Companies competing in the U.S. commercial end-user security markets are bundling products to counter an increase in competition and shrinking profit margins, says research firm Frost and Sullivan. This is likely to expand their target markets, prevent customer attrition, and thereby, enhance revenue flows.

Untraditional offerings, such as consulting services, systems integration, and broadband, along with sophisticated products, which include biometrics and intelligent video software, form part of these extended product portfolios.

The research firm’s U.S. Commercial End-User Security Markets report reveals that this market generated revenues worth more than $14 million in 2002 and is likely to reach more than $29 billion in 2009.

“Intense competition and commoditization resulted in price wars and have reduced profit margins by 25 percent over the past three years,” says Frost & Sullivan Industry Analyst Deepak Shetty. “This is likely to continue, despite the surge in demand for various security equipment and services.”

The marginal reduction in component costs led to greater economies of scale and enabled companies to cutback prices. They are now focusing on maintaining product differentiation and pace of innovation to remain profitable as this downward spiraling of prices continues.

Manufacturers are buoyed by the rising demand for state-of-the-art surveillance equipment and security services in the wake of 9/11 terrorist attacks and increasing instances of workplace violence, corporate espionage, and employee theft. Industrial end-users continue to be the largest revenue generators while the financial and healthcare sectors are rapidly growing to become attractive markets.

To meet this burgeoning demand, market participants are speeding up research and development processes and introducing innovative offerings, such as remote monitoring services, digital video recording, and ‘do-it-yourself’ kits.

Security software, which includes intelligent surveillance and behavior recognition, and biometrics for signature verification, facial recognition, and fingerprint identification, is gaining in popularity and fetching more revenues.

“High growth is likely to continue in the coming years with the proliferation of new construction works, strict enforcement of fire codes and security regulations, and increase in market consolidation,” concludes Shetty.

For more information, go to www.frost.com.

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