SSI’s 2014 Industry Forecast: Axis Communications’ Fredrik Nilsson

January 06, 2014 Scott Goldfine

The January edition of SECURITY SALES & INTEGRATION includes our annual industry forecast as a cornerstone of our special 2014 Industry Forecast Issue. For the piece, I interviewed 25 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 Under Surveillance blog posts.

Featured in this installment: Fredrik Nilsson, General Manager, Axis Communications

What are the key technology developments you see for 2014?
Fredrik Nilsson: IHS predicts 2014 is the year that IP video revenue surpasses analog. After the scales tip, IP video innovation will spell the end of analog quicker than expected. There will be no reasonable explanation for choosing analog over IP anymore. Today’s IP video systems provide much superior image quality, even in lower cost cameras. IP cameras provide movie-quality video, offer ever-improving WDR technology and can even see colors at night. This quality will continue to rise as prices drop — both for IP cameras and the corresponding storage technology. And don’t forget the encoder. For those customers who are attracted to the benefits of IP but want to retain their existing investment in analog CCTV, there are more powerful video encoders today at a much lower cost starting at around $80 per channel. Integrators who develop a migration strategy with their customers will see the most success and cultivate a long-term relationship. Also, small systems continue to create a great new opportunity for integrators. While large installations may appear more attractive as a one-time revenue boost, the millions of small businesses in the country account for more than half of all U.S. sales. Having an SMB toolkit in your portfolio that features options for edge storage, hosted video and encoder solutions will prepare integrators to jump on countless IP video opportunities with recurring revenue possibilities.

What are the key market developments you see for 2014?
Nilsson: This year we’ll start to see funding improvements for both the commercial and education sectors. There continues to be a rise in the focus on security in both of these industries, and there are opportunities to work with schools and businesses alike on solidifying a security master plan. How to select and properly utilize technologies at hand is a major piece to this plan. On the flip side, government will continue to see cuts in spending, especially in the military field. There will still be opportunities but offering cost-conscious solutions that meet government guidelines will be important. Projects for city surveillance and critical infrastructure remain strong in 2014. Cities large and small are searching for ways to supplement law enforcement staff, and the general public is becoming more and more accepting of video surveillance in their towns. In fact, according to a Time Magazine/CNN poll from last year, more than 80% of Americans are in support of surveillance in public places. Integrators that work with cities to design the best solution and then help properly set expectations within their communities will have the most success. Critical infrastructure sites – both those within the community and remote facilities – are also seeing an increased need for security. The price of raw copper has risen over $3 a pound and is a major draw for thieves. Unfortunately, copper theft is not only an extremely expensive monetary loss for utilities – both in dollars and down time – but the nature of the crime itself is dangerous for thieves and employees alike as they risk electrocution. Many critical infrastructure sites are turning to a combination of IP thermal cameras integrated with HDTV-quality and megapixel cameras augmented by remote monitoring for 24-hour protection.

What are the leading business and operational challenges for manufacturers in 2014?

Nilsson: The only way to remain relevant in today’s IP-centric world is to reinvest in ideas and engineering. This will be difficult for companies who do not have the established revenue to keep R&D moving along at such a fast pace. Consolidation is likely to happen with a number of players as the investment to keep up with technology increases. With so many video companies in the industry today, a challenge for manufacturers is to cut through the clutter and deliver value for both the integrator and end customer. This clutter can also make it difficult to ensure proper industry knowledge, as many can be misled by marketing spin. Get certified, remain educated and, above all else, test products before deploying in the field. What’s great, though, about the shift to IP and the industry’s increasing willingness to leverage new technologies is it affords manufacturers the ability to invest in exciting innovations. These investments and open partnerships are moving us into the proactive security era where we’re truly building a smarter, safer world. The emergence of all-IP, open platform access control is a perfect example of this, and it presents opportunities for many different manufacturers across the entire security solution.

What are the leading business and operational challenges for dealers in 2014?

Nilsson: There’s an underlying theme in almost all my responses, and that’s the fast pace of technology development. Staying current on new technologies and industry trends while making sure the staff remains committed to continuing education is a difficult, yet rewarding, challenge. The rewards come in the solutions you’ll be prepared to design for end users as well as the ability to attract top industry talent who crave knowledge and flock to companies that promote professional development. The opportunities lay in making professional and technical development a priority through continued education and industry certifications so integrators can differentiate themselves as a value-added partner, as opposed to merely an installer. This will open doors to long-term, recurring revenue partnerships with the customer. If you do commit your company to continuing education, promote it. The most talented integrators and engineers in our industry crave knowledge, and these continuing education programs will make them want to work for you.
What do you see for the security industry overall in 2014?
Nilsson: The increasing cost of health care could have an unintended effect on the security industry. As companies are being more cost conscious with benefits, many will be looking to replace man power with technology. Video intelligence – specifically using video for operational uses beyond security – will be an interesting aspect for integrators to explore when they are bidding projects. As Axis learned from the ESG research project, 88% of the IT managers who use video for business intelligence say that it’s easier to justify their overall surveillance investment. The trends indicate that the business use of video should be a selling point for all future projects.

What type of year are you anticipating overall for manufacturers?

Nilsson: It will be a year of growth for manufacturers that are willing to invest in new technology and R&D. The emergence of IP technologies has been the catalyst for innovation in physical security after years of stagnant development in the analog world. The only way to remain relevant is to reinvest in ideas and engineering. Consolidation is likely to happen with a number of players as the investment to keep up with technology increases.

What about for installing dealers and integrators?
Nilsson: As digital innovation marches on and leading manufacturers continue to reinvest in R&D, dealers and integrators will only grow if they choose to embrace new technologies and service-oriented business models. It’s more important than ever to focus on your company’s professional development and technology education while keeping up to date with industry certifications. Leverage the educational opportunities and academy programs that your manufacturer partners offer.

What about for monitoring providers?
Nilsson: Monitoring today still means mostly alarm monitoring. In 2014, video will present more growth opportunities for monitoring companies instead of past methods of shifting/buying accounts. Also local storage using SD cards has become lower cost and easier to integrate with hosted video solutions. This means video does not always need to stream back to the datacenter 24/7, which lowers the demands of internet bandwidth in those applications. Video can be recorded locally and then streamed to the cloud during predetermined times of low internet usage, like at night when the business is closed.

What is something that might surprise or catch people off-guard?

Nilsson: The surveillance market is still incredibly fragmented, with so many manufacturers offering IP and analog technologies. However, the quick market shift to IP technology and the innovation it’s fostered requires a lot of R&D to keep pace. Companies that don’t have the R&D muscle will likely be left behind. Ask yourself, will we really see 600 video solution providers again at ASIS 2014? Probably not.

Anything else you would like to add pertaining to 2014?
Nilsson: IP video has a strong foothold in physical security. In 2014, we’ll see more business shifting to IP technology, such as access control. One of the promises of IP technology was the integration of systems – video, access control, intrusion and so on. But to date we haven’t really seen true integration. This will change as other disciplines of physical security embrace IP. And then there’s edge storage – specifically the low cost and growing capacity of SD cards – really challenging analog in the small systems market. Why position a high-cost, failure-prone DVR when you could eliminate central recording altogether and instead sell the customer on HDTV-quality, intelligent IP systems? You’ll both have less infrastructure and maintenance to worry about, easily accessible video and the same image quality we see in our living rooms while watching the Super Bowl.

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About the Author

Scott Goldfine

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Scott Goldfine is the marketing director for Elite Interactive Solutions. He is the former editor-in-chief and associate publisher of Security Sales & Integration. He can be reached at [email protected].