Uncertain times bring new opportunities
While we are being bombarded with concern over the global financial crisis, ADT's Mark Norton sees new doors opening for the security industry.
In 2009, the global economic downturn will be the dominating issue.
Companies must conserve capital and use it more efficiently and get more out of shrinking resources. For the security industry, the downturn can also bring new opportunities.
Five worldwide trends will shape demand for security solutions in 2009:
- Rising crime in hard times;
- Emerging market growth to continue;
- Globalisation keeps shrinking the world;
- IT convergence to drive systems integration; and
- Innovative, cost-effective applications and managed services.
Rising crime in hard times
The historical record shows that crime rises as GDP falls. In the US, for example, the last four recessions going back almost 30 years showed sharp upticks in crime starting at the bottom of each recession. Here in Australia, police crime strategists have launched an internal study to identify areas of crime that can be expected to rise during periods of recession and high unemployment and have tipped shoplifting, house burglaries and street robberies to increase. Many economists believe the current downturn will be longer and deeper than any since the 1930s and last into 2010. Given this view, plus crime’s correlation with recessionary bottoms, we should expect crime to rise through 2009, creating a growing demand for peace-of-mind across both residential and commercial security markets.
Of course, how much that growing demand could be offset by individuals and businesses spending less is speculative at best. But those who do spend are certain to be more price-sensitive than ever. So the key for security providers in 2009 will be to stress the value of protection and peace-of-mind over their cost. In residential markets, value is tied more to emotional than financial benefits, while in commercial markets, value can be tied more to financial benefits associated with reduced risk and lower insurance costs, less shrink of or damage to physical assets, and less chance of business disruption, especially that due to workplace violence – a growing concern of employers.
Emerging market growth to continue
Emerging market growth led by Brazil, Russia, India and China, the so-called ‘BRIC’ nations, will continue despite the slowing world economy. The quarterly World Economic Outlook, published by the
International Monetary Fund (IMF) and released in October 2008, predicted that developing economies as a whole will grow six per cent in 2009 compared to zero growth in the developed world. While that six per cent growth is much less than the blistering growth rates of emerging markets in recent years, it is hardly the negative economic growth that defines a recession.
Another phenomenon occurring in emerging markets is the continued migration of rural populations to urban areas. According to the UN-HABITAT 2008 Annual Report, sometime in the middle of 2007, more than 50 per cent of people worldwide now live in towns or cities – a first time in human history. It estimates that 93 per cent of urban growth in the future will occur in Asia and Africa, and to a lesser extent in Latin America and the Caribbean. By 2050, the report predicts that over six billion people, or 67 per cent, will be living in towns and cities.
Clearly then, with continued economic growth comes a growing middle class and with urbanisation comes more crime, so despite the world economic crisis of today, we can expect the need for security of people and property to grow throughout 2009 and beyond.
Globalisation keeps shrinking the world
In 2009, the IMF predicts that world trade volumes will grow 4.1 per cent, despite the global economic slowdown. That means goods will still be moving around the planet and goods-on-the-move are always an enticing target for criminals. While Somalian pirates steal ships at sea and world headlines to boot, pirates on land prey more quietly but no less brazenly on the goods moving across borders through logistics companies and businesses alike.
From a technology standpoint, the Internet Protocol (IP) continues to reduce distance and allows for more centralised management of security systems that still remain overwhelmingly facilities-based, but the fact that IP video and networks can render borders and distance meaningless presents an enormous opportunity to upgrade security infrastructure worldwide to be more interconnected.
Globalisation also spawns a growing need for global standards, which will further develop in 2009, because open markets demand common approaches. Even though the ‘not-invented-here’ syndrome governs national acceptance of international standards, the fact is that standards help drive down costs. So global security standards are ultimately good for companies by enabling them to manage security across borders in more cost-effective ways.
IT convergence to drive systems integration
Almost 20 years ago before the rapid rise of the internet, Esther Dyson, a well-known IT industry analyst and venture capitalist, predicted that the future of IT belonged to systems integrators. That was a bold statement back then, as the world’s IT infrastructure was heavily proprietary, just as much of the world’s electronic security infrastructure is today.
In 2009, Dyson’s statement will apply more and more to security infrastructure. The integration of IT and physical security, while nothing new, will accelerate. That acceleration is due in equal parts to technological feasibility, performance enhancements and cost-reduction imperatives.
What this trend means is that commercial security issues will continue migrating to wider operational and even strategic intra-company discussions, involving IT, finance, HR, legal, manufacturing and other functions.
Ultimately we see more and more demand for security solutions to go beyond just IT convergence to convergence with business processes. For example, a video application for logistics involves IP video scans of packages and their barcodes. This application captures the date, time and location of the package along with its bar-coded waybill data as it moves through various checkpoints en route to its destination. Also captured is a visual record of the package, so its condition can be monitored or forensically reviewed should it be damaged along the way.
Innovative, cost-effective applications and managed services
2009 will be a tipping point toward the deployment of innovative security applications that incorporate new technologies as well as not-so-new technologies in fresh and more cost-effective ways.
One example is Radio Frequency Identification (RFID), a technology invented 60 years ago. After recent years of hype, RFID is finding its way into practical item-level in-store deployments to help retailers better manage merchandise inventories and prevent out-of-stock situations. Along with improving inventory visibility from as low as 50 per cent to near 100 per cent, retailers are finding 15 to 20 per cent sales increases even in this weak retail environment.
Another major trend we can expect in 2009 is security’s integration with web-based services – also known as Web 2.0 – in both residential and commercial security applications. In general, the interactivity and ubiquity of web services, thanks to wireless broadband, will enable users to more actively participate in their security rather than passively awaiting an alert to some threat. Global Positioning System (GPS) technology can further enhance security applications with precise location capabilities.
Mass notification, for example, can be customised to target specific groups of people either by function, location, threat-level or any other factors, separately or in combination. asset tracking, another example, can help authorities locate stolen goods. With advanced integration of wireless technologies and databases, users can set preferences for alerts to be delivered as text, images or video to their mobile phones, PDAs, laptops or any other electronic means that suits them.
Also, as cost/performance optimisation becomes acute in 2009, our industry can expect to see more and more companies consider shifting their security operations from in-house to external resources. These managed security services can be customised from a hybrid solution located on a company’s premises and using its own services to a hosted, off-site solution that provides comprehensive and tailored protection.
Opportunities exist if you know where to look
Long-term prospects for the security industry remain healthy. While 2009 will certainly provide just about all parts of the world and just about every industry with economic challenges, underlying trends may slow down but will not go away. As new, more cost-effective security applications are introduced, a point will be reached when their cost-benefits are just too compelling to ignore, unleashing a flood of deployments.
Many world-dominating companies were launched during recessionary times. Security providers can take heart that despite the headwinds the industry faces in 2009, opportunities still exist, if you know where to look for them.
About the author: Mark Norton is General Manager, ADT Security Australia & New Zealand