In an article at Securityinfowatch I argue that technological change has made the video surveillance industry more fragmented and that it is likely to consolidate in the coming years. The article can be found here.
Polaroid went bankrupt in late 2001 as digital imaging destroyed its profitable revenues from instant film photography. In 1997, the stock was traded around 60 dollars, four years later it was frozen at 28 cents.
Ever since, the brand has lived on in various shapes and in various settings, art being one of them. The company recently announced that
it will enter the commercial security market, something that at first appears to be an odd move.
Looking at the current structure of the video surveillance industry this event makes more sense. Video surveillance is undergoing a technological discontinuity where analog CCTV is increasingly replaced by digital, internet-based cameras. Such transitions usually create a temporary spike in firm entry as new companies with different competencies see abundant opportunities. Moreover, most of the components required for manufacturing a surveillance camera are readily available on the market, implying that entry barriers are rather low. And besides, in what other imaging application would Polaroid re-emerge? The regular camera business is fiercely competitive and demands huge economies of scale.
Whether the company will be successful or not remains to be seen. At present, its entry into video surveillance can be regarded as an indication of the hype and Klondike behavior that currently characterizes the security industry. Sooner or later, this must come to an end and the industry will become more consolidated.
Back in October 2009, I made some predictions regarding the growth rate of IP video surveillance. Video surveillance is currently undergoing a technological transition from analog CCTV to digital cameras that are connected over the internet.
The presentation below summarizes my predictions concerning growth rates that could be expected in the period 2009-2013. By drawing upon theory concerning the diffusion of innovations, I argued that growth might be faster than estimates suggested back then. In 2009, IMS Research suggested that about 50 percent might have switched to IP in 2013 whereas I was even more bullish. For a more detailed description of my rationale, please read this presentation:
Current estimates suggest that by the end of 2012, about 40 percent of the market had made the transition to IP. While this figure will continue to grow in 2013, it is still clear that I have been overly optimistic. The presentation above points out that technology is not adopted in a linear way. As the snowball comes into motion and more people become familiar with a technology, the adoption rate increases. How could this argument result in an inaccurate forecast then?
The answer is probably related to how the market is defined. Recall that S-shaped growth patterns occur in a homogenous population where the preferences of users are reasonably similar. If this is not the case, the S-curve of diffusion will be misleading.
Having learnt more about IP video and the technology transition, it has become clear to me that one needs to make a distinction between large and small installations. In larger installations, benefits of IP are more obvious (scalability, lower integration costs) whereas in smaller settings (3-4 cameras), IP has so far been less competitive compared to traditional CCTV. Growth has indeed been phenomenonal in the segment for larger installations and followed a traditional S-curve pattern.
Two conclusions can be drawn from this observation.
1. When making predictions about how technologies grow, one has to be careful about how the market is defined and delimited.
2. In the case of IP video surveillance, there are extensive growth opportunities in the segment for smaller installations.