Market consolidation, good or bad?

May 2016 CCTV, Surveillance & Remote Monitoring

We seem to be in a period of consolidation in the security market. Enormous amounts of money are being spent on buyouts and mergers, such as Canon buying Axis and Milestone, Johnson Controls and Tyco merging, Avigilon buying what amounts to a ton of video analytics patents, Flir buying DVTel and so on.

Some say this is a natural progression of a maturing market, others may suggest that western companies are reacting to competition from China, where quality products are being sold at lower costs. Whatever the reason, the market is changing. And no matter the reason, the person who will feel the impact, whether positive or negative, is the customer.

Hi-Tech Security Solutions asked industry experts why we’re seeing the spate of mergers and what the eventual outcome could be.

Ingo Mutinelli, sales director at Elvey Security Technologies.
Ingo Mutinelli, sales director at Elvey Security Technologies.

Ingo Mutinelli, sales director at Elvey Security Technologies, says the outcome depends on the reason for the acquisition or merger. “Many of these acquisitions/mergers are complementary, meaning that one company buys the other for some critical or innovative IP that will markedly improve an existing product or put the buying company into a space that it has battled to make inroads into.

“This can have a positive effect for their partners and customers in that their available basket improves or a specific product improves. The other reason would be for efficiencies that can be realised by joining two similar businesses making them more profitable or efficient, which should drive prices down, making them more competitive and in turn grow their market share.

“Conversely something to look out for would be creating a monopolistic environment through acquisitions or mergers, which is not good for partners or customers for obvious reasons.”

Rob Anderson, MD of Rob Anderson Consulting.
Rob Anderson, MD of Rob Anderson Consulting.

Rob Anderson, MD of Rob Anderson Consulting echoes Mutinelli that consolidation and mergers are generally based on one of two reasons:

(a) Getting access to new technology and/or increasing market share, or

(b) Using the acquisition to remove their opposition in the marketplace.

Anderson says that, in both cases, there is a period of concern and a reconsideration of who should be used on your next project. “This leaves customers, SIs, installers etc. in a position of difficulty when trying to provide a long term support in such a fast changing marketplace.

“This should result in all parties being sure they are offering solutions that are open and unrestricted. There must be an easy path to change without ‘lock in’ to particular protocols and non-standard interfaces.”

Competition and efficiency

Mutinelli doesn’t think consolidation is a response to Chinese competition. “Mergers and buyouts have been around for centuries and while price is always a factor, I believe technology, service and competence drives many of the acquisitions and mergers we see today.”

Anderson expects the consolidation we’re seeing is partially due to new competition, but it is also due to the need for more robust business plans – trying to be a producer of analytic algorithms only is not likely to be profitable.

“There is also a need to reduce the number of layers of systems or companies between the manufacturer and end user. Too many is too costly. This reduction in the number of mark-ups is driving a change in the rest of the market and the result is good for clients.”

Holistic offering

It’s nothing new to say that the physical security market is moving away from point solutions, or silos as the IT word calls it, towards holistic solutions that aim to deliver everything the client requires. The drive to solutions instead of products is also a factor in the consolidation we are seeing.

Anderson splits the market between box movers and mass distribution on the one hand, and professional, large project solutions providers

on the other. Customers are inclined to opt for the one-stop shop, or box mover because costs are lower, however, there is often a lack of expertise available to extract full value from solutions. “The average client is convinced by the salesman that this solution is best. It remains debatable if this solution is well serviced.”

“Share of wallet and how much of it they can get drives how companies view their market,” notes Mutinelli. “Consolidation and a holistic offering is where manufacturers and suppliers are headed. Customers also want one port of call and they want simplicity, not complicated value chains from many different vendors.”

Irrespective of the marketing hype or slick sales people, Anderson advises customers to ensure they always work with good brands, from equipment through to installation.

“The most important rule is not to allow your project to use software and products that have non-standard protocols. The systems must be open and allow for multi-product connectivity.”

Customers still rule

The era of consolidation is not likely to end soon, there are already rumours of more big deals in the making. The one thing the end user can count on, however, is that their suppliers, no matter who they merge with or buy, still need customers to make a profit. As noted above, many of these deals are driven by the profit motive and this is good news for customers.

“If you’re not looking after your customer, you can close your doors,” says Mutinelli. “Whether you’re wheeling and dealing to acquire a customer base or organically growing one, entities will always try their best to look after their customers. Whether they get it right or not is the question, and if not then there are more than enough choices out there for clients to try something else.”



Credit(s)





Share this article:
Share via emailShare via LinkedInPrint this page



Further reading:

Camera Selection Guide 2019
September 2019 , CCTV, Surveillance & Remote Monitoring
The Camera Selection Guide 2019 includes a range of IP, analogue, thermal and speciality cameras aimed at a broad range of surveillance functions.

Read more...
Intelligent analytics and the brains to match
September 2019, Bosch Building Technologies , CCTV, Surveillance & Remote Monitoring, Integrated Solutions
What if the brains behind our security cameras could be trained to improve their cognitive ability to pay attention, learn, and problem-solve according to specific rules and situations?

Read more...
AI-powered autonomous Drone-in-a-Box
September 2019 , CCTV, Surveillance & Remote Monitoring, Integrated Solutions
Organisations in the mining, energy and industrial, oil and gas, ports and terminals sectors can optimise security and business operations, whilst reducing risks and operational costs

Read more...
Cybersecurity for video surveillance systems
September 2019 , Cyber Security, CCTV, Surveillance & Remote Monitoring
Video surveillance systems are increasingly accessible over any IP network, which has led to the rise of potential cyberattack.

Read more...
A platform approach to innovation and value
September 2019, Technews Publishing , Editor's Choice, CCTV, Surveillance & Remote Monitoring, Integrated Solutions, IT infrastructure
Moving to the platform model of doing business holds tremendous advantages for end users and smaller developers, but also for the whole technology supply chain.

Read more...
Back to manufacturer uniformity?
September 2019, Dallmeier Electronic Southern Africa , CCTV, Surveillance & Remote Monitoring
Decision makers often have to choose between an all-inclusive, complete solution from one manufacturer and the products and services of several different providers.

Read more...
Open does not always mean easy integration
September 2019, VERACITECH, Technews Publishing , Editor's Choice, CCTV, Surveillance & Remote Monitoring, Integrated Solutions
Customers who opt for best-of-breed solutions will have to rely on their integrators to develop customised integrated solutions for them.

Read more...
The impact of AI on the surveillance industry
September 2019, G4S South Africa, Hikvision South Africa, Myertal Tactical Security, Technews Publishing , Editor's Choice, CCTV, Surveillance & Remote Monitoring
What the impact of AI will be on companies, the services and solutions they supply, as well as on the jobs people do.

Read more...
Video analytics and AI
September 2019, Axis Communications SA, Dallmeier Electronic Southern Africa , Hikvision South Africa, Technews Publishing, Dahua Technology South Africa , Editor's Choice, CCTV, Surveillance & Remote Monitoring, Integrated Solutions
Artificial intelligence has the potential to deliver real benefits in the world of video analytics and many companies are already delivering customer benefits.

Read more...
Cloudy with a chance of AI
September 2019 , Editor's Choice, CCTV, Surveillance & Remote Monitoring, Integrated Solutions
One local company has developed an AI solution that can be added to existing surveillance installations, offering 24-hour intelligence.

Read more...