Memoori: Major trends shaping physical security as we move into 2023

Memoori Research Senior IoT and Security Analyst Owen Kell shares his insights on the trends that will shape the physical security industry in the year ahead.

Ongoing geopolitical & trade tensions threaten to put the brakes on Chinese expansion

China’s leading video surveillance giants have become increasingly dependent on foreign markets. In terms of global revenues, giants Hikvision and Dahua Technology have retained their dominance through 2022, reporting strong overseas sales growth in H1 2022, and generating revenues of over $16.7 billion in 2021. 

Their future growth is, however, threatened by a combination of weak domestic demand (largely due to the knock-on effects of the Chinese government’s increasingly controversial zero-Covid approach and resultant regular lockdowns of major cities), ongoing trade tensions between China and the West, and a weakening global economic outlook.

Tensions over alleged human rights violations and the ongoing trade war between China and the U.S. has seen continued legislative moves, new sanctions, and tit-for-tat trade barriers erected that have hugely disrupted the flow of both physical security products and key product components critical to ongoing innovation between the two nations, as well as the ability of their respective manufacturers to trade in their respective markets. 

Furthermore, the recently announced US government export restrictions imposed on leading chip designers NVIDIA and AMD will stymie China's ability to cost-effectively carry out the kind of advanced computing required to remain competitive in the fields of computer vision and natural language processing AI.

Restrictions on Chinese physical products sales to particular market verticals (or indeed a total bar on sales of all of a particular company’s technology) continue to increase not only in the U.S., but also in other Western nations, and it seems that the geopolitical and trade tensions are set to get worse before they get better.

Chinese chipmakers are not yet capable of replicating the performance of these advanced NVIDIA and AMD chips, so as a result, Chinese AI researchers may be forced to revert to using multiple lower-end chips to replicate the processing power.      

AI adoption goes mainstream

After several years of false dawns and over-hype, through a series of incremental steps, AI-enabled solutions have become increasingly commercially viable in the physical security space. The pace of change over the past 12 months has been particularly remarkable, with new research papers that push the boundaries of what is possible being released on virtually a weekly basis.

We have observed significant improvements in terms of the speed, accuracy and cost of machine-learning solutions for practical applications in security-related fields including complex facial recognition, cutting-edge video surveillance scene processing, audio analytics and robotics/drones, to the extent that leading AI algorithms in several areas now far exceed human capabilities for several use cases.

While the most advanced AI relies on significant computational power and processing capability, a combination of improved edge processing capabilities at the device level and flexible access to increasingly affordable cloud-based computing resources now make accessing these innovations a viable option for many firms.

The race is now on between vendors to integrate next generation AI-enabled security functionality into end-user focused applications in a way that facilitates accessibility, practicality and ease of use for everyday security scenarios. AI is increasingly replacing the manual effort required for some roles, with data interpretation that formerly required human input now being handled algorithmically, automating processes or steps to make managing security that much easier.

For security staff, this will lead to a reduction in the amount of time spent monitoring screens or watching out for alarm notifications, and more time spent conducting higher-value work. AI will be leveraged to help analyze, evaluate and prioritize data feeds, and then provide real-time prioritization and recommendations on security issues requiring the attention of the security staff.

Making this kind of AI functionality accessible to security professionals will also require integration of AI/ML tools into existing software and platforms in a way that minimizes the need for coding or technical expertise to operate, as well as providing accessibility through multiple media including handheld devices.

While concerns over the ethical usage of AI and algorithm biases will persist, the increasing levels of integration of AI tech into all manner of everyday services and solutions (particularly into digital media generation) will lead to increasingly widespread acceptance of the technology in society as a whole.

An increasingly cyber-conscious customer base

Smart buildings are experiencing an explosion in the volume of IoT devices being deployed, as well as ever-increasing levels of convergence between IT and OT networks. These factors, combined with the growing sophistication of malicious actors and increased reliance on cloud services mean that smart buildings are becoming increasingly vulnerable to cyberattacks.

The last 18 months have seen a huge rise in ransomware attacks, as well as rising costs per incident of cyberattacks on businesses around the world[1]. All too often, IoT-enabled building automation or physical security systems have acted as the “soft underbelly” of organizational cyber defense, with multiple high-profile cases of security breaches serving to highlight the risk and vulnerabilities posed.

At the customer level, awareness of cyber risk, cost implications and even the adverse effect of cyber risks on building owners/operators' ability to effectively insure their buildings, is steadily increasing. We have observed increasingly strict cyber policies adoption among more sophisticated clients over the past year to mitigate these growing threats, with many companies adopting a “Zero Trust” approach to network architectures, as well as continuous verification as well as investments into systems hardening.

Here again, AI will also play an increasing role - both in cyberattacks and cyber defense.

Memoori’s recent report into AI & Machine Learning in Smart Buildings found that AI tools and building blocks for launching an offensive AI-driven cyberattack have already been developed by bad actors, with several incidents identified by researchers indicating that AI had been used to execute attacks faster or to gain deeper access into a system. In terms of protecting against the threat, AI is increasingly being deployed to provide cyber-risk analytics for improving organizational resilience and understanding cyber risk by improving threat intelligence, prediction, and protection as well as enabling faster attack detection and reducing the need for human cybersecurity experts.

As demonstrable cybersecurity capability moves from being a “nice to have” to a “must have” in the eyes of an increasingly cyber-conscious customer base, security solution vendors seeking to differentiate themselves will need to invest in areas including security by design, gaining cyber certification, demonstrating cyber standards compliance, and independent testing and validation of their products to help differentiate their offerings.

Other trends to watch out for in 2023

Other trends we’re actively monitoring that we believe will continue to significantly impact the market for Physical Security include:

• Ongoing global supply chain woes, which look set to continue well into 2023, impacting stock levels, price inflation and component availability.
• Continued blurring of the lines between cloud and on-prem physical deployments as increasing numbers of end users embrace hybrid deployment models for at least part of their security solution.
• Rising demand for security systems integration and interoperability for better reporting and control of other building/business functions for applications including occupancy analytics, energy efficiency and improving the employees or tenant experience.