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I Wouldn’t Do That if I Were You –
The Surveillance Market

By Michael Diamond, Director, Industry Analysis, Channels & Enterprise Technology, The NPD Group

It is no surprise to anyone that we are living in a new world where we are dealing with issues such as political unrest, terrorism, cybercrime and personal safety issues to name a few. When we speak with our clients and partners, the issue of Cybersecurity and physical security are typically two of the key topics that arise since they go hand-in-hand with protecting personal and corporate assets. The next few sections will highlight opportunities we see for partners in the physical security market.

In the business-to-business security and monitoring market, we saw 6% unit growth in 2016 compared to 2015 and a 13% compound annual growth rate (CAGR) from 2013 to 2016, which is one of the fastest-growth areas in the IT market. We believe that will continue over the next several years. Looking at features and functionality, outdoor cameras grew the fastest with 32% year-over-year growth and a 12% CAGR from 2013-16. Cameras with color and infrared capabilities are also on the rise, growing 65% year-over-year and 25% from 2013 to 2016. Another trend we see is the rise of cameras with motion sensors, which grew 14% year-over-year and 5% annually since 2013.

In the public sector, it’s no surprise that the federal government will be a key market for surveillance gear as it increases efforts to protect critical infrastructure (e.g., airports, power plants, railway, maritime ports, etc.) from terrorist activity via the Department of Homeland Security (DHS) and others. For example, the DHS IT budget has increased from $5.6 billion in FY 2011 to $6.5 billion in FY 2017, with projects spanning from remote video surveillance systems (RVSS) to air cargo security. In addition, better surveillance will be needed in federal facilities in the Level III (80,000 to 150,000 square feet) and Level IV (150,000 square feet or more) ranges, as they are often focal points for organized protests along with government monuments. At a state and local level, we expect an emphasis on surveillance for county jails, courtrooms and other critical departments where massive traffic is handled.

In the private sector, firms are strengthening surveillance strategies to help thwart on-premise violence, increase patient privacy and security, lower shrinkage costs and protect against theft of intellectual property. In the quick service restaurant  segment, it is not uncommon to see businesses open 24 hours, which increases the risk of aggravated assaults in later hours. In addition, as more establishments in the segment offer free WiFI and other amenities to attract younger generations, this could also pose a security risk for store owners.

Meanwhile, the brick-and-mortar retail segment is also trying to reduce inventory shrinkage, which is estimated to cost $45.2 billion in 2015, or close to 1.5% of sales. In the healthcare segment, companies handle larger patient volumes and try to enhance patient and staff security, coupled with privacy due to federal mandates (e.g., HIPAA). For example, one area posing risk for hospital personnel is the emergency room ,where wait times are typically longer than an hour and front-line staff is at an increased risk for workplace violence from patients that are intoxicated or have psychological issues.

When we think of physical security, what typically grabs headlines is terrorist activity or other nefarious acts by criminals. However, a key issue companies in the private sector face is the onslaught of economic espionage, or the loss of trade secrets to criminals or foreign governments. Although many have a vision of a hacker in some dark room behind a computer twisting their mustache and poaching secrets, thatreally isn’t the full picture. In fact, a lot of theft stems from employees mishandling or taking confidential information from corporate offices, factories and homes. For example, it is not uncommon for people going to or coming back from a lunch hour to politely hold a badged access door open for a non-employee to enter the building. Non-employees may seek to look under keyboards for login credentials, scan printer stations or administrative assistant desks for confidential presentations (which often have financials and details future strategies) or even plant devices in boardrooms where confidential meetings occur. Thus, when we speak with channel partners about physical and cybersecurity, we always ask how they address the human element or camera placement. Are they adding services such as technical surveillance countermeasure sweeps before high-level strategy meetings occur on campus or at a corporate event at an annual conference?

In summary, we believe the physical security market will continue to grow above traditional IT growth rates as issues such as school violence, bullying, terrorism, shrinkage, public safety and economic espionage continue to plague public and private sectors. Another catalyst will be the growth of handset devices coupled with social media as more people will leverage any prop (person, place or thing) they can to get notoriety in the social media spectrum.