IHS Markit looks at the rising number of security start-ups

OEMs play a factor in increased entrants, according to IHS Markit analyst Jim Dearing
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Monday, November 13, 2017

LONDON—According to IHS Markit, a research firm based here, there have been more start-up companies for consumer grade cameras, DIY systems and smart home solutions. The company detailed the nature of these start-ups and contributing factors to their increased numbers in a report, “Security Start-Up Numbers Soar – Have the Barriers to Entry Ever Been So Low?”

Jim Dearing, IHS Markit senior analyst, security and building technologies and the author of the report, talked with Security Systems News about it. Within IHS Markit, Dearing focuses on electronic access control and consumer video.

“According to IHS Markit consumer video surveillance research, in 2015 companies that were two years old or less accounted for 6 percent of global consumer video-camera market revenues. By 2016, this had grown to over 9 percent,” the report read.

Additionally, IHS Markit predicts that the global market for DIY intrusion equipment will “grow at an average of nearly 20 percent per year from 2016 to 2021.”

IHS gathers data on companies throughout a space—such as the consumer video market—and gathers data directly from companies, or it estimates companies’ revenues or units to get an idea of the overall market and the share one company might have. “From that database, I can pull out how much of the market those young companies represent,” Dearing said.

“There are a number of smaller companies cropping up that are essentially OEMing from Asia consumer video equipment, and not just standalone network cameras,” Dearing said. OEMs have become “larger and more diverse,” which means they can lower their minimum-order requirements, making it easier for entrepreneurs to enter the space.

“They’re able to quietly build some reasonable, respectable sales numbers and that is one of the reasons why that proportion is increasing,” said Dearing.

IHS Markit divides the global market into four geographic regions when it segments the market to look at cameras trends: the United States, the rest of the Americas, EMEA and Asia.

The United States’ market for consumer video is more mature than the professional video surveillance market, Dearing said. The adoption of higher resolution cameras, such as 1080p cameras, is “vastly higher” in the U.S. and, “The adoption of cloud storage use for consumer video surveillance is also higher,” he said.

Crowdfunding has had an impact on start-ups, Dearing said, lowering the barrier for entry.

“The thing about the crowdfunding is that it’s essentially made it easier for more potential entrepreneurs to get that funding,” Dearing said. “The reason why is because they can just post their idea on one of these crowdfunding websites, and because it's the consumer market, they can promise to deliver a product or a prototype in exchange for funding. So, in the mind of a consumer, they are simply purchasing a product in the future and also helping the company grow. It’s a mutually beneficial relationship.”

He added: “Basically, it allows the entrepreneur to secure sales before they’ve even made the product.”

According to IHS Market, the revenue numbers for DIY and consumer-grade products in the security space are comparatively low. The research firm observed that the DIY segment accounted for 2 percent of global intrusion equipment revenues in 2016 and less than 9 percent of the video surveillance market that year.

The report also noted interoperability as a key concern among consumers. “Consumers are now more wary of purchasing products that will not be able to integrate with their existing security/smart home devices. Future start-ups will need to allocate additional developer resources to ensuring that their systems are as open as possible,” it read.