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Australian Security Market Offers Great Potential
The Editorial Team 2007/10/17

One thing that really stands out about the Australian security market is the lack of manufacturers. Productsmostly Asiandominate the rapidly expanding market. And given the increased spending on security products and rapid economic growth, opportunities are numerous and varied. One thing that really stands out about the Australian security market is the lack of manufacturers. Productsmostly Asiandominate the rapidly expanding market. And given the increased spending on security products and rapid economic growth, opportunities are numerous and varied.

The security industry is one of Australia's fastest-growing sectors, creating both employment and economic growth for the nation at a rapid rate, observed the Australian Security Industry Association Ltd. The industry, it added, generates revenues of approximately US$3.63 billion per year and employs over 150,000 security personnel. The industry has developed in its innovation, diversity and professionalism, often leading the way internationally. Today, it provides a wide range of security products and services designed to meet the needs of the Australian community.

Paul Thompson, National Sales and Marketing Manager at Baxall Distribution, believes that the market is not flat but growing; this is contrary to what many others have stated. "Certainly, the number of units being installed tells us that. Reduction in prices means that market value is not increasing as much as market size in units."

According to Thompson, when DVRs were first launched, the cost was in excess of US$20,000 per unit. Now, however, they sell for less than a quarter of this on average. "I am reasonably comfortable with the $161.29 million market size for the CCTV industry, at wholesale level," he concluded. Growth rates, however, are "anybody's guess."

In a market this size, one major project can have an impact on overall growth by as much as 5 percent. Generally it is believed that market size (in units) is growing by 10 percent or so, but as prices fall, the result is a flat line or little growth for market price value. Baxall expects to be a $16-million (10 percent of the market) business within 12 months , observed Thompson.

With regards to Australasian market growth, Daniel McVeagh, Product Manager at Cardax, Gallagher Security Management Systems, reports seeing "Great growth in the mining and resource sector, not only from organic sector growth, but also from increasing regulatory requirements, such as controls on access to hazardous materials, and health and safety regulations. We have also been seeing rapid sales growth in Australia in the education, manufacturing and critical infrastructure vertical markets as well."

Gallagher Security Management Systems (the owner of Cardax) manufactures the bulk of its hardware, and develops software, at its head office in New Zealand. "We believe that the quality and innovation benefits from having Marketing, R&D, Production and Support teams working side-by-side," said McVeagh, "outweighs the cost benefits from outsourcing product manufacture."

The petroleum and diamond industries are two prominent vertical markets, in the view of Andrew Goodman, General Manager, GE Australia, New Zealand and Southeast Asia. "As Australia is experiencing fast-paced growth, office and apartment developments are another key sector as are infrastructure projects like highways, bridges and tunnels."

Key Players

Thompson noted that leading brands in CCTV include Pelco, Bosch, Panasonic, Samsung, Sanyo, Baxall and Sony. ICU and Kodicom are also popular choices when it comes to DVRs. In IP video, brand leaders include Verint, DVTel and IndigoVision.

There are about 30 companies active in biometrics in Australia, ranging from small consultants to multinationals such as Argus, Cognitec, Daon, IR, Sagem, Scansoft, Unisys and VeCommerce. The Biometrics Institute listed 24 suppliers on its Australian Web site. German company Giesecke & Devrient is a specialist in biometrics and card technology, the U.S. Commercial Services report pointed out.

According to Goodman, there are probably more than 5,000 installers in Australia. "Because of the tremendous amount of installers, distributors and importers in the country, there is a lot of competition."

Thompson said key distributors are Baxall Distribution Australia, Pacific Communications, Rexel Video Systems, Bosch and C.R. Kennedy with key integrators being ADT, Siemens, Honeywell, Secom, Johnson Controls and a number of local companies.

In addition, GE has a major presence in access control; furthermore, it is one of the few companies to manufacture locally. In the Australasian Access Control market, McVeagh names the major product vendors in the mid to high-end market (more than 16 doors) as GSMS (Cardax FT), GE (Tecom) and Honeywell (EBI). At the mid to lower end (fewer than 16 doors), major players include GE (Tecom), Inner Range (Concept), GSMS (Cardax FT), Chubb (AFX), along with a large range of generic, low-cost access control systems.

Priming the Pump

"Growth of the industry has partly been generated by the ongoing evolution of technology offering new products and services that are not only more effective, reliable and convenient, but also more affordable," a spokesperson at the ASIAL stated. In addition, the level of crime in the community and the random nature of crime have encouraged many consumers to take proactive steps to ensure that their assets and property are protected.

Improving levels of training and professionalism in the industry have resulted in higher standards and increasing consumer confidence. This is illustrated by the growing number of businesses and government authorities now using the services for an ever-widening range of services. The key drivers, noted ASIAL, include the following:

 Growing affluence with attendant changes in lifestyle  Technical innovation that is delivering a vast new array of security options  Devolution of some traditional policing roles  Shift to a user-pays economy  Outsourcing of specialist areas by business and government

In Australia, in the coming year, ASIAL estimated that $24.19 billion will be spent "keeping Australia safe." The private security sector alone will account for about 15 percent of this figure, and has been growing at a rate of 5.5 percent per annum over the last five years.

According to ASIAL, the cost of crime in Australia is as follows (Source: Counting the Cost of Crime: Australian Institute of Criminology, April 2003):

 Homicide: total cost $750 million or $1.29 million per victim  Vehicle theft: total cost $709.67 million or $4,839 per theft  Theft from vehicles: total cost 427.42 million or $443.55 per theft  Shop theft: total cost $653.23 million or $88.71 per theft  Criminal damage: total cost $1.08 billion or $564.52 per incident  Assault: total cost $1.16 billion or $1,290.32 per assault  Burglary: total cost $1.94 billion or $1,935.48 per burglary  Robbery: total cost $483.87 million or $2,903.23 per robbery  Sexual assault: total cost $185.48 million or $2,016.13 per assault  Fraud: total cost $4.68 billion  Drug offenses: total cost $1.58 billion 

New Security Imperatives

From an economic perspective, said ASIAL, the industry has continued to grow "exponentially." Outsourcing of security services has expanded and low barriers to entry have permitted not only an influx of sole tradersmany inexperienced as security providersbut also an attendant culture of subcontracting that has delivered mixed blessings to the industry.

Margins, in some sectors, have been squeezed to dangerously low levels (guarding often at around 2 percent) due to its purely competitive nature, where new entrants offer indifferent service at any price to gain a foothold. "To win business, the entity undercuts the competition and then soon finds itself unable to meet its obligations under industrial awards," continued ASIAL. "This often leads to dubious contracting arrangements, which are exploitive and tarnish the industry. Few such enterprises survive the first two years. They exit, leaving devastation behind them and a crisis in confidence. This parlous state is exacerbated by those businesses that operate on the fringe or outside of the regime altogether, again fuelling the industry's bad image."

Low returns are further depressed by a lack of contractual diligence, whereby clients, often government departments, award contracts on the lowest price without due regard for the required labor costs under the awards, supervision and management. On an operational level, national training standards have had an impact in lifting competencies and skills within the workforce, but security remains a low-paying profession (bottom 5 percent) with yet-to-be-witnessed orderly career progression, bemoaned ASIAL.

Government Projects Fueling Demand

With terrorism striking nations around the world, of course, security is of paramount importance, especially as Australiaalong with the U.S. and U.K.has taken a strong stance against terrorism. "Today, terrorism remains a serious threat to Australia and our international partners and allies," Australian Prime Minister John Howard said in 2006. He said the Australian government's response to terrorism has been decisive and wide-ranging. A total of $6.69 billion in additional funding has been committed since 2001 to ensure that agencies tasked with countering the terrorist threat have the resources that they need to achieve their objectives.

Australia's layered system of border control is regarded as world-class. The Australian government has invested $887 million since 2001 to increase the robustness and efficiency of the border security regime. The government has also strengthened national borders through major initiatives that include a tighter legal framework and increased enforcement powers for the AFP, the Australian Customs Service and other Commonwealth agencies.

Furthermore, it has also enhanced immigration visa processing, information storage systems and airline liaison officer and overseas compliance networks, while increasing capacity to detect fraudulent documentation, and development and use of biometrics to detect identity fraud. Moreover, it has bolstered security in the screening of air freight and sea-borne cargo with additional surveillance of seas to the north and northwest of Australia, while developing stronger cooperation with countries in the region.

In addition, APEC 2007, which will be held Sept. 2-9, will be Australia's biggest security challenge ever. Meetings and activities, which began in January, will eventually encompass 10,000 dignitaries (with 40 wide-bodied VIP jets parked at Sydney Airport), 6,000 delegate and support staff, and 1,500 members of the international media. In Sydney alone, 3,000 New South Wales policemen will be guarding 11 hotels, securing conference facilities and escorting 300 VIP motorcades though city traffic.

The federal government has allocated $56.45 million over four years for security-related purposes, with another $483,871 toward operating costs for armored VIP limousines. In addition, the following sums will be allocated for security:

 $45.32 million to the Protective Security Coordination Centre (PSCC) for security costs associated with hosting the Leaders' Week in Sydney.  $3.23 million for PSCC to buy 10 VIP limos and to manage the purchase, control and dispersal of other security assets acquired for APEC purposes and for additional ongoing operating costs.  $5.81 million to the Australian Federal Police (AFP) to establish and train 22 firearms and explosive detector canine teams to conduct firearms and explosive searches at Leaders' Week and preceding managerial meetings.  $725,806 to Emergency Management Australia (EMA) for development of consequence management plans for an incident during APEC Leaders' Week or any of the preceding meetings.

A National Approach

In New South Wales, said ASIAL, it was recognized when framing the Security Industry Act 1997 and Regulations that the industry was not ready for self-regulation alone and that the approach had to be one that covered all providers of product and services. Licensing, on its own, was only one regulatory instrument that would not provide the entire solution. It was, therefore, decided that there had to be stringent probity checking and a meaningful co-regulatory partnership between the security industry and the regulator, the NSW police.

Industry providers were required to belong to Approved Secur i ty Organisations and these associations assumed the responsibility for education, development and compliance of their respective memberships. Although controversial at the time, these initiatives have proven resilient and beneficial; they have underpinned the regime and the model has served stakeholders reasonably well, all things considered, explained the ASIAL.

The co-regulatory approach, pioneered in NSW, has become the basis of an evolving national approach that ASIAL has been promulgating with regulators around the country. ASIAL believes that it is indefensible that, contrary to COAG principles, there is no uniformity and consistency in security regulation around the country. Absence prevents portability between jurisdictions, national probity checking, a centralized registry with the police, appropriate standardized industry compliance and efficient enforcement of licensing by regulators.

In other states and territories, "a mixed bag of regulation" is in place that can best be summed up as "an unacceptable minimum to industry." Most jurisdictions, said ASIAL, have recently undertaken National Competition Policy (NCP) reviews but still failed to grasp the opportunity to close off weaknesses in their systems and adopt the National Model. ASIAL, however, finds it encouraging that there is now growing recognition that the scope of coverage should be expanded to include electronic and other providers and that a partnership with industry is a critical element to the success of any security regulatory regime.

Technology Savvy, Price Conscious

Australia is very advanced when it comes to technology. Emanuel Stafilidis, Business Development Manager at IPP Consulting, pointed out that because of acute labor shortages in Australasia, firms are opting for increased use of technology. "Other countries may not be as technologically savvy since we are prepared to reel in new technologies," Stafilidis said. "We have never had many guards; it is more cost-effective for us to rely on technology instead."

"I think that it is logical to say many Australians and New Zealanders were really forced to think outside the box about security solutions," Goodman said. Since there are not enough people to serve as guards, the solution was to look for technologies that could do the work instead. "Capitalizing on what we have at handtechnologyis more practical."

Australian security players, said Jim O'Flynn, C.R. Kennedy and Company's CCTV Division Manager, are highly motivated. "Australians are much more open and adaptable to new technologies; we absorb information from everywhere. We have some pretty fantastic engineering going on here. There are a lot of innovative people out there who are eager to accept all kinds of new things."

Thompson noted that, for example, that there is a high penetration of cell phones and video phones in Australia. Some of the best matrices are designed there as well. "The software design and integration is just fantastic. There are very professional and very good independent software designers in Australia, and I think, that is one of our greatest strengths."

Regarding technical trends, McVeagh reports seeing a growing requirement in Australasia for fully integrated systems with customers wanting best-of-breed access control, alarm, DVR and perimeter security systemsall capable of working together within a single user interface. "We are also seeing increasing demand for encrypted communications between all layers of hardware and software within access control systems."

Australians, however, keep an eye firmly on cost. "Australia is very competitive on price," said Thompson. "More so, I believe, than the U.S. or Europe. However, customers still require high-quality, reliable products. Reliability is very important here due to the size of the country and associated costs and difficulties." It is precisely for these reasons that biometrics is only beginning to gain acceptance. "Quite frankly, the technology is still in its infancy and has some way to go in terms of reliability."

"Some customers," said Goodman, "are price-sensitive, but others recognize how to save money by investing in solutions that save money. A lot of banks are upgrading to IP solutions for just this reason." For mission-critical, like airports, water supply and national landmarks, money is not the prime consideration. "Agencies governing these sites are willing to spend for the greatest level of security per dollar," said Goodman.

At a minimum, enterprises need security systems that must be integrated into larger infrastructures. "This is especially true in the realm of IP," said Goodman, "which is becoming a cost-effective system to manage data and voice, such as in banking, to link voice to access control panels."

Biometrics

When it comes to biometrics, market developments in Australia are in line with global trends, observed a U.S. Commercial Services report. Currently, there is a great deal of research into biometric techniques, with a few applications getting onto the market. "Local industry sources consider the market to be reluctant to adopt the technology until tangible benefits can be demonstrated," it concluded.

"We have noticed a growing acceptance that biometric readers are becoming reliable enough for broader access control use," said McVeagh. "This has driven us to offer a fully integrated fingerprint reader integration, allowing our access control system to seamlessly enroll and manage fingerprint templates within the one user interface."

The U.S. Commercial Services predicted that the market in 2007 is worth $30 million to $40 million. Government spending is driving research and development with injections into large homeland security projects such as border and passport security, though companies report low demand from government expenditure. The Department of Immigration and Multicultural and Indigenous Affairs (DIMIA) is examining the potential of a range of biometric technology, including facial recognition, fingerprinting and iris scanning with the Department of Foreign Affairs and Trade (DFAT) conducting tests with a prototype Australian passport that features biometric technology. During 2004-2005, a pilot biometric technology project in collaboration with the U.S. was held to ensure compatibility with border infrastructure.

In the 2005 Australian Federal Budget, a $116.94 million package was allocated to boost biometric technology over a four-year period for border security and passenger processing, said the U.S. Commercial Services. This measure represents the largest commitment to date by the Australian government to biometric programs. The funds are to be shared between DFAT, DIMIA and Customs. DFTA will use the money for electronic passport development to comply with the U.S. requirement for Visa Waiver countries (Australia is one) to issue e-passports, Customs will expand SmartGate and DIMIA will use it for visa applicant processing.

Over the next four years, Customs will phase in introduction of 80 SmartGate kiosks at Australian airports, while DIMIA is building a database of facial, fingerprint and iris scans that will be linked to a global processing system and intelligence and security databases. Finally, the Australian Federal Police (AFP) was funded $4.84 million to trial biometric technology at key transit points to enhance border security with the neighboring Asia-Pacific region.

In addition, Australian Customs has been trialing SmartGate technology with airline staff since November 2002. The SmartGate system uses facial recognition technology to compare live images taken at Customs control points against stored images. Second, CrimTrac has developed a biometric technology program for its National Automated Fingerprint Identification System (NAFIS), which incorporates the world's largest electronic palm database. CrimTrac's other primary activity in biometrics involves the National Criminal Investigation DNA Database, which was developed in collaboration with forensic scientists and state and territory police services to give Australian law enforcement agencies access to a national criminal investigation DNA database.

Moreover, the Queensland government is proposing smartcard technology for driver licenses. Chips used in the licenses can also provide verification when read by a suitable reader. The card may also be used as a cash card to make various purchases and store value. The New South Wales police force has also been testing fingerprint biometric technology to verify attendance of persons on bail at police stations. A Phototrac system is being used by the NSW police for suspect identification. Images are taken and can then be compared with images from a database. Furthermore, Woolworths has used digital finger scanning to track hours and attendance for 80,000 staff and Toshiba has launched a notebook computer in Australia incorporating fingerprint access.

Meanwhile, research at Australian universities is taking place, said the U.S. Commercial Services report, with advanced local research in specialized areas, such as facial and iris recognition, but there are few applications on the market, albeit with some systems in use for access control, employee identification and smart-card applications. The report optimistically predicted the industry as being "on the verge of rapid expansion," while noting that it is the fastest-growing segment of the ICT sector. Large-scale applications, though, may take three to 10 years to develop.

IP Increasingly Visible

IP product s and solut ions are also increasing in popularity as are high-performance cameras such as megapixel and IP cameras with onboard analytics, Thompson said. "Australia has very high demand for digital video recorders, and these are being embraced by all sectors of the government and industrypresent CCTV solutions being installed are up to 95 percent digital."

Graham Wheeler, Manager of Mobotix Australia and New Zealand said: "There is a huge opportunity in Australia for this next generation intelligent surveillance system. The marketplace is traditionally dominated by CCTV that delivers poor image quality and little intelligence, relying upon the vigilance of human operators. Research shows that an operator monitoring footage misses 45 percent of detail after only 25 minutes on duty; this figure deteriorates as time passes. This is obviously not good for security or monitoring operations."

In an article by Jennifer O'Brien on ARN's Web Site, Chris Boyce, Commercial Director for Dedicated Micros, stressed that, "Ultimately, the case for video over IP in the Australian market when systems are planned properly is extremely powerful," he said. "The falling cost of ownership opens up opportunities for networked video servers to be used effectively and economically as a security device and management tool."

Asian Players

"There really is not much of a reason for Australian firms to manufacture locally," admitted O'Flynn. "There are practically no manufacturers here." He further explained that it is simply not realistic for local companies to start dishing out security products when there is already a myriad to choose from around the world, namely, Asian.

Thompson agreed. "Around 95 percent of Australian security firms are either importers or distributors. It is not cost-effective to manufacture locally. Only GE, which leads the country in access control and alarm, and some other small companies manufacture locally."

Not only are Asian products widely embraced, the makeup of what is hot and what is not has also changed over the years. Japanese products used to be very popular five years ago, but as other Asian countries caught up in terms of qualityall at more affordable pricesthe landscape is being reshaped.

"Asian products have come quite a long way over the years and we have definitely seen quality improving over the last three years or so, especially among Korean and Taiwanese companies," O'Flynn said. "My guessand it is just a guess," said Thompson, "is that 50 percent to 60 percent of the products used are from Asia. The balance is spread across the rest of the world with U.S. products being slightly ahead of European ones."

"Asian products are leading especially in the video market; Japanese and Korean products are especially impressive." Goodman noted that one of the benefits of having so many Asian products is that there is good competition and, therefore, variety. "Not so much software is needed for access control, but these Asian products have greater strengths in hardware, especially in video. I am referring to companies such as Panasonic and Samsung."

Products from Asia, said O'Flynn, are now seen as "very, very good" with few complaints except maybe on the software side. Communication problems, however, can result in companies ending up with software that may not integrate well with other systems. "That is why Europeans dominate the high-end market when it comes to softwarethey are top-of-the-line when it comes to integration."

In IP, Thompson emphasized that more work needs to be done in this department when it comes to Asian brands as many IP cameras simply do not integrate well.

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