CCTV Market Analysis

By Julián Arcila

This generated concern because it could affect, directly or indirectly, the commercialization of security equipment, since for some years the government sector has been becoming an important buyer of technology. It was thought then that at some point the new governments could stop the projects that had been initiated for the implementation of electronic security systems.

In the field of CCTV, 2006 showed itself as a year of great technological transition. IP systems continued with a solid march hand in hand with developments in telecommunications infrastructure, although the latter did not occur in all countries, but in most. Likewise, CCTV continued as the segment that monopolized  the majority of the eyes, this because it continues to be the great reference of security, since this has been projected by the market.

SALES OF SECURITY interviewed representatives of four of the most important manufacturers of CCTV technology (Samsung 360, Infinova, Bosch and LRG, representing Samsung GVI and Everfocus) to analyze with them this market during 2006. An attempt was made to obtain real figures, but this factor is one of the great difficulties of the Latin economy. However, in the following lines we present the opinion of the professionals on what that year brought for that segment.

Market panorama: growth and ignorance

The Latin CCTV market during 2006 had high and low peaks; unfortunately, this territory continues to be characterized by ignorance (a factor that improves every day) and dependence on prices. There is still much to improve in this situation, although it also has its positive aspect, as it opens up business possibilities for many manufacturers and actors.

Bosch presented information from four of its markets: Mexico, Colombia, Chile and Argentina; what can be deduced from the experience of this company is that in general Latin America had a good year in 2006 when it comes to CCTV. For example, in Mexico, the "high end" market experienced a growth of between 8 and 10%, which remained in a trend that dragged on from previous years, said Klaus Blieffert, representative of the firm on Aztec soil; in Colombia, according to Rafael Padilla, of the same company, demand remained on the rise, although competition with new lower-priced brands also grew. Interest in IP products also grew in coffee land. In Chile, according to Alfredo Mascaró, Bosch experienced a remarkable dynamism, while Argentina did not clash with the trend and showed good recognition by the latest solutions in the segment, as Diego Madeo said.

For Samsung 360, the political dynamism was felt in the economy, but this did not make the market leave its characteristic constancy; According to Rafael Ramírez, vice president of sales for Latin America, in the last five months of 2006 there was a great demand for projects throughout Latin America.

Carlos Leschhorn, from Infinova, agreed with the above, who apart from pointing out the reactivation of projects in this market during 2006, stressed that the slowness in decision-making has not been a major obstacle for projects to develop.

Being more specific, the market presented two new trends; when it came to capture units, users focused more on stand-alone units and the weakening of PC capture cards, due to the increase in RMA (return of defective products). Such a situation has caused them to lose a lot of market share. In what has to do with storage, the highlight was the development, by a manufacturer of hard drives, of a product with a five-year warranty, which will generate more confidence in branded products, according to Glenn Patrizio and Manuel Hernández, of LRG.

Market maturity in the face of new technologies

This is one of the perhaps most difficult topics to define because of what the term maturity itself understands; however, if it refers to a certain evolution, it can be said that the result is positive. If, on the other hand, it is used to refer to a market that is really aware of its needs, with its own tools so that the technology works properly and that assimilates high technology in large proportions, here things are not so good.

Superficially it can be said that the market advanced and that at least there is access to technology by users interested in it; however, the already repetitive Latin dependence on price has led to the implementation of unprofessional solutions that adapt to basic needs without taking into account the best performance and without seeking to take advantage of all the capabilities that electronic security offers today.

Bosch's vision leans to this side. In the vision of the representative for Mexico of this company, in some segments the space for highly technological solutions can be opened, but there is another segment of the market in which ignorance abounds and where what is imposed are solutions with little professionalism. Something similar is happening in Colombia. Many customers look exclusively at the price without even knowing what they are acquiring, but at the other end of the chain are those who opt for very professional solutions, almost reaching high integration parameters. In Chile they simply affirmed that there is no maturity, while in Argentina they noted that the lack of maturity of this market is basically due to the fact that technological migration left out many actors and that those who remained were those who chose to hire personnel specialized in networks and specialized in the subject.

In Samsung 360 they agree and reiterate that the lack of knowledge and information is what is affecting the maturity of the market, reducing the possibility of further development. "Decisions are made based on what is needed and not on the best that the market offers," said Rafael Ramírez.

From LRG they assumed the term maturity as synonymous with gradual evolution, which is no less important. In the opinion of Patrizio and Hernández, the proportion that the market has advanced is basically due to the information provided by the sales teams of the different manufacturers, to which is added the progressive reduction of the prices of the equipment.

However, for Infinova, there were markets in which, despite being small or medium-sized, proposals were requested with the latest available technology, even though in many cases the communication needs are not at the point of what systems requested need it. This in many cases leads to telecommunications being forced to the point that they can correspond to electronic security.

Market trends

During the period in question, consumer interest was directed towards IP solutions and NVRs as storage methods. However, to talk about this interest, it is necessary to mention three determining factors to understand why this trend has not been consolidated in the region. On the one hand, the already known issues of ignorance and price dependence, but finally the reality seems to be that telecommunication platforms are not fully developed to support the advance.

Now, the positions of professionals are different compared to what has slowed down the trend, but everyone agrees that IP was consolidated in 2006 as the technology that aroused the greatest interest among consumers.

This is confirmed by Bosch representatives. In Mexico, for example, the sectors with greater economic capacity significantly increased their interest in IP solutions, which was slowed by the lack of infrastructure and budget; however, in this country, conventional solutions (DVRs and analog cameras) continued to dominate a large percentage of the market. In Colombia, something similar happened: a lot of interest in IP solutions, but a lack of knowledge to understand what the implementation of this type of system implies for networks; there were also, at that time, telecommunications problems. Chile also increased its interest in digital systems during that period; in Argentina, this topic was during 2006 the trend with the highest growth in the market.

In the case of Samsung 360, the trend continued in analog systems; NVRs, symbol of this new era for electronic security, hardly underwent a process of adaptation during that year, because they did not have all the knowledge of networks and peripherals that was required.

LRG's vision on this topic marks the first differentiation with the other comments. Hernández and Patrizio said that 2006 was the year in which the digital revolution really began in Latin America, but that it did so at a slow pace, not because of ignorance, but because of the technical limitations and the cost of equipment; this last factor, however, has been ceding and more and more state-of-the-art cameras are used.

On the Infinova side they reported two parallel trends. On the one hand there was a high demand for IP services and NVR systems, but on the other there was also a growth in demand for hybrid projects.

Data from some countries

As expressed above, thanks to the comments of professionals, each nation in Latin America has its differences when it comes to technology adoption. However, it also has its similarities. What can be clearly stated is that in almost all countries the same difficulties arise due to the lack of information and infrastructure.

Mexico

In the opinion of the professionals surveyed, this nation is presenting a rather interesting market for projects. There is good demand for both advanced systems and hybrids. Conventional ones have not left the market; this is how professionals rated the Mexican CCTV market during 2006.

In the opinion of Rafael Ramírez, of Samsung 360, distribution is at its best in this country; Carlos Leschhorn, from Infinova, agreed with the above and also pointed out the demand for hybrid products.

Central America

This market has several particularities. It receives a great Mexican influence and although traditionally it has been a slow market it rebounded during 2006, a situation that was confirmed even during 2007.

For Bosch, according to Rafael Padilla, in 2006 some interesting citizen surveillance projects were presented, but perhaps the biggest feature of the market was the dominance of some megaprojects. What perhaps stoked some dynamism in the market was the imminent signing of a free trade agreement with the United States, which would undoubtedly have a remarkable boost over the ports.

But for Samsung 360, this market has been perhaps the best performing after Colombia; the great cause of this phenomenon was dollarization in several economies of the region, which brought with it a flow of projects of high notoriety.

According to LRG, the Central American market stood out in 2006 basically for its inclination towards projects, this phenomenon being observed mainly in Panama, Costa Rica and Honduras. Those who execute the projects are consultants and risk assessors. However, the market is growing more and more every day. It is destined and determined to grow with high quality technology and equipment; even the issue of network development, as in the rest of Latin America, limits certain types of teams, but they are working on this. We haven't determined growth in round numbers yet, but it's important.

Infinova rated this market as a bit slow, but despite this it is emerging as a good prospect.

Colombia

There are many concepts that are woven around this economy. Certainly, it has been one of the most stable economies, since it has been clearly oriented towards free trade and that government entities have facilitated the realization of investments by granting all kinds of guarantees for foreign investment. Although it has always been a market with great interest in security, 2005 was perhaps the year in which the great potential of this nation began to be seen among its Latin peers, a situation that was also observed during 2006. Its GDP grew by 5.94% in this period.

Rafael Ramírez agreed with the above, who said that since 2006 Colombia has been experiencing perhaps its best moment, thanks to the political stability and cash flow that it is presenting there.

LRG presented elements that were fundamental for this market in that period and that allow us to get an idea of how this market works. According to Patrizio and Hernández, this market has been very traditional according to the use of brands, as it gives great value to the guarantee of the equipment. Perhaps the most outstanding aspect this year was the increasing penetration of emerging brands, which however have not been able to consolidate in the market due to the tradition of this country against brands and their guarantee.

In Infinova's experience, during 2006 Colombia presented an important demand for citizen and urban security systems, most of them with hybrid applications.

Venezuela

The political situation in this South American country gave much to talk about. Beyond delving into ideological concepts, for some economic segments Venezuela was an excellent buyer, since it is said that at present it is cheaper to import the goods than to manufacture or assemble them directly; nor should it be forgotten that during 2006 this country had a 10% growth in its GDP. However, the government's policy of exchange restriction has made imports from this nation difficult. However, it is important that the officials in charge of business in this country themselves describe it briefly.

Samsung 360 was one of the firms that observed commercial difficulties due to the exchange rate issue. The difficulties in this aspect made it difficult for many local companies to survive due to the impossibility of buying their equipment every month.

In LRG's opinion, the Venezuelan market is facing enormous impediments due to the difficulty in importing, linked to the restriction in the handling of foreign currency. What began to become fashionable in 2007 and continued to consolidate in 2007 were the economic cameras, thanks to the "ant" type work carried out by many distributors; but this practice is leading the market to opt for price instead of quality, when what should be done is to generate more education for consumers. Likewise, the market is divided into two groups, integrators and providers of professional services and electricians or "toderos". It is the latter who have preferred to acquire based on prices and not on quality, as the former did.

What Infinova observed, for its part, were important investments from the public sector, but still based on analog technology.   

Peru

During 2006, the Peruvian market had one of its best years to the point of being one of the fastest growing in its GDP during 2006 (7.2%). Its electronic security industry enjoyed during this year a good supply of technology from Asian countries, as well as the United States.

Demand remained high in this nation, rafael Ramirez said, but there were winds of concern about possible political and economic instability.

For other professionals such as Glenn Patrizio and Manuel Hernández, the Inca market is very similar to the Central American one, where the projects have a remarkable importance, being determined according to the suggestions of a large number of professionals dedicated to the specification.

In the opinion of Carlos Leschhorn, the mining and government sectors have had an exponential growth and have energized the market.

Brazil

Brazil is the most important economy in Latin America thanks to the figures it manages. Its GDP had a growth of 3.7% during 2006 and according to the analysis of the security services segment, as integration, carried out by this means in the last edition, electronic security grows every day, being the private sector the most important buyer.

Opinions are not very uniform regarding this nation, but there are several clear elements: there is increasingly a greater transition from physical security to electronics.

Samsung 360 highlighted that during 2006 Brazil was characterized by the large number of "special" projects that were presented, while Infinova highlighted the development of several 100% IP projects.

In contrast, LRG described the market as a territory of affordable pricing and equipment in which projects are still handled by the predominant brands, albeit with lower volumes. The mini cameras are equipment that has found a large market in the South American giant.

Determinants of investment

Latin America is a region that has historically had to deal with the phenomenon of insecurity. It is perhaps this factor that has had the greatest responsibility in making investments in security systems. Trends have been changing, mainly because companies today need greater effectiveness with lower costs, an element that has led more and more companies to look for electronic systems in order to minimize human failure.

Bosch fundamentally coincides with the analysis of insecurity as a triggering factor for the acquisition of security, which is fundamentally reflected in the implementation of citizen monitoring systems by more governments each year; however, in Chile, cost reduction is a top priority for companies and many of them have seen in electronic security the possibility to achieve this goal.

For Infinova, a key factor for the increase in investments in security has been the emergence of greater security requirements for facilities such as ports; additionally, it coincides with Bosch's assessments that insecurity has generated greater interest in citizen surveillance programs, thus raising technological demand.

Sectors that generated demand

The map of security consumption in Latin America is well segmented; on the one hand, banks and the retail sector stand out in demand, but also governments, thanks to the rise of citizen security programs. The residential segment seems to continue in the shadows, because despite many efforts it is still not possible to unleash all the potential it is said to have.

For Bosch, the demand for solutions was quite varied, differing in the countries whose representatives answered the survey. In Colombia, the segments that drove business for this company were government, retail and infrastructure; in Mexico, the public sector also did its bit, as did the banks, which thanks to the legislation have had to implement security systems in a massive way. In Chile, the prominent sectors were mines, government and entertainment, while in Argentina medium and large corporations, as well as government, were the determining niches.

For Samsung 360 customers were divided in a simpler way, so the private company was responsible for 88% of the sales of this company, while the remaining percentage corresponded to the public sector.

For LRG, banking was the gold mine. In the opinion of its representatives, this segment is again at the forefront, with strong intentions to migrate to IP technology, although there is still a little to take that big step. Other sectors, such as casinos and money management houses are still working with conventional systems, as they expect a greater evolution of the networks.

Infinova, on the other hand, concentrated on the large port works, being this sector, along with the mining and the citizen security (public), the most important for the coffers of the firm. In the three segments mentioned, 55% of the activity of this company was concentrated; in the sector where there was greater stillness was banking, where the increase during 2006, for this company, stood at 12%.

Technical preferences of the market

In general, the market showed great interest in IP systems, as already mentioned, as well as domes and equipment with high zoom capacity.

This was the case with Bosch. For example, in Mexico, hybrid recorders were among the solutions that were most in demand, as users have shown a lot of interest in developing their infrastructure to migrate to IP. In Colombia, the demand was for domes, but also for new features such as 36X approaches and systems with IP capacity, as well as for equipment with hybrid characteristics. Similarly, in Argentina the demand was inclined for domes, but also for cameras and IP encoders.

Samsung 360 classified the demand in a more generic way and divided it into cameras and DVRs, corresponding to the first type 80% of the turnover and the rest went to storage units.

For Infinova, the products that were consolidated in the Latin market during 2006 were its analog PTZ cameras, DVRs and fiber optic modules.

Final Considerations

The future poses positive elements and others for improvement. Among the first we can mention, with satisfaction, that the behavior of the market every day shows a more developed niche and with enormous commercial potential.

However, there are several elements that must be monitored, as they undoubtedly distort the market; in such a group can be included the distribution of technology without the required technical support, but also the installation carried out by "toderos", which usually leave some loose ends, harming end users, generating rejections before certain brands that have nothing to do and therefore, undermining the finances of companies that are generating development, in good faith.

At this point, manufacturers have a great responsibility, because not only is a market educated by providing information on the best technology, but also by developing a demanding distribution chain, where not everyone, without previously complying with requirements, can offer security systems.