Competition, not consolidation

November 2013 News

The global industry for physical security equipment and services was worth a massive $110 billion in 2012 with the Americas accounting for more than 40% of the overall market, according to the latest research from IHS.

Generating $46 billion in revenue last year, North and South America combined made up 41% of the worldwide trade for physical security equipment and services. Asia was next with $33 billion, followed by the collective Europe-Middle East-Africa (EMEA) region with $29 billion. Strong growth is predicted in all the markets for the next few years, predicts a finding contained in the new report entitled ‘Total Physical Security Equipment and Services – 2013.’

At its current level, the industry’s annual revenue is double the budget of the US Department of Homeland Security, and is also on a par with the global revenue of giant corporations such as Nissan Motor Co. of Japan, the UK’s Tesco or IBM from the United States.

“This is an industry that managed to stay strong during the recession,” said David Green, senior analyst for video surveillance and security services at IHS. “Now with the general improvement in the global economy, we expect total industry revenue to reach $170 billion a year by 2017, even though growth rates will probably peak before then.”

Competition rules

As the market matures, questions are arising on whether the industry will consolidate. Convention says that as markets age, manufacturers will consolidate until a select few dominate the supply, a theory supported by many within the industry. IHS, however, is not convinced that this will occur because of the huge level of competition and the current fragmentation of the market.

Only two entities, for instance, broke the $2 billion level in annual revenue, with both accounting for a combined market share of 10%. Behind them, only five other companies possess a market share of 1% or higher. In fact, the top 15 together only just managed a market share of just above 20%, with the remainder of the market – more than 78% – up for grabs among thousands of other companies.

Focusing in to the equipment market shows a similar story, with a very shallow curve to the market share table. In all, about 40 players in the space achieved revenue in excess of $100 million a year in 2012. “It’s extremely competitive in every vertical, product and region,” Green explained. “You have several companies that are offering virtually the same product in specification and price, yet the highly personal nature of security sales means that each company can claim its own little niche within the market.”

With the split of Tyco International – one of the largest companies represented in the 2012 data – into ADT, Tyco and Pentair as separate publicly traded companies, the service market is also set to become even more fragmented in the near-term future.

Is consolidation inevitable?

All this means that consolidation of the market may not be as inevitable as one might expect. “True, mergers and acquisitions in the physical security market are inevitable and will happen, especially on the product side of things, but not with the impact you might see in other markets,” noted Green.

For a company to make significant moves up the market share table, it would realistically need the combined share of five or more existing manufacturers. “That’s just not going to happen overnight – this is not an industry where one acquisition propels you straight to the top.”

There is still a general expectation that in the long-term the industry will start to become dominated by a select few, but it will be a much slower process than traditional market economy studies predict.

“Yes, it defies accepted market logic to some extent,” Green concluded. “But then at $110 billion and beating the recession, it’s hardly a typical industry anyway.”





Share this article:
Share via emailShare via LinkedInPrint this page



Further reading:

Online fleet management system
Issue 1 2020 , News
Fleet Domain’s online Fleet Management Information System is reducing operating costs and improving safety for South African logistics firms.

Read more...
Digital insurance bundle for assets and devices
Issue 1 2020 , News
My CyberCare is a specialist provider of personal, and SMME online cyber insurance, cyber detection and cyber monitoring solutions for both local and global consumption.

Read more...
IDEMIA to supply Morocco’s national electronic ID cards
Issue 1 2020, IDEMIA , News
IDEMIA will supply Morocco with national electronic ID cards and introduce a secured digital identity online services platform.

Read more...
Rockwell Automation to acquire Avnet
Issue 1 2020, Rockwell Automation , News
Rockwell Automation announced it has signed an agreement to acquire privately held Avnet Data Security, an Israeli-based cybersecurity provider with over 20 years’ experience providing cybersecurity services.

Read more...
Do we really want simplicity?
Issue 1 2020, Technews Publishing , News
Everything today has to be simple, easy and fast. Even access to your bank account has to fit these adjectives and banks spend significant time and money trying to ensure their web and mobile interfaces ...

Read more...
Longse Distribution to become LD Africa
Issue 1 2020, LD Africa , News
Brendon Whelan, sales manager for Longse Distribution, announced that the company officially changed its name to LD Africa as of 20 January 2020.

Read more...
Three expos in one
Issue 1 2020 , News
Looking ahead to 2020 Vision: combined Securex South Africa, A-OSH EXPO and Facilities Management Expo 2020 promises to be even bigger and better.

Read more...
Security events you can’t miss in 2020
Issue 1 2020, Technews Publishing , News
Hi-Tech Security Solutions will host a number of focused events in 2020 to highlight the latest in security technology and the operational benefits they deliver.

Read more...
David Shapiro to chair ESDA
Issue 1 2020, ESDA (Electronic Security Distributors Association , News
The Electronic Security Distributors’ Association (ESDA), established in 1989, has elected David Shapiro as its chairperson for 2020.

Read more...
Dimension Data debuts fifth business
Issue 1 2020 , News
Dimension Data has launched its fifth business in the MEA region, Dimension Data Security, aimed at helping organisations in the region address the challenges of today’s rapidly evolving threat landscape.

Read more...