Ifsec Frost & Sullivan Report

1 Security Industry Outlook 2011

Security Industry
Outlook 2011
Views of End-Users and the Supply Chain

ExEcutIvE SuMMArY
ExEcutIvE SuMMArY
Produced by Frost & Sullivan in association with IFSEc
Produced by Frost & Sullivan in association with IFSEc MAY 2011


Executive
Between March 18th and April 7th 2011 Frost & Sullivan, in
association with IFSEC, conducted a web survey with 355 end-
users and channel players, mainly in the UK, to determine the key

Summary
market developments, perceptions and future spending plans.
The sample included 133 end-users and 222 channel players
(installers, distributors, system integrators, security consultants
amongst others).

IFSEc, the the key objectives of the research included:
world’s largest
• Understanding budgets and future spend on security technologies
annual security
event, returns to the NEc Birmingham • Assessing awareness of technologies and critical product requirements
from 16 – 19 May 2011. Now in its 38th
year, the award winning event offers • Evaluating supply chain relationships and best in class providers
security professionals from all over
the world the opportunity to discover
cutting-edge security solutions as The full results are available in a report published by Frost & Sullivan together with a
well as benefit from a comprehensive full breakdown of the types and size of organisations interviewed.
about...

educational programme and innovative Customer surveys provide important insights into trends and opportunities and the
interactive feature areas. the IFSEc numbers provided should be viewed as indicative.
brand can now be found throughout
the world with IFSEc South Africa, For further information on the report please contact Andrew Thorndyke at
IFSEc West Africa, IFSEc India, Frost & Sullivan on 01865 398645 or by email andrew.thorndyke@frost.com
IFSEc South India and the recently
announced IFSEc Arabia.
For further information on all the IFSEc
events please visit www.ifsec.co.uk


Budgets The message from both end-users and channel players is that budgets
are on the rise. End-users are expecting a 3% increase in budgets over

are on the
the next year for video surveillance systems and around 2% for access
control and systems integration (Chart 1).

rise for
Intrusion detection will also see modest increases in budget. Whilst the increase in
spending on technology is encouraging for equipment manufacturers and installers,
manned guarding organisations will find 2011 to be another tough year with budgets

technology
reportedly down on 2010.
The view that budgets will increase for video surveillance, access control and systems
integration is also supported by channel players who tend to have a more optimistic
view. The channel view is an 8% increase in end-user video surveillance budgets and
healthy growth in security system integration and access control.
End-user expected change in budgets: Short and Long term A positive outlook for the security industry is also supported by channel forecasts of
their own revenue generation in 2011. On average the channel expects UK industry
revenues to increase by 4% in 2011 with distributors (6%) and system integrators (5%)
anticipating the highest revenue growth. Global growth expectations are higher with
respondents on average planning for a 7% growth in revenues.
chart 1


Pace of migration The positive outlook for IP/network video surveillance is also
supported by the survey with both end-users and channel players

to IP video reporting an increase in usage.
Chart 2 highlights that 71% of the channel respondents believe that the speed of

Surveillance to migration to IP will increase over 2011/12. Systems Integrators have the strongest
expectations with security consultants, installers and distributors all having broadly the

quicken
same opinion. End-users also forecast significant increases in the use of Network/ IP
Video Surveillance with the technology gaining greater priority in mixed use systems
(40% of end-users are using a combination of IP and Analog cameras). The survey also
reveals that 12% of respondents are planning to install an IP/network video solution
Speed of Migration to IP within the next 12 months.

Question to Channel Players: Do Question to End-Users: Within the
Challenges do still exist however with 47% of end-users reporting that other
you expect the speed of migration next two years, do you expect that organisational priorities are making it difficult to install Network/ IP Video
to IP of the physical security market the number of network/IP cameras Surveillance as part of their existing system. The lack of a formal collaboration with IT
(especially video surveillance) to installed in your facility will …
increase or decrease in 2011/2012? departments, no clear business case proved (total cost of ownership or ROI models)
and integrator recommendations were also raised as barriers.
As part of the survey Frost & Sullivan also assessed supply chain perceptions of
IP Video Surveillance manufacturers. It is not surprising that Network/ IP video
surveillance suppliers who have the broadest range of relationships across the supply
chart 2

chain were also seen as best in class providers. Building a broad base of relationships
across the supply chain is essential to ensuring a strong market share position.
Whilst IP video surveillance demand will continue to strengthen over the next 2 years
the analog market will remain flat with a loss of revenues from customers switching
to Network/ IP Video Surveillance being balanced out by replacement sales or new
sales in applications that require a relatively simple security solution. Decline in
analog camera usage will be highest in very large organisations with 50% reporting a
reduction in spend.


Industry Industry convergence remains an area of key debate for many organisations in
the security industry with new competitors, supply chain entrants and increasing

convergence...
applications for security technology. However new entrants, both technology and
integration specialists, from the IT industry should not be seen as a threat, rather
security organisations need to embrace the changes and plan for a changing landscape.
Indeed many channel players believe that impact of convergence between physical
remains an area for organisations to security and IT will have a positive impact on their business (see chart 3)
develop a competitive advantage The supply chain is gearing up primarily through training programs to get their
existing client facing teams to a competent level. This is the most popular measure to
address the IT skill gap with 44% of respondents reporting a past or active training
program. Systems Integrators have taken to partnering with IT integrators and
Speed of Migration to IP End-users using Security
this is a trend that the industry will continue to witness. Another route has been to
technology & Systems for
Purposes Beyond Security recruit talent from the IT industry though this can be a costly option. Leveraging
new employees from the IT industry as part of a formal training program will allow
organisations to get a better return on their investment.
It is difficult to be precise in measuring the speed of convergence but the current status
of the respondent group provides some strong insights. 64% of Video Surveillance and
62% of Access Control systems are currently linked to a command and control centre
with a further 17% of respondents reporting an integrated system within the next 24
months. Whilst these figures are high and not representative of the whole customer
chart 3

chart 4

base within security they do suggest a marked move towards converged solutions.
The trend of the use of security technology in alternative applications will become
stronger (Chart 4). Out of the current respondent base 25% currently use their security
technology in other applications with a further 3% trialling systems. In a more IT savvy
security world suppliers will start to look at client problems and business challenges
that are not just about security. Examples provided included attendance management,
health and safety, monitoring occupancy levels, asset tracking, operation processes
(machinery flows) amongst others.


Access Budgets are on the increase for access control in 2010/2011 with 26%
reporting increased budgets (chart 5).

control and
Card readers, the most used access control technology by some distance amongst
the respondent group, will also experience the largest increase in usage with 57% of
end-users reporting that they expect usage to increase within the next 12 months. An

convergence
additional 7% are planning to adopt within the next 12 months.
Although only 17% of respondents are currently using biometrics readers 12% are
planning to adopt in the next 12 months (chart 6). Fingerprint technology is by far the
most used technology amongst end-users and is
clearly the most recognised technology with 96%
of the respondent base confirming that they are
familiar with the technology. In descending order
change in budgets for Biometrics readers: End-user Interest
Access control 2010-2011 Awareness and future in using Access control the other most recognised technologies were iris,
usage for time and Attendance hand, face, voice and signature.
One of the clearest examples of security technology
being used in a non-security application is access
control and time and attendance. 35% of the
respondent base currently use access control to
record time and attendance. Out of the remaining
chart 5

chart 6

chart 7
65%, 29% of this sample are interested in using the
technology for this application (chart 7)


video Analytics Increased expenditure in video surveillance and multiple
applications for camera technology is also expected to drive video
analytics. Although there have been initial challenges to wide
End-user video Analytics Applications spread video analytics adoption (false alarms, high deployment
cost amongst others), 26% of respondents currently use video
analytics and a further 25% report that they are likely to adopt in
the next 12 months.
Server based analytics continues to be the preferred technology choice due to advanced
processing capabilities. 56% of respondents reported a preference for On server
analytics versus 35% for Hybrid and 15% for Edge based.
Video analytics is also one enabler for video surveillance to be used in non-security
applications within 3 broad categories: health & safety, business intelligence and traffic
management.
In a multiple choice question Motion Detection scored highest for the question “What
is the application of video analytics in your facility?” with 74% of respondents. The
highest score for a non-security related application was ANPR (Automatic Number
Plate Recognition) at 40% though this can be employed for security, road safety,
policing and congestion charging.
chart 8


Manned Guarding The Manned Guarding industry is under pressure from reductions in
budget as technology plays a more important role. However, Manned
Guarding will always be a huge industry and suppliers of services will
End-user Most Important criteria for Awarding contract continue to broaden their offering.
In this survey 52% of end-users outsourced their Manned Guarding whilst 30%
managed in-house. Typically the larger the organisation the more likely it is for them to
outsource.
Manned Guarding is a very competitive sector and often cost is given as the key
competitive factor. As can be seen in the accompanying graphic (chart 9), cost certainly
does play a role being the highest ranked factor when aggregating the top 3 reasons.
However, organisations that can provide a more tailored product and service, have
a strong reputation and have a previous relationship with the end-user position
themselves strongly for business. Brand image appears to count for very little unless it
is synonymous with a strong reputation for quality services.
Those that kept services in-house cited maintaining control, retaining skills and
historical decision as the main reasons. Cost was the 4 ranked reason.
chart 9


rOI and Proving the Return on Investment (ROI) of a new security installation is an
important consideration in the security industry where expenditure on new

Decision Making
technology is often seen by CEO/ CFO functions and respective departments
as a “Grudge Purchase”. This requires organisations to work hard to prove why a
more expensive but sophisticated technology is worth the investment. In order for
organisations to sell the ROI they need to understand how customers measure it.
cEO and cFO role in decision making A reduction in the number of risks/ threats was the most cited reason scoring 81%.
Definition of risks/ threats will change by industry area with the retail sector having
CEO CFO very different definitions when compared to transportation. Increased operational
efficiency and increased adherence to operational procedures also scored highly. A
simple calculation between reduction in man guards and technology investment was
the 4th most popular way to justify new expenditure with 40% of the respondents
selecting this option.
Use of physical security technologies in other applications was at 29% though this
will change depending on who you talk to. An isolated security department within an
organisation is not going to consider video surveillance for other applications – they
solely focussed on the security solution.
Proving an ROI and that the use of video surveillance can have multiple uses and
chart 10

benefits requires connections and across a customer organisation. In the survey
no other function appears to have as much decision making/ influencing power
on expenditure after the head of security than the CEO and CFO (or relevant
departments) though this was concentrated in small to medium organisations with the
CSO in large multinationals having autonomy (though not necessarily a wider view
on the needs of the business). 53% of respondents indicate that the CEO has a role,
no matter how distant he is from selecting the technology and vendor, in the decision
making process. Being able to influence a wider audience, including CEO’s and CFO’s,
is an important consideration for organisations wishing to demonstrate the full ROI to
customers.

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