Watershed year for local suppliers and manufacturers

February 2002 News & Events

Welcome back!

2002 is upon us and what a year it promises to be. Opportunity abounds for the courageous, focused and well prepared, in spite of a global economic environment which has dented confidence across the globe, and has left most of us cautious about the year ahead. Indicative of the mixed mood, is recent news that Motorola is poised for heavy cost-cutting this year after announcing a fourth consecutive quarterly loss and its first full-year operating loss since the 1929-30 depression! And yet, despite a $1,2 bn net loss and $90m operating loss for the fourth quarter, Motorola CEO Christopher Galvin insists the company will return to profitability in the second half of 2002 and post a gain for the full year, barring unforeseen political or economic disruptions.

On the local security technology front, the recent plunge in the rand has already seen a 30% increase in the supply chain, with end-users seeing an almost 50% increase in installed systems prices since November 2001. This is clearly going to be a watershed year for local suppliers and manufacturers. Whilst security has become a 'top-of-mind' issue with businesses across the globe, due in no small part to the fall-out from 11 September's tragic events, these same businesses are themselves struggling to formulate a strategy which will protect them from the downturn and still position them well for opportunities now, and later when economic fundamentals turn around.

Local security technology manufacturers are extraordinarily well positioned to boost their exports, with landed costs in Australia, New Zealand, Europe, and the US being significantly competitive. But South African distributors are in for a rocky ride. Imported products are becoming increasingly expensive, and it will be interesting to see to what extent local manufacturers and distributors align themselves; either as strategic partners or through defacto acquisitions and the such-like.

Trends in the year ahead outside of the few I have already highlighted, namely that of increased exports of South African security products and a realignment of the distribution landscape, there are a few other trends that I am sure will be noticeable.

One of the key trends will be the continued influence of IT within the security sector, both in terms of the technology underpinning security solutions, and the people influencing purchasing decisions. A recent discussion with Dave Schultz at Sony South Africa was enlightening, inasmuch as Sony's research has indicated that more and more IT people at end-user level are getting involved in the selection and use of security technology, as these solutions start to impact on network infrastructure and inter-operate with business solutions from payroll systems to human resources applications and manufacturing plants. Security is becoming more and more of a management tool, something Hi-Tech Security Solutions has advocated for years. And now it seems, businesses are following through on the promise, as are enlightened players in the industry.

IT security garnering more spend

Another significant trend, from a business perspective is that, according to a recent survey of network IT executives for Network World, there promises to be a major shift in spending toward network security and critical new areas including disaster recovery, storage, wireless and up-and-coming sectors such as remote access/teleworking and videoconferencing.

A pair of studies by META Group subsidiary Metricnet offered proof of just how much attention has been focused on IT security in the wake of 11 September. In a study that ran before 11 September, Metricnet found that more than 80% of companies were spending between 0 and 5% of their IT budgets on security. A study completed in November found that 33% of companies are spending more than 5% to secure their information assets. Why I find this interesting is that many of the so-called 'physical' security solutions are starting to make their presence felt in the IT space and are likely to find favour amongst IT professionals, if they are well positioned and well priced. The challenge for the industry is to become as IT-literate as possible, as quickly as possible, without sacrificing its most fundamental competitive edge, its knowledge of security principles.

Last word? While acknowledging that 2001 has been "one of the toughest years for several decades for the world at large and for business," the Chairman of Microsoft, Bill Gates, recently predicted during his Comdex keynote address that the next 10 years will be seen as the "digital decade." With that in mind, all the very best for the year ahead.

Darren Smith
Darren Smith

Till next month,

Darren Smith

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