The electronic security industry has been enjoying strong growth over the past few years. A&S takes an inside look at industry developments in 2007.
One of the biggest developments in 2 0 0 7 was the emergence of situation management software. This makes data from multiple security systems available to a single user interface, interprets alarms and other data to make them actionable, and triggers workflows to resolve incidents. ¨It seems like we are waking up from a technology hangover and refocusing on solving business problems. We are making businesses more efficient,〃 said John Fenske, Director of Fire and Security Marketing, Johnson Controls.
In March 2007, HID Global introduced its new Edge family of IP-based access control solutions. ¨The products currently available are the EdgeReader, an integrated contactless smart card reader and access controller; and EdgePlus, a single-door, IP-based controller,〃 said Paul Everett, Senior Research Analyst for IMS Research. By moving the decision-making and intelligence to the door, HIDˇs Edge product line eliminates need for access controllers to reside in closets, allowing for simplified connection to IT infrastructure.
¨We are seeing the next step in the evolut ion of acces s cont rol systems as more manufacturers turn their attention to IP-based network devices designed to reside at the door,〃 said a representative at Brivo Systems. ¨From Web-based to Web-hosted, access control manufacturers are just beginning to utilize the power of the Internet and the integration with a myriad of other systems or even end user web sites to drive the power and potential of access control well beyond todayˇs technology.〃
Hosted applications for everything from inventory management and point of sale to payrol l and HR applications are eliminating upfront costs. In addition, the advent of HSPD-12 means that every card, reader, access control panel and system sof tware in government buildings will require either replacement or upgrade, said Everett. ¨This trend is going to have a huge impact on growth within the electronic physical access control market over the next two to three years.〃
That said, electronic locking cylinders are not going to replace high-end access control systems installed in buildings throughout Europe, Everett continued. ¨ The sesystems have much more in the way of sophisticated software and also have many more features. On the flip side, they are also a lot more complicated to install and more expensive.〃
Voice verification is set to change the way that mobile and Internet payments are made. In a move that will substantially reduce fraud, the Voice Pay systemreputedly the world's first voice -verified payment processing systemuses the customerˇs own voice as a means of digitally signing and authorizing payments. This type of technology is also being extended to credit cards. In addition, Elmo-Tech, which sells electronic monitoring technologies, is using voice verification in its football hooligan monitoring application in Europe, especially the U.K.
The shift from installer-targeted products to end user-targeted products, said Avi Shachrai, President and CEO of Visonic Group, has evoked a wide range of changes. As product design becomes more impor tant, companies are hiring world-class design of fices. In addition, fast-installation guides are replacing traditional technical user manuals, and cell phone-type user interfaces are being adapted. Finally, public-switched telephone networks (PSTN) are in decline.
IP technology(broadband) , Internet server technology, cellular (GSM, CDMA) , GPRS, audio and video technologies, he continued, are already being used by leading manufacturers. Wireless is spreading fast, mainly in the residential market. Finally, the home security, ambiance control, personal emergency response system (PERS) , safety , environ - mental control is delivering interoperability to the mid-market consumer. Product obsolescence has, therefore, become and issue. Scalability that adds functional services is almost mandatory.
Over the past 12 months, there has been a general increase in demand for uncompres sed t ransmission of video, said Sara Bullock, Sales Director, AMG Systems. ¨Acceptance of IP technology has been somewhat slower than originally anticipated. This is due mainly to confusion created by multiple compression algorithms. Inherent latency is a big issue.〃 In most markets, Bullock continued, IP technology is still perceived as having limitations that end users who have experienced full bandwidth video are not prepared to accept. ¨Only 5 percent of the security market is using fiber optic technology; it is encouraging to see a return to full-bandwidth, real-time video being favored over IP.〃
¨ IP video,〃 said Eric Fullerton, Corporate Chief Sales & Marketing Officer, Milestone Systems, ¨is all about decoupling software from hardware. This has been enabled by IP-addres sable cameras and card readers. During 2007, people finally stopped questioning whether IP video is the future.〃 2007, he continued, was also the year when people burst out of proprietary jail; no longer do end users find themselves locked into using one vendor.
Intense competition is driving down the price of IP hardware, such as IP network cameras, servers and storage, said Fullerton. Meanwhile, performance continues to improve. ¨Every year, it is possible to get more megapixels, more gigabytes and more processing power for your dollar. Moving to IP networking opens up an enormous marketplace of choices in commercial, off-theshe lf (COTS ) servers, storage, switches, cameras, video servers and other devices that can be connected via open platform software.〃
Video analytics is appropriate for applications where 100 percent accuracy is not crucial, said Martin Gren, Founder and Director of the Board at Axis Communications. ¨ Take people count ing. Even i f 100-percent accurate, it is often not applied correctly because retailers are more interested in shopping-unit counting.〃
Nevertheless, reliability and functionality have improved, said Fenske. AxonXˇs video-based fire detection solution uses standard surveillance cameras and video analytics to recognize smoke, flame and reflected flame; it can often detect fires faster than traditional fire detection methods.
Large projects are really taking off in the Middle East, said Anders Laurin, Executive Vice President of Axis Communications. He pointed out that Russia is the strongest market in Eastern Europe, especially for cameras , whi le not ing that there is no clear leader in China. ¨Significant success has not yet been seen by any one par ticular player; but companies which have a strong brand because of success in commercial electronics sales have an edge. Today, there are literally hundreds of companies in the network camera field in China. Competition is fierce and ongoing.〃
Tyco has set up an R&D center in China to reduce costs and meet domestic demand. Bosch has expanded production as has Tamron. In addition, first-tier Chinese security companies are expanding product lines, improving quality and spending more on R&D. Meanwhile, Chinese software companies are developing video management and central management software to integrate alarm data and access control . Integrated alarm and surveillance is a clear trend. Product design is shifting to ease of installation and use.
Central Asia has seen a lot of activity this year, and Southeast Asia is Boschˇs fastest-growing region. Following years of double-digit growth, the Southeast Asian market is worth US$1.6 billion (2006). City surveillance in Malaysia is booming and Thailand's Suvar nabhumi Airport is seeing continued security investment.
The U.S. Department of Homeland Security, which spent US$445 million on security in 2007, announced in June that U.S. and Canadian citizens would need to present ei ther a Western Hemisphere Travel Initiative (WHTI)-compliant document or a government-issued photo ID and proof of citizenship beginning Jan. 31, 2008 to enter the U.S. The air portion of WHTI went into effect in January 2007. It requires travelers to present a valid passport to enter and depart the U.S. when flying to Bermuda, Canada, the Caribbean and Mexico.
The British security industry is wasting $1.4 billion ever y year, according to Plimsoll Publishing. The report found that 15 percent of companies are making a loss, 11 percent are losing money for the second year running, and 7 percent made less than 3 percent return on investment. The findings suggest that a staggering 1,111 of 1,500 companies covered would make more profit under new ownership, resulting in $1.4 billion in extra revenue for the industry as a whole.
The U.K. Home Office Managing Global Migration report outlined the country's plans to manage future migration to the U.K. Five key objectives focus on implementation of new technologies, particularly biometric security checks on individuals traveling to the country. Additionally, the Home Office has released a new CCTV strategy document. The Olympic Delivery Authority (ODA) organized its Security Industry Day in October, designed to provide further informationon the upcoming procurement process for the 2012 London Olympics.
Heathrowˇs Terminal 5, due to open March 27, 2008 will require that passengers have photographs taken and fingerprints scanned. Fingerprints will be checked again at gates before boarding. X-ray scanners will screen hand luggage before departures, and an advanced threat identification system has been designed to detect explosives and liquids in baggage and automatically divert suspicious bags for further examination.
i & i Ltd.ˇs study of the electronic security system market in Europe revealed modest compound growth of 3 percent over the last five years to $10 billion in 2006. Access control and CCTV have grown at 6 percent and 7 percent, respectively, with the highest levels of growth recorded in Spain, Italy and the U.K. Sales of intruder alarms fell in all countries except for Spain. Across Europe, replacement and extension business account s for approximately 40 percent of the total market. Without this market sector, most companies would not be able to support high levels of R&D that are necessary to keep ahead of the game.
One segment that has grown dramatically in Brazil is online monitoring, involving cameras installed in vehicles of several sizes with up to four cameras working at the same time to transmit live to a fixed base. As the technology is GPRS-based, transmission costs are reduced.
Crime is pervasive in Brazil, said Celso Calazans, owner of Emforvigil. ¨ That is why we have a growing market. The security market has grown from 10 percent to 15 percent in 2007, and is estimated to grow 30 percent in 2008, tak ing into account all segments including intruder alarms, surveillance, access control, fire alarm systems, and vehicle tracking and vehicle image monitoring. GPRS or GPS vehicle tracking system is also experiencing fast growth here.〃
Companies are starting to look at verticals in a new way, said Fenske. ¨In the past, vertical markets could generally be classified as healthcare, financial, government or education. Now, we are beginning to look at which companies have organized their security function to coordinate with the IT function, as opposed to which are using a traditional reporting structure.〃
Currently, 50 percent of banks in Japan use IP-based video, said Laurin. Asian manufacturers are leading surveillance used for monitoring. By contrast, penetration in the U.S. is much lower.
Retail security has been the talk of leading IP-based surveillance systems. Axis held its annual conference in Oc tober. Back in March, ISC West looked at retail loss prevention trends, techniques and technology. Additionally, retail was one of the key vertical markets being discussed at the first IFSEC India in October. India is currently experiencing a retail boom, as organized retail increasingly resembles that of Western countries.
A Rand Corp. report identified 39 security measures that can substantially reduce risk of terrorist attacks at enclosed shopping centers. The study identified a high-priority set of six to 10 security measures that can cut terrorism risk to just one-fifteenth the level. Costs of implementing the highest priority security measures ranged from $500,000 to $2 million per year at each of three shopping centers examined.
Safety and security on U.S . campuses has become a topic of national debate, said Everett. In April 2007, a gunman killed 32 people at Virginia Tech University. In October 2006, a gunman shot dead four girls and injured several others in an attack on an Amish school in Pennsylvania. These were in no way isolated incidents. In September 2006, a 16-year-old girl died when an armed man took six students hostage at a Colorado high school. In the same month, a head teacher at a high school in Wisconsin was killed when he confronted an armed 15-year-old student as he entered the school.
Mergers and Acquisitions
¨The speed of innovation in the security industry is faster than any single vendor can possibly achieve or fund by themselves,〃 said Fullerton. ¨Advances are being developed too rapidly from many sectors and new areas of expertise for one company alone to be able to keep up. This is why new collaborations and partnerships are occurring, as well as the mergers and acquisitions that we see taking place.〃
¨ There have been two very important acquisitions this year,〃 Ful ler ton cont inued. One, was Schneider Electricˇs acquisition of Pelco. This definitely underscores the strong consolidation in the traditional sector of the security market. The second was the acquisition of BroadWare Technologies by Cisco. ¨This has strengthened the belief that IP video and IP-based security management are the future.〃
2007 also saw Pelcoˇs company figures made public for the first time, added Laurin. According to Gren, the newly merged company will become a significant player in the market after overcoming significant initial challenges.
Other important mergers and acquisitions were the purchase of Rentokil Initialˇs Initial Electronic Security Group (IESG) by UTC Fire and Security; and the merging of Bioscrypt and A4Vision, which buttressed its penetration of three-dimensional facial recognition systems. Finally, Honeywell acquired ActiveEye and HID Global bought Integrated Engineering.