Growth of the security systems integration market in the Americas and EMEA picked up in 2016, posting decent figures.
Growth of the security systems integration market in the Americas and EMEA picked up in 2016, posting decent figures. The EMEA will edge higher at 3.7 percent during the same period, after posting $15.2 billion in 2015 and $15.8 billion revenue in 2016. However, the weak oil prices have inevitably exerted pressure on the Middle East systems integration market.
Challenges in Middle East
Despite a rosy picture in the West, the year 2016 has been quite challenging for the systems integrators in certain areas. In the Middle East for instance, weak oil prices and the subsequent reluctance in spending has hurt the business and has created an unhealthy trend of customers turning to low-cost products. The region has also suffered under political instabilities in certain parts.
“The market had been slower than usual in Q3 and Q4 with the biggest challenge being the cash flow,” said Tanzil Mahmood, Security System Director at Securitas UAE. “In general clients are struggling to pay on time which has had a massive impact on the health of the industry. Overall the market has become much more competitive as vendors/manufacturers have heavily discounted their prices in order to meet targets. The industry fears that once the market corrects itself, the customers would still not be willing to pay higher prices as they are used to these special discounts.”
Wael Abdallah, GM of NIT, a distributor that works closely with several major systems integrators agreed, adding that the year has generally seen a negative trend.
“Business growth in this region differs from one country to another, although the general trend of growth was a slowdown during this year due to lower oil prices, economic situation and turmoil in some countries in the region,” Abdallah said. “Nevertheless, I am very optimistic that growth will continue to recover especially for the physical security industry in the region.”
But the SIs are coming up with innovative methods to counter the challenges, like turning security into a service. Mahmood gave an example of an instance when his company adapted its business strategy to counter the challenges.
“We had a client, who was using us for man guarding services,” said Mahmood. “They had a new building constructed with a need for quite a large number of cameras. The company policy did not allow them to buy unknown brands, so they had to buy well-known, premium products like
Axis [Communications],
Milestone [Systems],etc. But this wouldn’t fit into their budget for this year and were struggling to convince their management on why they should now move to a low value product. They were not able to do this.”
“We said, let’s change the dynamics of this discussion,” he continued. “We told them instead of paying for the video surveillance system upfront, let’s turn it into a three-year
OPTEX contract. The new model requires that we carry out a ‘Securitas Security Scan’ and provide the client with a ‘solution’ rather than products. This allowed us to provide the client with a service that included all the key ingredients but at a cost which was less than the budgeted value. With this model the company doesn't have to pay upfront but can pay a flat fee every month for a combined contract covering the products and manned guarding services. In this way, we were able to turn security into a service and the client was able to achieve his goals.”
There are others who suggest that some sectors have seen strong growth despite the slowdown. Speaking specifically of the Kingdom of Saudi Arabia, Ahmed Faiz, GM at Khonaini Computer Technologies, said security for small and medium businesses have seen decent growth in 2016.
“This growth i s because the government has taken the initiative to make video surveillance mandatory in places like markets, grocery stores, gas stations, etc.,” Faiz said. “There is also an effect that I have seen in the SMBs — as they go for the video surveillance systems, they get interested in the access control systems, time attendance systems and other similar solutions.”
Another SI from Saudi Arabia, Mega Information Technology and Communications, further explained the situation there.
“Saudi Arabia is the largest construction and infrastructure market in the Middle East especially in telecommunications, oil and gas, civil security including border, road and rail traffic, etc.,” said Roshan Punnilath, Head of Operations at Mega ITC. “The security growth is highly proportional with the construction industry. The Kingdom planned for a new vision called Vision 2030 and the security industry is one of the main industries which affect the business in this 2030 vison. There were some slowdown in the construction industry during the last half year of 2016, and proportionally the security industry was also affected. However all government sectors are increasing budgets for their safety and security. The Saudi security services market sector has a value of $2.6 billion (including border security), and caters to 60 percent of the demand from the government sector.”