The January edition of SECURITY SALES & INTEGRATION includes our annual industry forecast as a cornerstone of our special 2013 Industry Forecast Issue. For the piece, I interviewed 20 of the industry’s most knowledgeable market analysts, business experts, systems integrators, manufacturer 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 Under Surveillance blog posts.
Featured in this installment: Bob Banerjee, Senior Director of Training & Development, NICE Security Americas.
What do you expect will be the biggest changes, challenges and/or opportunities as they relate to security technology, markets, and business & operations?
Bob Banerjee: On a higher level, leveraging cloud computing and virtualization capabilities can bring amazing new opportunities. When these capabilities are harnessed they have the potential to shift business models. As both cloud computing and virtualization happens on the system level, and aren’t solution or technology specific, the impact will be felt across markets and industry. More specifically, in the video surveillance field there are several emerging trends that are impacting the market. Camera-edge or onboard storage and the opportunities that come with it will most probably have a significant impact on the entry-level and midrange market. It is less expected to substantially impact the enterprise market with its more stringent requirements with regards to total days of storage and the need for higher video quality. Implementation for onboard camera storage will basically have two main types, the first being an NVR-less solution and the other would be a VMS over-the-cloud offering. In both cases, the impact would be felt mainly in the entry-level market not only because of requirements for keeping storage and video quality, but also because of the associated network bandwidth requirements. Another trend we’re seeing is the return of video analytics [VA]. It’s back and is here to stay. And with time, it will gain more and more traction. While a dramatic change may not happen in the next year, expectations are that increasingly, enterprise customers will deploy VA. And not just to improve their security operations, but also for the value it brings beyond security. Markets such as mass transit, airports, retail and others are using VA applications to identify things like commercial hot spots, or used by legal departments to refute false claims.
In the case of specific markets, we don’t see any significant changes. There is a growing awareness to the notion of smart/safe cities, which will probably be increased activity in this area in the form of more video and its integration with other systems within the smart city. In terms of market segments, as mentioned above, the cloud offering, already available today by camera vendors such as Axis, and by VMS vendors such as DVTel and Genetec, is expected to have a significant impact on the entry-level market. This, in turn, will not only impact end users, but the entire ecosystem: suppliers, distributors, system integrators, etc.
On the business & operations side of it, As the migration to IP continues, the impact on manufacturers and hardware vendors is unquestionable. One could speculate that with a reduced need for appliances and devices, revenue will decrease too. As the shift towards software-only and application-based solutions gains momentum, vendors will be challenged to maintain revenues and profit. Furthermore, as barriers to entrance are lowered in the VMS market, this may suggest further price erosion in the entry-level/mid-range markets, and to some degree in the enterprise market as well. Although in the enterprise market, value-added solutions such as VA, can ‘compensate’ for the basic recording license price erosion. Another challenge that manufacturers and suppliers need to address is creating solutions that are more IT friendly by providing management tools for administrators. Similar to what is seen with other IT appliances. Currently, not all VMS systems are there yet, and the same can be said for many of the system integrators out there. Opportunity also exists, in particular, with PSIM systems. Right now, they are the one place that security solutions can move to the next level. PSIM systems offer much more than simple integration. They can generate meaningful and actionable data that can transform security organizations from reactive to proactive. Another trend to watch: over-the-cloud offerings for the lower-end market segments. Only time will tell how successful this is going to be, but it is definitely something to watch.
There seems to be increased polarization in the dealer/integrator space. Some dealers that claim to be integrators are being exposed as not having the skillsets required for this role. At the same time, true integrators with real software and complex program management skills, are well positioned for the larger projects involving system integration such as video and access control, or even PSIM. Some dealers and integrators seem to be challenged with the training of their salespeople and business development staff to do true consultative selling.
Are there any political, legislative or standards issues to take note of?
Banerjee: Two issues in particular will have an effect on the security landscape. One is related to the seemingly constrained budgets of Homeland Security. The question is if this trend will continue, or is it more temporary in nature and a result of the global financial crisis that has affected all budgets. The other issue is privacy. Will there be pushback on the Patriot Act and similar legislation that gives the government the ability to probe into the private lives of individuals and organizations when a security threat is suspected? This is no doubt linked to the perception of threat that exists. The more that individuals feel threatened, the less likely they will be to challenge the privacy issues surrounding this kind of legislation.
What type of year are you anticipating overall for 2013?
Banerjee: In the face of relentless commoditization, vendors must sell more in order to compensate for lower prices and margins. Additionally, trying to differentiate a commoditized product is a red-ocean strategy. By introducing higher value solutions such as PSIM, the conversation changes and we’re no longer dealing with a commodity but a unique value proposition. This then allows the leading vendors, those with higher-level solutions, to continue to grow.
What are some nagging or pressing security industry issues you expect to remain unresolved?
Banerjee: The lack of standardization in the security industry is an issue that remains and will continue. ONVIF has made substantial strides in the market, but that’s only applicable to cameras. The lack of common, well-adopted standards for other security systems complicates integration. Setting standards, while definitely a possibility, takes time. And from a technological perspective, addressing the challenges and business model opportunities associated with cloud computing will probably not be solved in the next year either. On the budgetary front, for many organizations, today’s reduced security budgets are impeding their ability to deploy state-of-the-art, technology-based, high-value systems. In the current climate, this probably is an issue that will be around for a while. On the flipside of this, you have a lot of vendors in the physical security arena focused on the primarily small- to medium-sized video, access and intrusion projects. As commoditized products or solutions, there are very high levels of competition.
Any ideas/thoughts about how to address or improve these situations?
Banerjee: There are those in the security industry whose leadership have the vision to not only survive, but also thrive over the next few years. We will see these organizations restructure themselves, adapt their skillsets and focus on a new direction – one that involves higher value and greater margins. Is the market even remotely prepared to discuss business continuity or operational effectiveness, or is it preoccupied with megapixels and biometrics? It carries risk, but conversely the cost of maintaining the current course can result in possible elimination from the market due to acute commoditization.