Someone’s doing business
March 2018, News

It’s hard to say if 2017 was a good or bad year for the security industry. For some companies it was a booming year, but for many it was one of just making it through to the end. Recent research from Memoori states that the total value of physical security products “at factory gate prices in 2017” was $29.2 billion. This represents an increase of about 5% on 2016.

While not a top performing year, 2017 was better than the past year or two on a global scale. Memoori says the past eight years has seen the market growing at an annual CGR of 6.41%, and the company expects the market to reach $41.27 billion in 2022, a CAGR of 7.2%.

The access control market was the best performer, producing about 7% in growth to capture a healthy 23.5% of the total physical security market. Intruder alarms command a 22% presence, but with lower growth (2.5%), and the surveillance market rules the roost with 54.5% of the market, but again with lower growth (5.9%). If you’re interested in the report, you can buy it at www.memoori.com/portfolio/the-physical-security-business-2017-to-2022/.

So what is happening in the local market that saw so many companies taking strain over the past year? The first culprit must be the political situation which came to a head in December and has shown more positive signs in the first two months of 2018 than we have seen in years. The uncertainty kept many wallets shut with a ‘wait and see’ attitude taking precedence over doing what was necessary.

There are other reasons, however. What is known as the ‘race to the bottom’ had an impact as well. Today we see companies selling large numbers of devices at very low prices, making it especially hard for the traditional market leaders to maintain their pricing and revenue streams. Some have managed, others not so well.

There is nothing wrong with pushing the prices of technology down as the end user benefits at the end of the day. There is a problem when it is done in a way that is unsustainable and that damages the industry in the long term.

One of the problems lower prices create is that the middleman – the installer and integrator – is caught between a rock and a hard place. They can’t make much margin on products (if any), some even go so far as to sell cheap technology at a loss in the hopes of getting a deal and making some money on services. The result is poor service, poor support and rushed jobs in the pursuit of a profit.

We can also see poor skills becoming a problem because training is too costly. Even free training is too costly because technicians on a course are unproductive for however long they are away from the office or customer sites.

Yet we still have the race to the bottom and customers seem to love it as they save on the initial costs. But perhaps we should see the race to the bottom as commoditisation of a technology. Taking this approach (which is simplistic, as it doesn’t cater for all the market factors) leaves the traditional technology leaders in a position of having to add value – and unfortunately the definition of value can differ broadly. They need to start looking more closely at their total cost of ownership (TCO) and return on investment (ROI).

This issue of value is why we are seeing companies spending money on cybersecurity, IoT (Internet of Things), integration, automation and artificial intelligence – to name a few. Customers don’t want more megapixels, they want results and if the value you deliver helps them get those results, you have a foot in the door. Then all you have to do is deliver.

Andrew Seldon

Editor