Global physical security market to reach 32.2B by 2017, growth 8%

The total value in world production of Security Products at factory prices was $23.4 billion in 2013; predicts Memoori, by comparing these figures with 2008, the global market has grown at a rate of 4.5% over the past 5 years, given the poor economic trading conditions.

The two major factors have been 12% aggregate growth in video surveillance and higher levels of demand in Asia, increasing the share to over 39% for all physical security systems. Less so in North America and Western Europe, 2% down from 2012 in developed markets namely Europe, Scandinavia and North America with 47%. This said, Memoori is forecasting a Growth Rate of 8% over the next 5 years with market reaching $32.2billion by 2017. This could be considered optimistic but there is an enormous latent demand waiting to be exploited in the emerging markets.

In Europe, with public sector budget trimmed resulting in almost certain decline in demand across EU countries. However Asia and BRIC countries are predicted to expand. The security industry's healthy state of product portfolio can deliver more attractive opportunities for clients to improve security and benefit from it.

Emerging Markets
A security product penetration measure is an important factor to establish; in order to set a benchmark for latent potential availability, which has a major bearing on future growth. There are 4 major regions in the world compared on a matrix of physical security products per capita against GDP per capita estimated by 2012.

In China sales per capita were $3.34 in 2013 showing that the potential for future growth is significant. This market has forged ahead at the highest rates of growth recorded in the industry and its aggregate growth over the last 5 years has not slowed down. However despite the fact that its penetration has increased by almost 60% during this time it is still only one sixth of North America.

The research was categorized by 3 main groupings, namely:
Category A which includes major global players having sales of over $1 billion in security systems
Category B which includes companies having sales of over $100 million but less than $1 billion
Category C which includes companies that have sales of over $1m but less than $100m.

In 2012 & 2013 the structure of the business seems to have changed; primarily by Category B company's rapid growth through innovative IP networked products delivered through organic growth. Category A company's share of the product market has declined and they have failed to correct this through their normal process of growth through acquisition.

Most conglomerates have made major acquisitions in their other businesses and in a strong position to access the future growth most of which will come from Asia and the emerging markets but only if they can offer leading edge technology products.

In the next 2 years, they will need to take action either to acquire leading edge technology companies or sell their products business and concentrate on their systems business. This is already happening as Ingersoll Rand, announced plans early in 2013 to spin off its security products business. The new company will be called Allegion and will have revenues of over $2 billion.

Throughout the last 3 years successful security companies have delivered annual growth well into double figures but this has required them to make some fundamental changes to established business practices.

Continued growth should be built on the foundations that through disruptive IP technologies and innovative business models, the clients' security operations are moved from cost center to cash generator, whilst converging with other services in the business enterprise.

Acclimatizing to this rapidly changing business environment, reshaped by technology and new competitor from outside the business, will require a clear vision of future business opportunities and skillful implementation of the appropriate strategies.