Security

The Major Security Companies “Wait and See” Strategy is Allowing Others to Drive Innovation and Steal Market Share

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 acquisition since 2010. In the 5 years prior to that they were all active in acquiring businesses both large and small; increasing their geographic scope and updating their technology. Instead the market now faces, what Martin Gren from Axis ‚ Communications calls, “Consolidation by Starvation”. He continues ‚ "There are now more than 500 manufacturers of IP Cameras and this high ‚ amount is not sustainable. The bulk of smaller players will be forced to exit the IP camera industry 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 10 years ‚ time, […]

Stay ahead of the pack

with the latest independent smart building research and thought leadership.

Have an account? Login

Subscribe Now for just $200 per year per user (just $17 USD per month) for Access to Quality Independent Smart Building Research & Analysis!

What Exactly Do you Get?

  • Access to Website Articles and Notes. Unlimited Access to the Library of over 1,700 Articles Spanning 10 Years.
  • 10% discount on ALL Memoori Research reports for Subscribers! So if you only buy ONE report you will get your subscription fee back!
  • Industry-leading Analysis Every Week, Direct to your Inbox.
  • AND Cancel at any time
Subscribe Now

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 acquisition since 2010. In the 5 years prior to that they were all active in acquiring businesses both large and small; increasing their geographic scope and updating their technology.

Instead the market now faces, what Martin Gren from Axis ‚ Communications calls, “Consolidation by Starvation”. He continues ‚ "There are now more than 500 manufacturers of IP Cameras and this high ‚ amount is not sustainable. The bulk of smaller players will be forced to exit the IP camera industry 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 10 years ‚ time, the top 10 companies in the world will own about 90% of the ‚ total Video Surveillance market.

Security Strategy

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 3 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, Panasonic, Samsung etc. Some are strong in Energy Conservation, Smart Grid and Aerospace, where they have made ‚ significant investments.

The majors have been more successful in the System and Integration business where size and scale is a basic requirement and they feel more comfortable.

We agree with venture capitalist Paul Graham in his statement “It turns out that the rule “large and disciplined organizations 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.

There are 4 main reasons why we expect the “new economy” to change the structure of the physical security industry;

  1. The pace of innovation is speeding up, not slowing down. Edge based storage and advances in analytics are creating more & more applications for IP Video.
  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 competition will then kill off weaker companies and consolidation will come about through open market forces.
  4. The strong brand and channel infrastructure of the conglomerates which gave reach and efficiencies in marketing across the globe can now be achieved by small companies through the Internet at a lower cost.

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 companies out there.

For more information on the Physical Security Market including market sizing, structure, technology and investment visit our report page - http://memoori.com/portfolio/the-physical-security-business-in-2012/

Thank you to Martin Gren of Axis Communications (https://twitter.com/martingren) for his contribution to this article.

Most Popular Articles

Witco Acquisition
Smart Buildings

Consolidation in the Workplace Experience Market as Witco Acquires SharingCloud

This Research Note examines what’s behind Witco’s latest move to acquire SharingCloud. We review the deal in the context of the startup’s development, funding, prior acquisitions, and strategy. Witco Profile Witco, a Parisian startup was founded in 2016 as MonBuilding, serving the French and Canadian enterprise market for workplace engagement apps. After raising 2 million […]

Axis Communications Financials 2023
Security

Axis Communications Video Surveillance Business & 2023 Financials Examined

In this Research Note, we examine the Axis Communications video surveillance business. This analysis is based on Canon’s 2023 Results Presentation 30 January 2024, Axis Communications 2023 Sustainability Report, 22 May 2024, and Memoori analysis. Founded in 1984 with headquarters in Lund, Sweden, Axis Communications offers products and services for video surveillance and analytics, access […]

Complimentary Article You Can't Design a Truly Smart Building Without Human Resources!
Smart Buildings

#Podcast 31: You Can’t Design a Truly Smart Building Without Human Resources!

In our Podcast series “Sh*t You Wish Your Building Did!”, Memoori explores the intersection between technology and commercial buildings through interesting conversations. For Episode 31, we were joined by Tomás Mac Eoin from Master Systems Integrator (MSI) Hereworks to Discuss their Swift HR Concept. The Swift HR concept envisions a cross-functional team, led by Human […]

Subscribe to the Newsletter & get all our Articles & Research Delivered Straight to your Inbox.

Please enter a valid email

Please enter your name

Please enter company name

By signing up you agree to our privacy policy