The January edition of SSI includes our annual industry forecast as a cornerstone of our special 2015 Industry Forecast Issue. For the piece, I interviewed more than 20 of the industry’s most knowledgeable market analysts, business experts, security dealers, systems integrators, supplier representatives and trade association directors. Some of their perspectives can be found in the magazine article, with the balance of their assessments appearing in separate blog posts.
Featured in this installment: Jon Cropley, principal analyst, video surveillance & security services, IHS
What do you expect to be the major security technology and market shifts for 2015?
Jon Cropley: A major challenge for video surveillance equipment vendors will be ensuring that their solutions continue to have unique features versus the competition. Vendors with low prices from China and other countries with low labor cost are gaining market share and expanding their product range. Competing with them on price will mean lower margins. Vendors need to compete on brand, features, and services to growth their businesses. We are forecasting that the global market for video surveillance equipment will grow by over 10% in 2015. However, the total market is made up of many different products, geographic regions and end-user sectors. The markets for some of them will grow much faster than the average. On the product side, the market for 180/360-degree network cameras will continue to grow rapidly at over 50%. On the geographic side, the Middle East market for video surveillance is forecast to grow quickly and exceed $500 million for the first time in 2015. The city surveillance and the utilities and energy end-user sectors will continue to grow rapidly in 2015. However, the education end-user sector is also one to watch.
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What do you see as the leading business and operations drivers throughout the channel?
Cropley: We are forecasting that the trend to selling products through distributors will continue. Around 58% of video surveillance equipment revenues are estimated to have come from sales through distributors in 2014 and this proportion will increase slightly in 2015. Integrators’ biggest challenge in 2015 remains the commoditization of equipment keeping margins down and thus making it more difficult for revenues to grow. Despite this, there remain opportunities for integrators to grow their service offerings, with many integrators looking at ways of offering a form of security as a service. Service and maintenance revenues are expected to outpace installation revenues in 2015, and are forecast to grow at over 9% in 2015. Home automation will be the biggest opportunity for monitoring service providers in 2015. Already growing dramatically within the United States, the home automation market has attracted the big names of monitoring such as ADT, Vivint and Monitronics, as well as new cable and telecommunication companies such as Comcast, AT&T and Cox. Home automation and remote security management products from these companies allow customers to interact with their alarm system and control aspects of their home remotely to better fit around their lives. The main benefit of this is that customers associate the interaction more positively such as saving money on their heating, and as such home automation customers have a much lower churn rate than intruder alarm customers.
What do you anticipate for the industry pertaining to politics and legislation?
Cropley: Over 40% of spending on video surveillance equipment comes from the public sector so politics can have a huge influence on the market. For many years governments worldwide have deployed video surveillance equipment as a crime prevention tool. While research into the effectiveness of video surveillance as a tool to reduce crime remains inconclusive, most would agree that it reduces the fear of crime, which itself is an attractive proposition for most governments. Moreover, today’s omnipresent threat of terrorism has heightened security concerns, leading to increased government spending on public space video surveillance.
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What are some pressing security industry issues you expect to remain unresolved?
Cropley: The supply base for video surveillance remains highly fragmented with thousands of suppliers. Over 50% of the world market is served by suppliers with a share of less than 1%. It is unlikely there will be widespread consolidation of the supply base in 2015. However, if aggressive price declines continue and margins are squeezed, the number of vendors offering video surveillance equipment will eventually be reduced either through acquisition or market withdrawal.