Short Term Prospects for Physical Security Depend Upon Containing COVID19

Short Term Prospects for Physical Security Depend Upon Containing COVID19

We have charted the fortunes of the world’s physical security business over the last 12 years. Despite cycles of poor world trading conditions and slow economic growth, it has delivered a compound annual growth rare (CAGR) of 6.6 percent; reaching 8% in its peak year of 2019. Then along came COVID-19.

GDP has drastically reduced. In fact, when comparing this past April with the same month in 2019, GDP has been reduced by as much as 20 percent in some countries. How quickly we can get back to normal will depend on how fast we can contain COVID-19. The physical security business will play a significant role in the “new normal” post-COVID, but at the same time, it poses a huge challenge for the industry.

COVID-19 and the resultant lockdown this year has stopped normal business operations and this has stemmed the flow of business. The immediate future depends upon releasing the lockdown and introducing measures to contain COVID-19. Lockdown is gradually being eased and very substantial financial aid is being given by many governments to assist all businesses to hasten the return to normal.

While the drive to improve the performance of physical security products will not be stunted by COVID-19, it will be more difficult for customers to find the budget to invest and therefore they have to be convinced that they will get a quick return on their investment. In this challenging economy, customers will be demanding more value from their investments and will be less willing to commit to upfront capital expenditures, thus making ACaaS (Access Control-as-a-Service) and VSaaS (Video Surveillance-as-a-Service) even more attractive than it was just six months ago.

This business model is defined as one in which the customer purchases a service or subscription from a third-party service provider that then delivers the service through assets it owns, maintains and improves. “Servitization” replaces the single transaction for delivery of a product with continuous service while improving the customer experience throughout the lifecycle of the asset.

This shifts the investment off the building’s balance sheet as the total service eliminates upfront capital expenditure. COVID-19 has certainly made this service more appealing. We also expect alliance and acquisition will become more important in strategic matters as opportunities open up during the next 24 months.

Similarly COVID-19 has driven growth in “Building Wellness” systems as building operators are now in the process of installing a variety of products in preparation to meet the new standards for opening up their buildings.

Demand for thermal cameras to detect the temperature of visitors to their buildings is growing fast and is now a multi-million-dollar business. As part of a wider tracking and testing system, they can provide employees and clients with a safer environment to work in. COVID-19 has directly given the physical security business some positive drivers.

The question now is how fast can the physical security industry bounce back? At this moment, the most optimistic scenario would be a return to pre-COVID business trading one year from now provided that the virus is contained by the end of 2020; and a proven vaccine is made available to the world by mid-2021. In the second less optimistic scenario, COVID-19 could have a second spike this winter and cause a return to lockdown in some countries while a proven, fully-tested vaccine is not available until the end of 2021, resulting in pre-COVID business trading not returning until 2023.

About the Author

Jim McHale BSc is the founder of Memoori, a consultancy company that provides market research, business intelligence and financial deal tracking services to clients across several industries.

Featured

  • Security Today Launches 2023 Government Security Awards

    Security Today is proud to announce the launch of the 2023 Government Security Awards. The Govies honor outstanding government security products in a variety of categories. For this year’s awards program, participants can choose from 38 different categories to enter their product(s) into. Read Now

  • City Safe Partners Announces Scholarship Program for Dependents of Full-Time Employees

    • Guard Services
  • Back to the Basics

    Back to the Basics

    Security is a continuous evolution of practices and procedures. The developments in technology and advancements in threats make security difficult at times. Although security from one location may look different from another location, there is a common goal applied to security measures. The common goal is protection. Read Now

  • The Top Three Security Trends in 2023

    The Top Three Security Trends in 2023

    As security technology has become more widely used, the interest in new capabilities and increased security measures has increased. As we head into 2023, these three trends will shape the security landscape. Read Now

Featured Cybersecurity

New Products

  • Hanwha Techwin Wisenet XRN-6410DB4 / mXRN-3210B4

    Hanwha Techwin Wisenet XRN-6410DB4 / mXRN-3210B4

    Hanwha Techwin America, a global supplier of IP and analog video surveillance solutions, unveiled two new Wisenet X series NVRs that support the industry’s first video playback and recording of up to 8K super-high-resolution images. 3

  • LiftMaster Garage Door Opener

    LiftMaster Garage Door Opener

    LiftMaster Transforms the Garage Door Opener Into a Sleek Smart Home Device That Does More Than Open and Close the Garage Door 3

  • PACE® Long Range Ethernet Solutions

    PACE® Long Range Ethernet Solutions

    Altronix introduces the newest addition to its portfolio of PACE® Long Range Ethernet Solutions. 3