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
2 Security Industry Outlook 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 firstname.lastname@example.org IFSEc South India and the recently announced IFSEc Arabia. For further information on all the IFSEc events please visit www.ifsec.co.uk
3 Security Industry Outlook 2011 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
4 Security Industry Outlook 2011 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.
5 Security Industry Outlook 2011 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.
6 Security Industry Outlook 2011 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)
7 Security Industry Outlook 2011 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
8 Security Industry Outlook 2011 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
9 Security Industry Outlook 2011 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.