In this article we discuss the 6 most important factors that will shape the future of the Physical Security industry through the next 5 years, which will require fundamental changes to business strategies.
1. 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.
China is now effectively a closed market for non-Chinese products, which accounts for at least 40% of the world’s consumption and the large majority of this is shared by just 2 Chinese companies. These companies previously initiated “the race to the bottom” which has caused significant harm to the hundreds of small and medium sized companies across the world.
We have now reached the stage where the Video Surveillance business requires a strategy that either focuses on volume through the SMB (Small / Medium Size Business) market or brand through the enterprise business. We believe that no more than 5 companies by 2025 will thrive by operating in both at the same time.
Merger and acquisition between the leading western manufacturers is seen as a possible solution to match Hikvision and Dahua, but at best we believe it could only slow down further widening of the gap. Strong Brands with end-to-end solutions possibly focused on a number of vertical markets and having strong alliances with companies in other Building Automation services is the other option for hardware suppliers to ensure a profitable future.
2. It is ironic that Physical Security equipment, which provides for the safety and security of people and assets in buildings and public places is often perceived as having a high level of risk of cyber attack.
This must be the biggest single threat to our industry particularly video surveillance, which has so far been the weakest link.
Those suppliers that can prove a high level of security against cyber-crimes 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 ruin their business. Physical security manufacturers must take all the measures they can to minimize cyber security threats. The more the industry integrates with other services on IP networks the more likely cyber threats will become.
3. In 2020 AI video analytics has become mainstream but still has some growing pains. Growth in this type of software will come from manipulating the vast quantities of information that continues to be generated from physical security sensors particularly video cameras.
Memoori published a report on AI Video Analytics two years ago which showed that there could be a huge total addressable market for applying AI video analytics in existing installations. AI Video Analytics is a game changer and will have a major impact on the Video Surveillance business. lt will require all those that trade in this business to review how they should get involved to apply and/or incorporate it into their products and services.
4. Integration and IT Convergence has for almost 10 years impacted all 3 branches of the industry and in particular Video Surveillance, but its only in the last 3 years through IP networks and open standards that integration across all sectors has delivered more elegant and cost-effective solutions.
However, integration has now advanced to IoT and the Building Internet of Things (BIoT), that’s joining all building automation services in buildings. Today we can deliver advanced integrated security systems designed to provide a view of all relevant data points, enabling security personnel to quickly scan and understand highly involved, intricate and sophisticated building intelligence.
Full integration will require strategic alliances to be formed between companies across all the Building Automation Services and will have a major impact on the routes to market. Now is the time to get involved.
5. VSaaS & ACaaS cloud services has taken some 10 years to get established within the professional video surveillance and access control business. Within the last two years some 34 companies have now joined the leading suppliers.
This provides another channel to market for both Access Control and Video Surveillance products. Demand has grown significantly in the last two years and we forecast that over the next 5 years it will deliver a CAGR of approximately 12%. The one remaining concern is that once your video data is in the public cloud (AWS, Azure etc) you have effectively lost control over it and some sectors such as the finance industry are reluctant at the present time to accept this. They are much more likely to adopt a private cloud strategy.
However companies such as Amazon, Google and Microsoft have investing billions of dollars in cloud services. These companies can now provide customers with not just computing power on a pay-as-you-go basis but can also analyze the data through AI analytic software delivering actionable intelligence.
6. COVID-19 has opened up new opportunities for the physical security business and we expect to see more innovative products and systems being bought to market that will play a role in controlling future harmful viruses, should they appear over the next few decades.
Whilst vaccines will save lives, we now know that they are not the complete answer. We need to be much better prepared to control the spread of COVID-19 type viruses and physical security systems can make a significant contribution here.