Most major security firms are now focusing on acquiring missing competencies, filling gaps in their service offerings and divesting lines of business that are not central to their competitive position.
And the impending consolidation of the Indian security industry and the recent M&A activity are examples of an industry that appears far different than it did a few years ago.
Today, India is affected by a number of security issues. The Mumbai terror attacks are still fresh in the mind, Kashmir region has become a melting pot of terrorism, Maoist Naxalite extremists are active in eastern, central and southern India; and other terrorist attacks have taken place all over the country in the recent past.
While politicians and administrators struggle to deal with terrorism activities and heightened local crime levels, the security industry is cashing in on the opportunity.
The other key drivers have been the burgeoning economic development, urbanisation, and aggressive infrastructure activity, poverty owing to imbalanced development, asset creation, and growing consumer awareness of security risks. The growth of the travel and tourism industry has also contributed to this story.
The industry has also evolved over a period through various regulatory policies, with the latest being the Private Security Agencies (Regulation) Act, 2005 and also the recent setting up the National Investigation Agency (NIA), in the wake of the Mumbai terror attacks.
On A Sound Footing
The economic reforms launched in the early Nineties made India an attractive place for investment. Leveraging the low cost base, the country has been found to be attractive enough to multinationals to relocate here. Over a hundred of the Fortune 500 companies now have a presence in India.
Introduction of guidelines by the government in specific sectors such as telecoms, ports, airports, railways, roads, energy and construction development have been done with a view to improving the competitiveness of the Indian economy. A Special Economic Zone (SEZ) Act has also been put in place to facilitate this process.
The huge private manned guarding sector, comprising over 5,000 guard companies and employing more than 1 million people, remains the backbone of the industry.
Born in the Sixties, this sector started with a handful of large players but now companies like G4S, SIS, Tops, SDB CISCO, Peregrine, Checkmate, Premier, GI Security and some others operate through their various regional and city offices to offer protection services nationwide.
Another round of liberalization resulted in the influx of global players like Honeywell, GE, Bosch, Tyco, Siemens and HID. Other global companies too have begun to offer sales and after-sales support in India. Huge government and infrastructure security system projects are being established as end users realize the advantages of electronic protection.
Challenges Ahead
According to Frost & Sullivan, globally, the security industry is estimated at $140 billion and it is growing at around 10-12 per cent CAGR (Compound annual growth rate). India, South Africa, China, Middle East, South America and some of the South Asian countries form the rapid growing markets.
The market for India, combining the organised and unorganised sectors, is estimated at more than $500 million, and growing at about 30 per cent per year. India’s electronic security market is estimated to be in the region of $227 million and is growing at a compound annual growth rate of 8.9 percent.
An evolving business landscape in India, accompanied by the increased use of technology, has brought about a glut of new security challenges that range from breaches in enterprise-level data security to issues of consumer identity privacy.
The spotlight is on India to meet global standards for safety and security and although the electronic security industry, which is largely import based, is fast expanding, it still has a long way to go to match the standards of the developed world.
A trend that has emerged is the industry moving towards a ‘one-stop shop’ model in the commercial and industrial markets as customers seek to decrease their systems integration costs.
Another trend is the thrust to focus on digital from analogue. The industry is witnessing IP-based systems gaining ground and also the convergence of IT and physical security.
Intelligent Facility Management Systems and emergence of security industry publications reflect the maturity of the industry. Also the number of exhibitions and seminars, along with the professionally active involvement of industry associations, are bound to pay dividends.
The Road Ahead
In a bid to garner a share of the market, smaller companies resort to cost-cutting, which results in bringing down the quality of service provided. However, bigger companies, on the other hand, have begun to provide training facilities – job orientation programmes which are reflected in the quality of service offered.
To ensure healthy growth, the security industry must follow some quality certifications. While standards should be formulated for equipment, suppliers and installers should be certified as per their performance and professionalism.
If it is to improve to attain an industry status, the crying need is for self-realization and commencement of accreditation programmes sponsored within the industry by brand leaders like Ingersoll-Rand, Honeywell, GE, Tyco, etc, to bring the skills and maturity levels to world standards.
Interestingly, the concept of Central Monitoring Services (CMS) of alarms is yet to catch on in India, as the end-user expects a private response rather than a police or a state response. As of now, there are about five companies providing CMS and Response services, and the majority of them have started such services in the last couple of years.
However, with more emphasis being laid on the provision and upgrading of electronic protection measures, the future of the Indian security industry indeed appears to be secure!