This article has been taken from Memoori’s annual report “The Physical Security Industry 2019" and identifies the 5 most important factors that are helping to shape the future of the business.
1. The Widening Gap Between Video Surveillance Suppliers
The gap between the major suppliers of Video Surveillance equipment and the many hundreds of smaller suppliers gets wider every year and this is rapidly increasing the minimum economic size to operate profitably in this industry.
Further distortion is being caused by the Chinese market. It accounts for at least 40% of the world’s consumption of video surveillance and a large majority of this is shared by just 2 Chinese companies (Hikvision & Dahua). These 2 companies now have the scale to exert significant price pressure on the market.
However some leading western / asian manufacturers, whilst having to trim their margins, have increased their market share and improved their financial performance in 2019. They continue to invest in delivering better performing products that have reduced the buyers total cost of ownership, and provide products more resistant to cyber attacks.
Merger or acquisition between leading western manufacturers could be a possible solution to at least maintain market share if not increase it. Strong Brands with end-to-end solutions possibly focused on a number of vertical markets have proved to be successful. Having strong alliances with companies in other Building Automation services is another option for manufacturers to deliver open smart building and smart city technology.
2. Improving Cyber Security
It is ironic that Physical Security products, which provide for the safety and security of people and assets in buildings and public places are perceived as having a high risk to cyber crimes.
Those suppliers that can prove a high level of cyber security meet the most important buying criteria today in the enterprise business. Those that are selling vulnerable products will at best find their market share decline and probably face heavy financial damages that could severely impact their business.
Physical security manufacturers must take all the measures they can to minimise cyber security threats. The more the industry integrates to other systems on IP networks the more important cyber security processes and procedures will become.
3. AI Video Analytics Goes Mainstream
Vast sums of money have been invested in new venture AI Video Analytic companies in North America and China. By 2024 we forecast that the market will grow to $3.5Bn. In total software will then account for at least 15% of the video surveillance business, achieving a growth of more than double that of hardware sales for the previous 5 years.
Much of this will come from manipulating the vast quantities of information that is being generated from video cameras. AI Video Analytics is a game changer and will have a major impact on the Video Surveillance business. Many businesses from across the industry are now reviewing how they should apply and incorporate analytics into their products.
4. Integration across all Physical Security Systems
Integration across all physical security system types is becoming a regular business for many manufacturers and system suppliers. If physical security systems are to integrate effectively with the wider Internet of Things, it will require strategic alliances to be formed between companies across the smart building ecosystem. It will have a major impact on the routes to market for physical security product manufacturers.
5. VSaaS & ACaaS
VSaaS and ACaaS services are becoming mainstream but this has taken much longer to be realized than most predicted. Disappointing perhaps, but not totally surprising; When the first IP Video Camera were launched by Axis Communications back in 1996 and it took nearly 10 years for the traditional CCTV camera manufacturers to accept that IP offered the way forward.
Part of this move towards cloud acceptance can be attributed to IT companies including Amazon, Google and Microsoft who have invested billions in cloud services. These companies provide customers with not just storage but computing power on a pay-as-you-go basis; including AI video analysis software.
Small and medium size businesses are particularly receptive to cloud services as they eliminate some costs associated with storage and maintenance of servers. However Enterprise customers will take longer to move over and trust third parties with their data; in the medium term preferring hybrid or private cloud offerings.