Security

Difficult Times Ahead for Physical Security But Growth Opportunities Are Still Available For Those With The Right Products and Services

One of the most encouraging conclusions from Memoori’s 3rd annual report The Physical Security Business in 2011 is that the Physical Security Industry has out performed most of its peers; and despite a troubled economic climate it has increased revenues and profitability whilst merger and acquisition has surged by more than double in the last 2 years to $9.847 billion. This business looks like a very safe port in a storm. The total value of world production at factory gate prices was $19.17 billion. Of this Video Surveillance products at $9.1 billion take a share of 47%, access control at $4.41 billion took a 23% share and intruder alarms at $5.65 billion has a 30% share. The developed markets of North America and Europe are losing market share to Asia and particularly China which will be the largest single market by the end of this decade. The anticipated aftershock from the 2008 financial meltdown now […]

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One of the most encouraging conclusions from Memoori’s 3rd annual report The Physical Security Business in 2011 is that the Physical Security Industry has out performed most of its peers; and despite a troubled economic climate it has increased revenues and profitability whilst merger and acquisition has surged by more than double in the last 2 years to $9.847 billion. This business looks like a very safe port in a storm.

The total value of world production at factory gate prices was $19.17 billion. Of this Video Surveillance products at $9.1 billion take a share of 47%, access control at $4.41 billion took a 23% share and intruder alarms at $5.65 billion has a 30% share. The developed markets of North America and Europe are losing market share to Asia and particularly China which will be the largest single market by the end of this decade.

The anticipated aftershock from the 2008 financial meltdown now looks inevitable irrespective of whether the right corrective actions are taken now. This will dampen future demand but we are optimistic that as it can now deliver more attractive opportunities for clients to improve security and profit from it, demand will edge forward at a CAGR of 3.7% over the next 5 year period whilst we forecast a much more modest growth in M&A; well down in single figures.

Delving into the details in the report, which is a comprehensive assessment of all the factors that influence this industries future; including technology, funding and consolidation, it's capability to produce a constant stream of new products that meet the customers need to drive more ROI out of investment; that is its ONLY salvation in these difficult trading times.

We expect that the next 2 years will be difficult times for many suppliers that have not kept pace with new developments but for those that have invested in IP Network products and wireless communications, just to single out two areas that the report throws up, offering high growth prospects,then demand will continue to grow. What the report does emphasise is that the successful companies do not need to be big. There is now a good cross section of medium sized companies, particularly in the video surveillance sector that have developed leading edge products that have resulted in them gaining a significant market share and exposure to world markets.

The major multinational traditional market leaders are both product manufacturers and system suppliers and cover almost all aspects of physical security. Most in the last two years have positioned themselves more towards the systems business and have been successful in growing this business during the last three troubled years. One of the major reasons for this is they have fed off their heritage estate business and at the same time have integrated activities from other parts of their organisation such as fire detection and extinguishing, evacuation control, mass notification and energy management into holistic solutions for their clients.

We expect them to continue prioritising their efforts here and on the products front extend their interest in PSIM and PIAM software to deliver system differentiation in the integration business. One other potential market that will open up as a result of reduced budgets through austerity measures in the public sector is outsourcing security services. Honeywell, Johnson Controls, Schneider Electric, Siemens and UTC Technologies have for many years carried out estate management and this has extended to full responsibility for all the services particularly energy management and it has been a very successful strategy. Through PSIM and PIAM and MVaas they would have the ultimate service to offer with no competition from the smart innovative product manufacturers.

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