Planning for the Future

• By Ralph C. Jensen
• Dec 01, 2014

Business planning for 2015 likely started a long time ago. I know it has for the publishing industry, as we keep our editorial calendar upto- date each quarter. It won’t be long before the first quarter of 2016 is updated on our website.

The same is true for the security industry. Planned upgrades and new products have been released throughout the year. December, however, is the perfect time to review what some of the industry analysts have to say about the coming year.

The good news is that the physical security market continues to grow.

According to IMS Research, there is still strong market demand in what is described as “an increasingly competitive physical security equipment and services industry.” The market reached $120 billion in revenue during 2013, which reflects a 10.8 percent increase, compared to 2012. The United States remains the largest country with $6.5 billion spent on equipment. China, however, is closing that gap each year, where one in every $5 spent on physical security equipment in Asia is for a government building, not including state-led facilities and installations such as airports or infrastructure.

“As global economic conditions continue to improve and budgets slowly increase, the physical security industry continues to perform strongly across the world,” the IMS Research report stated. “Growth in the number of projects employing different types of physical security equipment as a single solution is also increasing, often managed through the same platform.”

Physical security remains a competitive market, and while global revenues for equipment and services continue to increase, expectations that the industry supply market would begin to consolidate seem premature. The top 15 manufacturers and service providers accounted for only 22 percent of the market in 2013, a decrease of 3 percent from just a year ago. In fact, no one can boast more than a 5 percent market share, showing how fragmented this growing industry truly is, and that there are high levels of competition.

Asian-based manufacturers are gaining market share outside of their domestic markets. Last year, four of the top 10 equipment manufacturers globally were in Asia. They have improved product quality and are starting to expand to new markets. This also means increased price pressure on the American and EMEA markets. Price pressures are not strong enough to outweigh the increases in general market demand, so there is consistency for strong growth in the foreseeable future, especially in the following sectors:

Ethernet switch manufacturers. There are new, fastgrowing markets where Ethernet switch manufacturers can diversify. Data from ISH Research shows that 606,000 Ethernet switches were sold for use in video surveillance deployments in 2013. This is but a small portion of the Ethernet switch world right now.

The forecast for Ethernet switches is that by 2018, there will be some 1.6 million units sold, representing a much larger portion of the market. IHS estimates that 24 port switches are the most widely-used in video surveillance applications and Ethernet switches used in video surveillance revenue are estimated at $188.2 million.

“A number of Ethernet switch manufacturers have been quick to capitalize on the growth in this market and have started producing solutions tailored specifically for video surveillance,” IMS Research reported. “Two such notable moves were the launch of Avaya’s Fabric Connect solution, and the strategic partnership between Extreme Networks and Milestone Systems.”

Smartcards. Global shipments of smartcards are expected to rise by 2.1 billion from 2014 through 2019. Smartcard shipments in 2019 will rise to 10.9 billion units, up from 8.8 billion in 2014.

“The key end-user sectors that will drive growth over the next five years include payment and banking, e-government, healthcare and transportation,” said Don Tait, senior digital and ID market analyst at IHS. “The market will expand despite declines in subscriber identification cards (SIM), which are used in mobile phones. Slowing growth in mobile phones will cause SIM card shipments to flatten or decline.”

Asia also plays a key role in the overall smartcard market. China, India and Indonesia will be a huge part of the growth of the smartcard market over the next five years, and electronic passports are contributing to high volumes in the Asian market. The Asian- Pacific region accounted for the highest number of ePassport shipments in 2013.

PERS. The North American personal emergency response systems (PERS) market is forecast to grow from $700 million in 2014 to $1.5 billion in 2019. The main market driver in this vertical is a growing elderly population, increasing the use of mPERS. However, as the United States moves away from the POTSbased communication in the home, mPERS will grow substantially.

It seems to me that 2015 is the year we’ve all been waiting for since 2008, when the economy began a nose dive. Overall unemployment in the United States is declining, and with more people back to work, there is a greater need for high-tech security systems.

Many companies have been planning for the worst and hoping for the best. It seems the time to hope is over; the time to perform is now at hand.

This article originally appeared in the December 2014 issue of Security Today.