soup of federal legislation. “The US domestic market has more emerging regulations,” said John Romanowich, President and CEO of SightLogix, who chairs the security committee for CFATS. “Before, the government would push a mandate, and the petroleum companies would say they had no money that year. Now, the mandates will be authorized for five to seven years, instead of annual mandates.”
Hollywood attracts aspiring stars; New York draws fashion hopefuls; and Silicon Valley pulls in the brashest high-tech entrepreneurs. Finding a regional hub for physical security is harder to locate. For security, America is more of a think tank for R&D rather than actual manufacturing. There is no need to cluster production facilities in the same physical space, unlike film studios or couture ateliers.
Security is also more fragmented, making location less of an issue. “Companies in North America add more value on R&D for the high end, and then outsources the mainstream volume products to Asia,” Christensson said.
America's vastness makes it difficult to generalize about the whole nation, as each state has its unique culture and business approach. “If you look at access control, the East Coast is very security-conscious for 9/11 areas, like Washington, D.C. and New York City,” Everett said. “When you go to the West Coast, it's more laid back, with a different thought process compared to the East Coast.”
The US security industry has a wealth of resources. It attracts top talent and nurtures entrepreneurs willing to think big. However, its success has earned it some enemies, requiring legislation and funding to defend against threats. America's domestic market demands and key product usage trends are explored in the US Market Update.