IMS Research: State Of The Industry 2013

Video Surveillance

By Niall Jenkins, research manager, IHS

The transition from analog to network equipment has been an established trend in the CCTV and video surveillance market for some time now. However, this trend is driving another transition that is gathering pace according to IMS Research (now part of IHS Inc.): the IT land grab of the video surveillance market.

As an example, the “Americas Market for Distribution of Video Surveillance Equipment” report forecasts that IT distributors will account for a quarter of all distribution revenues by 2017. Most of this revenue share will be won from the traditional security distributor.

At its most basic level, distributors are responsible for transporting video surveillance equipment from manufacturers to installers/systems integrators or occasionally to end users. However, in practice, distributors carry out many other functions, such as financing the supply chain, bearing the commercial risk of stock being unsold, and maintaining relationships with both the vendor and integrator community.

Traditionally, the physical security market has achieved larger margins on equipment sales when compared with the IT industry. While there is an argument that security distributors offer more functions and higher service in return for these margins, physical security has proven to be an attractive opportunity for IT distributors. These companies are used to working at lower margins, and this has placed average margins for distribution of video surveillance equipment under even greater pressure.

Many IT distributors are also keen to divest their business across a number of key markets. In difficult economic times, such reliance on a contracting IT market has resulted in significant declines in revenues. The physical security industry, while not recession-proof, fared better than most other commercial and industrial markets analyzed by IMS Research and provides a measure of balance to its core IT equipment markets.

Initial feedback from IMS Research’s Vertical Insight series of end-user research reports shows that the IT department has also increased its influence in physical security projects when compared to two years ago in key markets such as transportation and banking. While this is not altogether unexpected, the extent of the IT managers’ influence, especially in the transportation market, was somewhat surprising given the high level of compliance required to meet industry regulations.

The increasing influence of IT distributors and IT managers presents IT integrators with a real opportunity in the physical security market. However, the dominant players, at least in terms of market share, remain the traditional security companies. While IT distributors have gained market share over the last couple of years, more than 20% of global video surveillance revenues are in sales direct to integrators and installers. This route to market is primarily supplied by the traditional security integrator or installer.

Despite this, IT integrators have a clear opportunity in terms of their networking knowledge and experience. Furthermore, as more of the market moves to IP-based solutions and increasingly through IT distribution, the pull of the video surveillance industry may be hard to resist.

Access Control

By Blake Kozak, senior analyst, IHS

The Americas’ access control panel market is largely split between mature products such as keypad (stand-alone) controllers and serial (RS-485) controllers, and more recently IP-enabled panels and edge devices. Similar to proximity readers, keypad controllers and serial controllers benefit from a large, installed base and product familiarity among distributors, installers, and end users. At the same time, the popularity of IP communications in physical security and access control has given rise to products such as IP-enabled panels and edge devices.

Legacy sales will continue to support the moderate market growth of serial (RS-485) controllers. However, over the next five years, increasing pressure and requests for uniform IP systems (access control, video surveillance, other equipment) will erode market growth, especially that of serial controllers, which will continue to slow during 2015 and 2016.

IP-enabled controllers accounted for the largest proportion of panel revenues in the Americas with a 2012 revenue share of 64.1%. The rise of IP-enabled controllers has led to an emerging trend towards Webbased systems for managing and hosting access control. In this situation, the panel or intelligent reader is Web-based and managed through a Web browser. This offering is typically free to the end user, and the server is located on the end user’s premises. This trend, known in the industry as “Access Control as a Service,” is gaining increasing popularity in part due to its new recurring service model. In 2012, the Web-based IP-enabled panel market was estimated at $41.9 million. The United States represents the best opportunity for the “Access Control-as-a-Service” model thanks in part to the popularity and success of Web hosting services that are ever present in other business applications.

IP-enabled control panels that were PC-based still account for the largest proportion of IP-enabled control panel revenues, suggesting that management of access control systems is still performed on dedicated servers physically located on a facilities premise. PC-based servers allow for more complex and extensive procedures with regards to access management and credentialing. With that said, PC-based servers are almost exclusively used in larger enterprise access control systems and in companies with multiple locations across multiple countries. IMS Research assumes that while Web-based servers will gain popularity in the Americas’ access control market, PC-based servers will still remain the dominant networked connectivity type because of the complex access requirements needed by high commercial and enterprise applications and lingering doubts about hosting security from IP communications. Web-based servers are more likely to see greater traction in SMB commercial markets where access control management is less demanding and more geared towards adding and deleting credentials for employees. However, in recent months access control suppliers have had some success in implementing Web-based systems and Software as a Service for access control in government and healthcare industries. It remains to be seen if these project successes are one-offs or an indicator of future enduser adoption.