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2. Open standards are starting to
take a hold and eventually best
of a breed will be de rigueur.
This will open up competition
even further and will reduce the
barrier to smaller companies.
3. This increase in competi-
tion will then kill off weaker
companies and consolidation
will come about through open
market forces.
4. The strong brand and channel
infrastructure of the conglom-
erates which gave reach and
efficiencies in marketing across
the globe can now be achieved
by small companies through
the internet at a lower cost.
Improved products
The fact that products become
more important in the "new
economy" is not a reason to totally
write off conglomerates that have
interests in security. However it
will require them to improve their
products performance and in the
short term they are more likely to
achieve this through acquiring the
relatively newer successful compa-
nies out there.
New model
The majors have been more suc-
cessful in the system and integra-
tion business where size and scale
is a basic requirement and they
feel more comfortable. We at Me-
moori agree with venture capital-
ist Paul Graham in his statement
"It turns out that the rule `large
and disciplined organisations win'
should be appended by `at games
that change slowly'."
We have for some time argued
the case that a new model for the
products business will kick in and
that seems to be happening. The
security industry whilst not the
fastest mover is undergoing some
significant shifts in technology.
Structure changing
There are four main reasons why
we expect the "new economy" to
change the structure of the physi-
cal security industry:
1. The pace of innovation is
speeding up, not slowing
down. Edge based storage and
advances in analytics are creat-
ing more and more applica-
tions for IP Video.
Lost market share
As the major conglomerates have
turned off the acquisition tap the
flow of innovative products has
declined and with it market share
has been lost. So why adopt this
strategy?
· They don't think it's the right
time to buy as exit values will
fall Trading conditions in
the last three years have been
difficult and margins have
tightened. Larger companies
may well have decided to lie
low for this reason. But many
medium and small specialist
companies have grown rapidly
and demand in some sectors
and countries has been in
double figures.
· Difficulty in raising the cash
The conglomerates are cash rich
and also have access to plentiful
supplies of low interest finance;
so this can't be the reason.
· Better opportunities to invest
in other areas of their business
This is a strong possibility for
Honeywell, Schneider Electric
(Pelco), Siemens, UTC, Pana-
sonic, Samsung etc. Some are
strong in energy conservation,
smart grid and aerospace, where
they have made significant
investments.
The message from the market
seems clear: major conglomerates
in the security business have given
up on their long standing strategy
of growth through acquisition.
None of them, excluding Tyco,
have made a significant acquisi-
tion since 2010. In the five years
prior to that they were all active
in acquiring businesses both large
and small; increasing their geo-
graphic scope and updating their
technology.
Not sustainable
Instead the market now faces, what
Martin Gren from Axis Commu-
nications calls, "consolidation by
starvation". He continues: "There
are now more than 500 manu-
facturers of IP cameras and this
high amount is not sustainable.
The bulk of smaller players will be
forced to exit the IP camera indus-
try as they will not be able to afford
the necessary R&D costs. The top
players, who can effectively execute
their strategy and invest in R&D
will prosper. Some, but not all, will
acquire the relevant technology".
Axis fully expect that in ten
years time, the top ten companies
in the world will own about 90
percent of the total video surveil-
lance market.
security
technology market
Largesecuritycompaniesarelosingmarketshare
Jim McHale, market analyst at Memoori, has written
an article for detektor on the fact that major security
conglomerates are losing market share to smaller
players in the industry. His opinion is that the major
security companies "wait and see" strategy is allow-
ing others to drive innovation and steal market share.
AnaloguecamerashipmentsintheAmericas
consumermarkettosurpassprofessionalmarketin2013
By the end of 2013, unit shipments of consumer
analogue security cameras in the Americas region
will surpass those in the professional market. In a
recent market report entitled The world Market for
Consumer and dIY Video Surveillance equipment
2012 edition IMS Research forecasts unit shipments
of consumer analogue security cameras will top
three million in 2013.
Consumer video surveillance
equipment is sold through either
a physical or online retailer
and despite the difficult retail
climate the market has contin-
ued to display strong growth.
Josh Woodhouse, IMS Research
market analyst and report author
comments, "The Americas region
is the largest and most mature
regional market for consumer
and DIY video surveillance
equipment. The increased growth
of analogue camera shipments
in this market coupled with the
decline in analogue unit ship-
ments in the professional market
means for the first time we are
approaching a tipping point."
The consumer market is just
a fraction of the professional
market in terms of revenues, yet
the high volumes of analogue
security cameras shipped could
extend the overall lifespan of
analogue security cameras and
their components in the Ameri-
cas market.
Woodhouse concludes,
"Whilst some of the trends and
technology seen in the consumer
video surveillance market feed
directly from the professional
space, the cost sensitive nature
of the market and need for sim-
ple, easy-to-use products means
the transition from analogue to
network video surveillance is
slower in the consumer market
than in the professional."
For more information on the
security market including market
sizing, structure, technology
and investment, see the report
"The-Physical Security Business
in 2012". For more information
about the report and ordering
details: www.armedia.se, info@
armedia.se, +46 (0)8 556 306 80.