Securing growth

Electronic security systems have become the norm rather than the exception. The new-age security market has evolved from analogue to digital systems. A typical electronic security product portfolio includes systems across intrusion and detection, access control, surveillance, safety, and such.

Sources indicate that the Indian electronic security equipment market industry witnessed a strong growth of over 25 per cent during the last five years and is expected to grow at around 18 per cent for the next five years. This will double its size from about ₹8,000 crore in 2016 to ₹18,000 crore in 2020.

Over the last decade, the industry has grown based on some fundamental drivers such as the rise of organised real estate, growing threat perception and improving value proposition for the customers. These drivers would continue to propel the industry. However, additional trends are expected to create newer opportunities for the players. Tata Strategic has compiled a list of five prominent trends that all stakeholders need to watch out for.

Key trends

The new-age electronic security market has moved much beyond traditional camera devices to include technologies such as sensors, biometrics, real-time connectivity, advanced processing software and analytics. These technologies are also opening up new application areas.

The need for automated security solutions and increased application by the government is driving demand for the new technology solutions. Reports say the domestic biometrics market is expected to have a CAGR of 31 per cent during 2016-21 and the fingerprint sensor market growth is expected at a CAGR of 18.9 per cent (2016-22). This would require the players to ramp up investments and build capabilities.

Additionally, 90 per cent of the current installed surveillance systems are still analogue. (A strong case exists for upgrade to digital technologies.) By all research estimates, the IP surveillance market is expected to grow (1.5 to 2.5 times) faster than the average market growth of 18 per cent.

What began as the security and surveillance products sector has metamorphosed into a solutions industry. Suppliers don’t just provide products off the shelf, but customised end-to-end offerings ranging from location evaluation, installation to monitoring support.

A major player in the electronic security segment considers its e-SaaS business as the new growth engine. The launch of subscription-based security services is an interesting milestone for the industry and could substantially change the conventional business models.

Further, video surveillance and sensor-based security solutions could be very soon moving towards providing business intelligence as well. However, consumer awareness and technical capabilities are key challenges to the growth of these trends, and so firms are expected to invest in these two areas to drive adoption.

The Tier-2 and -3 cities are expected to generate demand for security systems across establishments. Key factors driving demand from these cities are:

Faster real estate growth: Unlike metros where real estate growth has declined, large Tier-2 cities are witnessing an estimated growth rate of 10-15 per cent every year. The drivers (such as increasing penetration of home loans and affordable property prices) seem stronger for Tier 2. Hence they are expected to create more demand for security solutions.

Smart city phenomenon: Growth in the number of smart(er) cities would add to the demand for electronic security. The magnitude of the demand that will be created by this phenomenon can be gauged by the fact that cities such as Beijing and London have over four lakh installed CCTV cameras while Mumbai has about 4,700 in public spaces. This also shows that the government is set to become one of the most important clients in this space.

New legislation will lead to adoption of relevant safety and security solutions increasing demand. Various States have already made it mandatory for all private institutions to have CCTV surveillance. (For example, Tamil Nadu & Maharashtra).

Further stringent implementation focussed on safety (Mumbai fire brigade’s notice to high-rise apartments, star hotels and assembly buildings regarding mandatory adherence to fire safety norms) is expected to increase the compliance rate, thus generating the demand for safety systems.

System integrators are expected to be benefited by the increasing competition amongst electronic systems’ manufacturers and through government intervention. For example, the Make in India drive, along with specific schemes such as M-SIPs are giving incentives to domestic electronics manufacturing industries. Incentives as high as 20-25 per cent subsidy on capital expenditure would make electronics manufacturing a more profitable venture.

However, given the fairly low prevalent equipment cost, the reduced cost base would enable availability of higher specifications and functionalities at same prices. This would also improve the value proposition offered to the customers by system integrators.

We believe that these trends are critical for all existing and upcoming players in the ecosystem. Appropriately leveraging the above trends would lead to “higher-than-industry” growth rate. However, this would require firms to have a clear strategic roadmap that defines focus areas, investment plans for capability enhancement, product development roadmap and go-to market strategy.

Sourabh Gupta is Engagement Manager, Tata Strategic Management Group. Chandranshu Mishra is Project Lead, TSMG and Fazal Sarkar is Associate Consultant, TSMG.

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