Security

The Internet of Things Ensures Continuity of Growth & Stability in the Physical Security Business

This year the world’s Physical Security Industry (Access Control / Video Surveillance / Intruder Alarms) has completed 5 years of continuous growth, coming out of the economic tsunami of 2008 it’s now structurally and financially stronger. Going forward, it will play a major role in the Internet of Things (IoT). Security is synonymous with all the top 5 revenue opportunities of the IoT - Home, Transport, Health, Buildings and Cities. In all of these sectors IP Network Cameras will become the "Swiss Army Knife of Sensors" as it will play a key role in not just hardware but also in managed services. Memoori’s new research report, published next week, estimates the total value of world production of Physical Security products at factory gate prices in 2014 at $25.28 billion a growth of 7.5% over the previous year. Of this Video Surveillance products at $13.48 billion take a share of 53.4%, access control at $5.62 billion […]

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This year the world’s Physical Security Industry (Access Control / Video Surveillance / Intruder Alarms) has completed 5 years of continuous growth, coming out of the economic tsunami of 2008 it’s now structurally and financially stronger. Going forward, it will play a major role in the Internet of Things (IoT).

Security is synonymous with all the top 5 revenue opportunities of the IoT - Home, Transport, Health, Buildings and Cities. In all of these sectors IP Network Cameras will become the "Swiss Army Knife of Sensors" as it will play a key role in not just hardware but also in managed services.

Memoori’s new research report, published next week, estimates the total value of world production of Physical Security products at factory gate prices in 2014 at $25.28 billion a growth of 7.5% over the previous year. Of this Video Surveillance products at $13.48 billion take a share of 53.4%, access control at $5.62 billion takes a 22.2% share and intruder alarms at $6.18 billion has a 24.4% share.
Video_Surveillance_City

The 2 major drivers for growth in 2014 have been a 10% aggregate growth in the Video Surveillance and Access Control markets and higher levels of demand in Asia, which has increased its share to 39% for all physical security systems. Growth has been much more modest in North America and Europe with an aggregate increase of 6% and 3.5% respectively in 2014.

We forecast a CAGR of 8% over the next 5 year period. Not particularly optimistic considering that the market managed to grow by a CAGR of just over 4% during an unprecedented traumatic 5 year period from the end of 2007. Whilst some research companies are downgrading growth our figures have always been more conservative and despite the economic climate not being too favourable, we believe the opportunity is there for these numbers to be exceeded.

The security industry is now in a much healthier state with a product portfolio that can deliver more attractive opportunities for their clients to improve security and at the same time profit from it. This together with the unstoppable growth of IP Video Networks and now IP Access Control, coupled with management identification and verification will drive the market forward. In addition further growth opportunities are opening up in relatively new vertical markets.

In the Smart Building sector, System Integrators from the Security Business are using their platforms to deliver holistic systems incorporating monitoring building and energy performance, creating further demand. Before the end the of 2018 the BIoT (Building Internet of Things) could be opening up more opportunities for security products.

Memoori’s analysis of the structure of the product sector over the last 8 years has shown a continuing trend for the major conglomerates to lose market share to the specialist manufactures of products focused on 1 of the 3 segments of the Physical Security business (Access Control / Video Surveillance / Intruder Alarms).

The average market share of the major conglomerate players across all sectors of the physical security products business is only 2 / 3% whilst the largest share is under 8%. Specialist products companies are achieving much higher market shares within the Video Surveillance sector and particularly the IP Video Networking segment. They have also been more active in growth through M&A in 2013 / 14 and we expect that this will continue over the next few years.

IP is Still the Most Influential Driver of Growth

IP Network products for video surveillance have delivered high levels of growth around 25% / 35 % for some manufacturers over the last 4 years and we are now seeing access control moving into IP and reaping similar benefits, whilst intruder is about to follow suit. The consensus of opinion in the market is that IP Video Surveillance will continue its strong irreversible trend of both growing the market and taking market share from Analogue systems. The latter will slow down but HD over coax is keeping analogue alive.

Falling IP prices together with much easier to install products and improved performance have all conspired to increase the Return on Investment (ROI) and reduce the total cost of ownership (TCO) of this fast growing technology. The manufacturers and system integrators that will lead in the future are those that have invested in this technology and people. It is inevitable that as the IoT becomes the norm in both domestic and non-domestic smart buildings, IP will be obligatory.

Within the last 3 years there has been an accelerated move for end users to apply surveillance equipment to monitor business enterprise functions. The focus for end users is now on TCO metrics along with scalability. High on the list of technologies associated with that will be video analytics and hosted or cloud-based services.

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