An Eye OnPhysical security

The terrorist attack of 26/11 in Mumbai andthe subsequent terror strikes in the
countryhas put the importance of having the rightphysical security solutions and
protocol in the cross hair of architects who are planning new buildings.
Government as well as private owners of edifices are also relooking to see if
their buildings are safe from similar attacks. This has put the importance of
physical security solutions in the spotlight in recent times.As per definition,
physical security is the protection of personnel, hardware, programs, networks,
and data from physical circumstances and events that could cause serious losses
or damage to an enterprise, agency, or institution. This includes protection
from fire, natural disasters, burglary, theft, vandalism, and terrorism.

Market demographics

According to market sources, India's total homeland security spending under
all major threat domains will amount to an estimated total of $8 billion by
2016. Security installations for manufacturing hubs in sectors, such as
petroleum, petrochemicals and power will grow over 125 percent by 2012, the
hotel infrastructure security itself is projected to total over $1.2 billion and
transport sector security (aviation + railway) is projected to total over $1
billion. Security in the BFSI space is estimated to total over $800 million
while government. facilities & real estate is pegged at $400 million. The public
health care sector needs security spending in the order of $665 million while
Industry as sector demands something to the tune of $840 million. Talking about
the current market size, Anand Swaminathan, CEO, Zicom Retail Products shared,
“In our estimate, the market size is at Rs 1500 crore excluding the fire
detection and fire fighting products and expect the market to grow at upwards of
30 to 50 percent in the coming few years.” Ram Krishna G, Technical Head, Sanvei
Overseas said, “There is about 60 percent growth in value terms and 20 percent
in volume terms.”

Trends

Prakash Prabhu, Country Manager, Axis Communications India talked about the
Analog to IP shift in the video surveillance market. “Analog has been around for
50 years now with CCTV cameras being used. However the shift from analog to IP
is now taking place more rapidly and by 2013 it is predicted that in India the
ratio of Analog to IP will be 1:1. This is because of the faster up take of IP
devices compared to analog. The analog market is growing at less than 10 percent
in India and the same throughput for IP is at 40-45 percent annually. The pure
IP market is about $20 million in India now while the entire surveillance market
is around Rs 300 crores in India,” said Prabhu.

There is also a move towards using IP cameras as intelligent devices on the
edge. Prabhu explained, “Conventionally surveillance cameras have been used for
just monitoring purposes. However with IP, the advantage is that they can be
used for other purposes as well. For instance in a retail setup, cameras are
used to monitor pilferage and theft. However IP devices can also be used for
applications like people counters, video POS and retail video analytics. This
enables customers to make better decisions, based on hard evidence and patterns
recognized by these smart products.

Another key vertical besides retail where
this is useful is banking where ATMs can use it to address the problem of ATM
frauds.”

Suprabhat Chatterjee, Senior VP, Cisco, India and SAARC shared a similar view
point, “There is a shift happening in terms of using surveillance not only for
monitoring but there is integration of other applications like energy
monitoring, network monitoring, into one central command and control base. All
this is enabled because it is being done using the network as a platform. This
move from a multi siloed view of things to a more unified view enables greater
efficiency and control for the customer.”

Also the newer devices from most companies are enabled to interoperate with
analog. It can be used in conjunction with existing infrastructure to protect
their investment. While earlier analog devices would run on proprietary
software, now IP comes enabled on open source with even certain options where
popular proprietary shareware is used over IP so that interoperability is made
possible. It is also much easier to plug in applications over the network on
these devices to enable greater functionality over and above what is offered.
The reduction in average selling price of IP has also worked in its favor
although it is still more expensive than an analog solution.

“Over the last one year, the average selling price for IP products have
dropped by 15 to 18 percent,” said Prabhu.

Growth drivers for this business

According to Nisha Menon, CIO, Micro Technologies, “The continuous threat of
terrorism, development of India's infrastructure and the eventual expansion of
the nation's civil aviation capacity will act as drivers of growth in the
market.” Out of Micro Technologies' total revenue of Rs 280 crore, 68 percent
comes from security. The company's distribution model includes specialist
distributors, dealers and retailers besides also supplying directly to the
customer.

Zicom's Swaminathan said, “We are seeing traction from government, public
sectors, commercial, SME and residential segments. We are witnessing encouraging
growth rates across the board from all segments. Our recent wins include city
surveillance projects across major cities in India, major commercial
establishments; upcoming residential projects are evidence of the fact that
growth is not restricted to anyone vertical.” Zicom Group's revenue ending March
2010 is expected to be around Rs. 400-425 crore.

Prabhu felt that government projects are one of the biggest drivers of the
surveillance market. “Sectors like infrastructure and transportation have
received a boost in terms of big spending by the government. Also projects like
Commonwealth Games is a driver for this market,” quipped Prabhu. Interestingly,
Axis products were deployed at the Dr DY Patil Stadium where the IPL games are
being hosted. Rajeev Shukla, Marketing Manager, Tutistech a biometric device
manufacturer, said, “Biometrics is picking up big time and the major spurt for
this is because of government projects like e-passport, e-driving license and
others. The need for biometric identification is going to be huge in India.”

Inhibitors that hinder the business

Micro Technologies' Menon felt that the lack of standards and codes are
major challenges in the market. “Lack of regulatory framework and industry
reluctance to open systems makes your actual users unhappy. Also SMBs would
rather adopt inadequate technology solutions sold by fly-by-night operators out
there and this causes an adverse impact in the market.”

Agreed Swaminathan, “What we now see is an inflection point in this industry. We
do not anticipate any major show stoppers that inhibit growth rates. But
challenges do exist from poor and shoddy jobs from the unorganized segment. This
is stoked by customers who install systems towards meeting compliance criteria
rather than addressing the real need. And when emergencies occur the systems are
not able to detect or deter the threat.”

Concurred Krishna of Sanvei, “Non serious system integrators proliferating the
industry with cheap dysfunctional products are spoiling both customer perception
about the industry and business opportunities for serious players.” Echoed
Shukla of Tutistech, “Low level quality products are impacting the pricing
because they come cheap. A lot of products from China and Korea are of poor
quality although not all are bad.”

Axis' Prabhu felt that the channels are sluggish to adopt new technologies and
this acts as a barrier to realize greater market potential. “Our extended arms
and legs are our partners and if they are sluggish in taking the message to the
market, then there will be a similar response from the market itself. The
challenge lies in adopting the change in technology for our partners. It
requires effort to be certified and trained and that is something we will
address.”

Partners give the ring view

Some partners have expressed an interest to enter this space while others
are getting good business. Anil Sachdeva of Kadam Marketing said, “We are
looking to enter the video surveillance space as this is a huge market and the
market is shifting to more modern methods of securing the physical premises.”

On the other hand, S Nautiyal of Delhi based Spark Technologies regretted not
giving enough attention to this business, “It is really a potential market with
a lot of growth however for us it contributes a minuscule percentage of our
revenue. We have not allocated enough of dedicated resources because we have
been more concerned with our traditional lines of business.”

Santosh Kamble, MD, Nexgen Integrated Systems, an Axis Gold partner said, “It is
a growing market and there is a shift towards IP surveillance. The constant
threat from terrorists and the increasing awareness for intelligent systems is
causing customers to move away from conventional security to spend money on more
modern systems. We are active more in the government and corporate space”.
Superior picture quality, manageability and scalability are factors in favor of
adoption of IP devices while the cost advantage lies with analog cameras.

Another channel partner, Alarm Factory, has been active in the surveillance
space in India for the last one and a half years. “The SMB segment is also a
buyer of surveillance products and not just the corporate segment. Key verticals
however remain government where we work with the defense and police. On the
lower end, we are also active in the housing and retail space. Telecom is also a
sector we are looking to tap into and one of our customers is Uniword
communication a mobile network. Here, we had more than thousand installations of
our intrusion alarm systems,” said Rohit Srivastav, Assistant VP, Alarm Factory
which has done about Rs 4 crore of business since setting up in India.

Talking about the challenges selling, Srivastav noted, “The awareness is often
missing in terms of knowledge of quality requirements. The Indian market is
typically keyed in on the cost and not so much on the quality parameter. This is
which helps our competition with lower quality products to get a foothold in the
market.”

Anil Gupta, Artek Enterprises detailed, “Ever since 26/11 happened, the
government has increased its spending on physical security. This has opened up a
big market for us and we are quite active in the defense and other government
projects. Also since we are majorly into networking, products like surveillance
acts as a natural add-on that we can offer our clients. One of the deals we won
was for the Attari railway station in Punjab which is the first stop on the
Indo-Pak rail route. It's been only a year since we have entered this business
but we have already made Rs 1.5 crore and are targeting Rs 5 crore this year.
Biometrics is another space we are looking at and this is not just restricted to
fingerprint identification but also face recognition technology. This is
especially critical in the defense vertical. Our other customers include HAL,
BHEL in this area.”

Plans vendors have

“Our current partners for the commercial and SME markets are dealing in both
IT and security products. What we are witnessing is pure play IT resellers
getting into this area, so over a period of time we expect majority of our
partners to be from the IT channel community. We are appointing IT distributors
in each state who have the right the channel access across the state. In the
last three months enrolled nearly 1500 new dealers through our 'Millions trust
Zicom' ad campaign. Majority of these are from IT channels. We expect to add
another 5000 dealers across the country this year. We have a strong presence in
all major cities and this year we plan to add 10 tier-2 cities to have direct
presence,” highlighted Swaminathan of Zicom.

Sanvei's Krishna said, “We are not a product manufacturer, so we do not have
distributors. We do however have six value channel partners in various part of
the country. This is a solution centric business. Distribution model therefore
is SI centric with two to three large distributors managing logistics of product
delivery.”

Cisco's Chatterjee said, “In many ways we are trying to grow the market by
influencing policy makers and making them understand the need for certain levels
of security to be in place. In the coming quarter (May-July), we will be
launching some specific promotions to create pull in the market around our
solutions. We will also continue to certify and train our partners in this
space.”

Finally, there is money to be made in this market if partners are willing to
jump on to the bandwagon at the right time. “Channels can add value by
fulfilling latent client requirement of compliance and audit by proposing
products like “debriefing” solutions and analytics and reporting, that can add
unique value to their offerings and to that of the company” signed off Ram
Krishna.

This shows that there are emerging opportunities, more covert than overt, in
providing physical security business solutions for solutions providers. But only
those who get into the domain space ahead of their peers, will be able to
exploit it fully.

John Jacob

johnj@cybermedia.co.in