2018 Security Industry Forecast: Pros Face Crossroads of Cloud, IoT, AI & Cybersecurity
The top security market experts and execs dish on what to expect in 2018, as DIY smart home products, AI and cybersecurity continue to disrupt the industry.
Like the famous legend of 1930s blues great Robert Johnson, almost 100 years later the electronic security industry similarly finds itself at a crossroads.
Although security dealers and integrators do not have to consider cutting a deal with the devil to attain success in exchange for their souls, as that famous tale suggests, they are faced with some tough decisions in a marketplace disrupted by new technologies and services, business models, and competitors.
They now find themselves at the security crossroads of taking their chances sticking with what worked in the past or getting out of the business altogether versus adopting and adapting to 2018’s agents of change.
As with the musical gifts gained at Johnson’s mystical intersection, higher growth likely awaits dealers and integrators that choose the latter.
“We are looking for 6%-8% growth for the overall security industry, with continued flat to low single-digit growth for traditional businesses, offset by very high growth in excess of 20% for newer technologies such as mobile identification, anti-counterfeiting/authentication and certain niches in cyber like predictive analytics,” says Jeff Kessler, Imperial Capital’s managing director for the Equity and Industry Research Group.
“In the middle, we continue to see low double-digit growth for home automation, while commercial monitoring should grow faster than residential monitoring by a couple of percentage points, both in the mid-single digits.”
Kessler projects 5%-7% growth for dealers with those focused on commercial business faring best, and 4%-6% for systems integrators, including “a handful with customer-focused culture and high IT IQ that will grow 10%-30%.”
IHS Markit Research and Analysis Manager, Technology, Oliver Philippou says his firm forecasts the world market for physical security equipment will grow 7% CAGR through 2021. They are among the nearly 30 market experts interviewed for the annual Security Sales & Integration’s Industry Forecast, believed to be the most thorough instrument of its kind.
Even the minds of those averse to the kind of radical change electronic security is undergoing will rest easier knowing what to anticipate as leading dealers, integrators, manufacturers, consultants and analysts lay it bare. Cue the music of “Cross Road Blues” and discover how security is likely to be conducted in 2018.
2018 Security Technology
Jim Dearing Sr. Analyst, Security & Building Technologies IHS Markit
We will see wider adoption of mobile credentials beyond the hospitality sector. Key early adopters are higher education providers and enterprise-level commercial offices. A challenge is providers of mobile credentials still haven’t really worked out the best pricing method.
Should they charge customers per user per month, per license or give the credential away for free and try to make money selling Bluetooth readers at higher prices? The supplier best able to offer mobile credentials in a secure and user-friendly way will likely not only increase share of the credential market but the reader market too.
It’s also possible mobile credentials remain a complement to the traditional physical credential, which would expand the size of the total market without cannibalizing physical credential sales.
There will continue to be an increase in cameras integrated with intruder alarm systems for the purposes of video verification. Likewise with PIR cameras replacing PIR sensors in some cases.
These products reduce the false alarm rates of intruder systems that in turn reduce alarm monitoring operating costs and responder resources. A challenge is video cameras sold by alarm monitoring companies still remain fairly expensive when compared with the DIY consumer-grade camera option now available on Amazon.
We are still at a relatively early stage in the integration process, meaning there is plenty of room for innovation and cameras with additional functionality. For example, facial and object recognition features figure to become increasingly common during the next two to three years.
Miguel Lazatin Director, Product and Channel Marketing Hanwha Techwin America
With heightened awareness and continued global instabilities, dealers and end users will be looking for high-performance cameras with greater pixel density, longer distances and wider fields of view. Customers will continue to migrate toward technology and camera performance that provides more usable information for forensic analysis.
Disruptive technologies like H.265 will drive integrators to deploy devices and VMS systems that utilize this efficient codec to reduce bandwidth while providing high-er-resolution images. They can also make better use of existing bandwidth with multibitrate, multisensor cameras.
Enhanced on-the-edge capabilities will provide additional choices when designing IP-based video systems that precisely meet end-user requirements. With lower bandwidths, Cloud infrastructure solutions may become an increasingly attractive and affordable solution for more organizations.
Jim Devries President, ADT
The biggest issues will revolve around cybersecurity for both residential and commercial applications. Cybercriminals are as likely to strike small- and medium-sized business as large enterprise companies. As the IoT movement gains traction in the residential marketplace, smart device manufacturers must address the security of their solutions and installing companies must ensure solutions they offer clients can be properly secured.
A second key challenge will be delivering seamless interoperability of multivendor components and platforms to the end user. The end user wins when “best-in-class” physical devices and Cloud-based services are seamlessly integrated.
Opportunities from a commercial perspective lie in offering clients separate networks, aside from the primary business network, for security solutions along with other business automation systems to help protect companies from cyberattacks.
Beyond just designing and installing these networks, managing and monitoring these networks for clients to proactively identify attempted data breaches is another area of growth for qualified security suppliers.
This category will continue to grow with new markets emerging within network/cybersecurity called managed detection & response [MDR], which focuses on threat detection via 24/7 monitoring and instant response versus the traditional approach of prevention.
We are also seeing the need for better cybersecurity solutions expanding from enterprise solutions to midsize and small business segments. Finally, consumers are looking for a secure environment, whether at home, at work or play and on-the-go.
Integrating security solutions with a variety of emerging connected and mobile solutions will present great opportunities as we move into 2018.
Jeffrey He President, Hikvision USA and Canada
Deep learning and AI will change our indus-try and present tremendous opportunities. In addition to enhancing security, AI will provide rapid access to highly accurate business intelligence data that will help run businesses more efficiently. At Hikvision we call the combination of AI and video technology AI Cloud.
This enables the AI algorithm to move seamlessly from edge to Cloud, improving efficiency for processing large amounts of data. Edge computing utilizes local processing to enable analytics at the source of the data.
Powered by AI technology, it strengthens the sensing capability of front-end cameras, and helps us understand the captured scene more effectively and accurately.
With AI algorithms woven into the edge devices, only selected information — an individual or a vehicle in a video image, for example — is extracted and sent over the network. This makes the transmission of data more efficient and reduces bandwidth consumption, while still sustaining high quality and accuracy.
Another major global trend will be the ever-increasing uses of robotics.
2018: Security Markets
Brandon Reich Video Surveillance Bus. Leader, Pivot3
Estimates project the global population could reach 10 billion by 2050. In addition, people are flocking to urban areas and this challenges officials to rethink safety and security strategies, especially in the United States. Use of video as a law enforcement tool has given many neighborhoods previously plagued by crime new life as vibrant, livable communities and as a result many regions are passing legislation requiring the use of video surveillance.
This is leading to the growth of the “safe city” concept in the U.S. Availability of federal grants and even private funding sources make video surveillance and advanced security technologies, like analytics, a viable option for communities across the globe.
Video surveillance can serve as a force multiplier for police by providing live or archived video of any incident to allow intelligent response and ensure a safe environment.
Alice DeBiasio, V.P. & G.M. of Residential Security Americas Honeywell
Nontraditional competitors are pushing further into the professional monitored security and smart home space. These are big brands with deep pockets for advertising and driving consumer demand. Dealers are facing increased competition for consumers purchasing new homes.
Whether it’s the MSO bundling solutions with its phone, TV and Internet offerings, or retail outlets making security cameras more readily available, the pro security dealer is no longer the only game in town. Dealers need to think about why someone should not only opt for a professionally monitored security solution, but why purchase it from them?
Lastly, the professionally monitored, self-installed model is proving a viable means for some pro dealers to get into the DIY space. This is allowing them to take advantage of different business models, such as pay as you go, and different creation costs such as focusing on lead generation/conversion rather than installation.
Peter Boriskin V.P. Product Mgmt. ASSA ABLOY
Sustainability is going to affect all markets going forward. When we look at trends from the residential space, the opportunity to utilize energy-efficient technology in commercial and institutional facilities, for applications ranging from lighting and HVAC to access control, can result in significant savings.
Conversely, much of what was only possible for large enterprises in the past is now coming to schools and other markets. One of the challenges is the people charged with maintaining these security systems, where there are ecofriendly solutions to help lower operational costs, are not necessarily incentivized to follow that path of sustainability.
The opportunity is to continue offering products and solutions that serve this demand in a way that educates, informs and addresses the needs of the end user. Integrators involved in these types of projects will find them an excellent opportunity to grow business.
Mike Bradley President & CEO ECD Systems
Maintaining and growing a quality, trained workforce remains our industry’s biggest challenge. Wage inflation is growing rapidly with no corresponding benefit to our companies. In other words, we find ourselves paying more and more for less and less qualified people.
Our larger customers are driving serious increases in compliance reporting and insurance requirements that are quickly raising our cost of doing business. Prices must increase more rapidly during the next 24 months to avoid deep erosion in integrators’ margins.
Mitch Reitman Principal, Reitman Consulting Group
New technology brings new financial dynamics. Customers will be looking to lease equipment. Companies will face new pricing challenges. Vendors will limit credit availability and equipment purchases per install will increase. Successful companies will negotiate credit facilities with their banks, or find banks that understand their business.
Companies that have a good handle on their financial performance, not just income statements, but job costing and cash flow, will do better than companies that operate by the seat of the pants.
Financial dashboards will become more prevalent as smart owners and management have a desire to exert more control over their cash cycle.
Keep reading to see what experts predict is ahead for the security industry, as well as what they believe 2018 will be remembered for…
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