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Frost & Sullivan

Security industry ‘will shift to service-based solutionS post-pandemic’

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The security industry has ‘tremendous’ investment opportunities despite the economic slowdown witnessed due to COVID-19 and under an ‘aspirational’ forecast scenario is likely to grow at a compound annual growth rate (CAGR) of 4.3% post-pandemic to hit revenue of $140.60 billion by 2025.

That’s according to respected research outfit Frost & Sullivan’s recent analysis, Post-Pandemic Growth Opportunity in the Global Security Industry, in which its slightly more cautious ‘conservative’ forecast scenario predicts that the industry will generate $131.01 billion between 2019 and 2025, at a CAGR of 3.1%.

In the pre-COVID-19 forecast, the industry was estimated to increase at a CAGR of 7.1%, generating revenue of $164.97 billion over the forecast period. 

“COVID-19 will cause a brief slowdown in the security market after almost a decade of uninhibited progress,” said Danielle VanZandt, Aerospace, Defense & Security Industry Analyst at Frost & Sullivan. “Additionally, while some security sectors may find themselves experiencing a slower recovery than others, much of the industry will witness a shift to more service-based solution offerings after years of hesitance by customers to adopt these solutions.”

“The key security markets such as disaster management, banking and finance, and airport security will recover at a different pace, and the time taken to return to pre-crisis spending levels will also vary significantly. Markets that will record higher-than-average CAGRs during the recovery period include ports (4.5%), disaster management (4.0%), first responders (4.0%), and mass transit (4.0%).”

Despite a marginal slowdown expected in 2020 and 2021, Forrester says strong demand-side trends will present immense development potential for security market participants, including:-

  • Digitalization priorities: Remote/cloud-connected access to security systems and monitoring tools will witness a drastic rise in demand as manned guarding will become extremely limited due to stay-at-home orders issued by state or federal governments, and likely not recover once those orders expire.
  • Emphasis on contactless technologies: In the post-pandemic period, contactless technologies such as biometrics, remote access and authentication, and multi-use analytics solutions will attract investments.
  • Plug-and-play surveillance: Customer willingness to deploy plug-and-play surveillance equipment over permanent system additions due to cost-effectiveness will offer vendors repeat business opportunities.   
  • Sensors-to-action: Vendors must prioritize the development/enhancement of data analytics and sensor networks’ capabilities to provide increased value to customers without having to purchase new solutions or equipment.

Post-Pandemic Growth Opportunity in the Global Security Industry is the latest addition to Frost & Sullivan’s Aerospace, Defense & Security research and analyses available through the Frost & Sullivan Leadership Council, which helps organizations identify a continuous flow of growth opportunities to succeed in an unpredictable future.

‘Servistisation models’ becoming commonplace in security industries

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Niche security solutions, rapid advancements in technology and budget pressures are all reasons driving the security industry to explore innovative ‘as-a-service’ business models.

That’s according to analysis from Frost & Sullivan, which asserts that in the end-user space, new business models such as Screening-as-a-Service, Biometrics-as-a-service, ISR-as-a-Service, and Infrastructure-as-a-Service are all gaining traction.

“The ‘servistization’ of the security market is paving the way for the network effect and hybrid business models, not necessarily based on cloud applications, but offering a mix of hardware scalability, limited cost of ownership and controls to clients, such as pay-as-you-grow,” said Aravind Srimoolanathan, Research Analyst, Security, Frost & Sullivan. 

“Incumbents providing solutions through conventional means will face competitive pressures from innovative substitutes, which will lead to merger and acquisition ventures and market consolidation.”

While end-user security strategies are evolving, the report says suppliers are increasingly focused on providing solutions that unify and secure processes throughout various applications.

However, given the complexity of the ecosystem and the number of processes involved, Srimoolanathan predicts customers are likely to continue using multiple vendors for different solutions.

To capitalise on further developments, Frost & Sullivan says players should focus on:

  • High-interest end-user business models such as Security-as-a-Service, which solves long-pending issues like affordability, ease of operations, and significant aftersales maintenance costs.
  • Developing niche AI cloud security solutions through hyper-configurable business models.
  • Security data analytics, which is important among end users (private and government) to understand the return on investment of security investments.
  • Lucrative cybersecurity service sectors like banking, oil and gas, and ports.
  • Niche technologies that are key growth areas, including Identity Management-as-a-Service, Video Analytics-as-a-Service, Electronic Surveillance-as-a-Service, and Cyber-as-a-Service.

“Although as-a-service solutions offer a more customer-centric approach to security, challenges still exist relating to measurement criteria and pricing,” concluded Srimoolanathan.

Image by MasterTux from Pixabay