Background

The electronic security industry is currently undergoing rapid change, driven by the ongoing convergence of information, communication and security technology. As mechanical and analogue security products are IT- and network enabled and whole product segments are shifted onto digital technology platforms, the long-established roles and interdependencies of vendors, distributors, resellers and system integrators are transforming. In addition, convergence creates new business opportunities related to e.g. software development, consulting, and security and IT systems integration services. Another direct and significant effect of the convergence process is the expected arrival en masse of IT companies – spearheaded by giants such as IBM and Cisco – onto the highly fragmented physical security market.

As one of the most important segments in the physical security market, the video surveillance market provides an illustrative case in point. Whereas analogue CCTV surveillance systems have traditionally been marketed through specialised security equipment distributors and resellers, new generation IP-networked video surveillance products are mainly sold through IT equipment distributors and resellers. This means that as the industry shifts from analogue to networked video, the sales channel structure of one of the major product segments within the security industry will change fundamentally in the years to come. In addition, the emergence of IP-video systems brings about new business opportunities for a large numbers of actors not currently active on the market, such as intelligent video and biometric software developers, network consultants and IT system integrators.

While the video surveillance segment may be the clearest case, convergence is having similar effects on all physical security market segments. Among security convergence evangelists, the network is the new mantra for the industry, implying that eventually all security technologies – physical as well as IT – will be interconnected on the same network using IP technology. This is not met with unequivocal enthusiasm in an industry dominated by conservative practitioners used to working with closed (analogue and low-voltage electrical) security systems in “siloed” organisations where there was virtually no cooperation or knowledge sharing with IT and information security departments. Consequently, the shift towards networked platforms may take longer and be a more arduous process than some expect.

Nevertheless, there is clear evidence that convergence is a real and powerful trend, and not just an industry buzzword. Major IT and telecom players are currently moving rapidly into the security market, forcing incumbents to react quickly or risk falling by the wayside.

The LUSAX project comes into place as the industry transition described above is still at the very beginning stages. With its longitudinal scope, the LUSAX research project will present a unique opportunity to monitor and document events and market developments as they happen, in order to assess and analyse the long-term effects of convergence on the industry.

Research project objective

The overall goal of this research project will be to study the impact of the convergence process on the global physical security industry dynamics. Specifically, the purpose will be to analyse and gain knowledge on how the value creation process – and the roles of and relations between the different market actors – will change within the industry.

Initially the objective of the field work will be to map the US and European security markets, analyse current industry and channel structures, identify the major players, and determine and compare potential intrinsic national market characteristics.

This will be done by approaching the industry and asking questions from many different perspectives, including:

System integrator perspective

• To what extent will IT integrators and large tech companies (e.g. IBM) enter the security systems integration market?
• Will installers and consolidated locksmith companies take on more complex systems integration tasks?
• Will the complexity of future systems integration challenges favour large, consolidated system integrators at the expense of smaller, regional system integrators?

Vendor perspective

• Will niche product specialist vendors (e.g. Axis) be able to compete head-on with complete system vendors (e.g. Bosch, Siemens)?
• To what extent will direct sales models, bypassing distributors and resellers, affect market dynamics.

Distributor perspective

• What will be the outcome of the convergence between traditional security distributors and IT distributors? To what extent is this process already underway?
• With system integrators and installers partly taking over the distributor role, will there be room for distributors at all?

Contact: Benjamin Weaver