Security Industry Report

8/6/2019 Security Industry Report

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Industry AnalysisSECURITY PRODUCTS

Research Report

Segment Definitions .......................................................................................................3

07/12/2006

Jerry LvovichBarington Capital Group


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Industry Overview

Security industry consists of thousands of individuals and businesses (notincluding public sector law enforcement) that provide products and services for

the protection and monitoring of life, property and information. Segments,comprising the security industry, consist of Access Control, Biometrics, ClosedCircuit Television, Fire Protection, Home Automation, Monitoring and SystemIntegration.

The market for security industry is estimated to be greater than $30 billion.Different segments are growing between 5% and 20% per year. The securityindustry caters to either government or business. Three main business groups ofclients are Commercial, Industrial and Residential. In 2005, commercial segmentwas near 50% of total business market revenues, despite decreasing by 7%compared to 2004 in absolute value. Revenues from industrial customers were31%, a growth from 2004 of 11% in absolute terms. Residential customersgenerated 19% of all revenues, demonstrating the largest increase, 26%, in

absolute value.

CCTV is leading product revenue generator source with 38% with access controlthe next highest at just 21% according to Security Sales & Integrations 2005Installation Business Report. Fire Protection generates 10% of revenues whileHome Automation only4%.

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Industry Profile

Segment Definitions

1. Access ControlAccess Control is the use of qualifying devices or identification methods at

various points to control the passages of people, assets and vehicles into orout of an area or structure. Access control systems limit access to people whohave authorization to enter through selected points. In short, it can controlwho or what goes where and when.

2. BiometricsBiometric identification uses some unique physiological or behavioralcharacteristic, not shared by any other individual, to positively identify anindividual.

3. Closed Circuit TelevisionClosed Circuit Television, also known by the acronym CCTV, is a private videosystem within a building or complex used to visually monitor a location for

security or industrial purposes. A CCTV system can be recorded and viewedon-site or viewed remotely through the use of telephone lines.

4. Fire ProtectionFire alarm signaling systems consist of a fire alarm control panel, initiatingdevices (smoke detectors, heat detectors, water flow switches, pull stations)and notification devices (horns, strobes, bells). The system automaticallysends a signal to notify building occupants and outside monitoring stationsthat a fire alarm condition exists.

5. Building AutomationHome automation is the use of microprocessor-based intelligence to integrateor control electronic products and systems in the home. Examples of products

to be controlled or integrated are floodlights, coffee makers and computers.Systems (or "subsystems" of a home automation system) include securitysystems, heating and cooling systems, lighting control systems andaudio/video (home theater) systems.

6. MonitoringIf it can be sensed it can be detected, and if it can be detected it can bereported. Monitoring is the key reporting link in electronic security. Alarmcommunications transmits digital, audio and video data over thousands ofmiles using telephone, broadband connectivity, VOIP, radio or othertechnologies. The location that receives and processes this vital information isknown either as a central station or a monitoring center. There are options asto who, how and where monitoring takes place.

7. System IntegrationSystem Integrators are firms and individuals who implement for end userstechnology described in every segment above. System integrators developand deliver security solutions to be employed by government, business andresidential consumers.

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Convergence

1. Centralization of Systems Control

Convergence is main tendency in security systems markets. In commercialand government settings, todays fire, alarm, security and other systems tend

to tie into central information technology networks. Large internationalcompanies increasingly want to manage security systems across multiplesites from a central location. The industrys challenges are to develop cross-functional packaged systems and to service such clients. Overcoming thesechallenges has resulted in consolidation process.

Integration will cover intrusion, locking and access control, all in easy-to-perform functions without having to perform each of the three differentfunctions separately. Such solutions offer integrators foolproof operation anda much better level of safety and security for their clients.

2. Security: Information vs. Physical

AssetsThe industry is moving from a command and control model to a businesscoverage model by converging physical and logical security. The transitiongoes from worrying about the cost of an asset to worrying about theinformation on the asset. As a result IT security is becoming essential part ofthe security industry. Below is the historical and forecasted data on spendingrelated to convergence projects.

Security Convergence Spending in North America and Europe ($mm)Year 2004 2005 2006 2007 2008Total Spending $506 1,123 2,713 5,962 11,290

Industry Participants

1. Large Consolidated Players

Over the past five year industry went through a wave of consolidation. Largeplayers have bought over 50 security and fire systems companies.Conglomerates that operate security divisions include Bosch, Tyco, Panasonic,Sony, General Electric, Honeywell, Assa Abloy, etc actively participate acrossindustry segments. Despite consolidation there are still a few medium andsmall competitors. Smaller firms are finding it more difficult to compete in thenew environments. However the most successful ones find their strength in

product and customer focus, attention to detail and technology innovation.

2. Small Fragmented Businesses

Implementation segment of security industry is still highly fragmented. 50,000individual companies in the United States and just as many abroad comprisethe industry of manufacturers, security installation companies and locksmiths.

There has not been a major roll up which suits smaller providers of security

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equipment and services. This suites well medium and smaller firms as theirclients find them to be the right size.

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Economic Distribution and Trends

Systems integrators experienced a rise in the scale and price of installations, aswell as in gross and net profits. As a result, integrators are installing nearly twiceas much of CCTV products then any other product. This can be interpreted as agrowth potential for CCTV product suppliers and manufactures. On the other

hand, suppliers and manufacturers of access control systems may have toreevaluate their strategy. Research report by Frost & Sullivan notes that keyfactors behind increased demand for electronic security equipment are stringentinsurance requirements and new technology developments.

Network Cameras

Network camera market is expected to grow 53% annually to exceed $1billionby year 2009 according to World Market for CCTV & Video SurveillanceEquipment, a study from UK research firm. IP-surveillance market was over$200 million in 2005, however this year along there are numerous examples

of installation contracts for major airports. This segment represents a greatfeasible growth opportunity. Airport Security Equipment Industry earned 2,616billion in 2004 and is expected, by Frost & Sullivan to earn $6,120 million in2009 an average annual growth of 18.5%. Such tremendous growth can beexplained by two factors, heightened awareness of the products value andintroduction of higher quality equipment, such as mega-pixel cameras andnetwork-dome cameras. Note, that this segment had grown in 04 and 05faster previous research had predicted.

Biometrics

Biometrics market is growing at a phenomenal pace. In 2002, total size of

global and North American biometrics market was $561million and$249million respectively. In 2004, market size grew to $1,137million and$527million doubling in size over only two years. Moreover, in 2008, Globalmarket is expected to reach 3,449million, while North American wouldaccount for $1,419 million of it 32% annual growth globally and 28% annualgrowth for North America. Currently, traditional fingerprint technologyrepresents most of the market size. Most of the growth, however, would comefrom developing more then one technology. Purchasers demand integratedmultimodal (more then one verification method) solutions. Currently 95% ofplayers offer only one-in-seven technologies. This factor may contribute togreat consolidation within this industry segment.

Over 70% of respondents support biometrics as a way of verifying identity

according to a recent study of publics attitude across the world. Convenienceof not having to memorize ids and passwords was named as a majoradvantage. Voice recognition lead the list preferred methods, according to

The Ponemon Institute, followed by fingerprints, facial recognition, handgeometry and iris scans.

Access Control

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Access control is possibly the most mature segment of Security Productsindustry. Current U.S. access control systems market at $768.5 million, whileglobally its expected to exceed $1,700 million by the end of 2006. Marketresearch firm RNCOS expects this market to grow at annual average rate ofanywhere between 10% to 37%. At the same time, Access Control segmentparticipants enjoy the widest gross margins of any other industry segment.

According to IMS Research, intrusion detection portion of access controlmarket could experience annual growth of 6% for at least next 5 years. Themajor contributor to such growth is higher reliability of wireless alarmequipment, that previously was considered to be to risky for security.

RFID

Consumer Packaged Goods

Sales of Radio Frequency Identification (RFID) systems, which account for alarge portion of Access Control market, have tremendous growth potential.

Wide use of RFID tagging is becoming imminent, as security concerns widenand modern technology evolves. This technology should replace barcodesystem in the supply chain. However, there are questions regarding ROI onRFID technology use in Consumer Packaged Products sector. Currently ADTand OAT Systems are sponsoring major study on ROI value in retail involvingmajor CPG manufacturers and retailers.

Wal-Mart has adopted an RFID requirement to all of its suppliers. FDA hasurged pharmaceutical companies to consider RFID tags as a way to battleexploded counterfeiting of drugs. RFID tag technology allows for instanttracking and global locating of marked assets. According to In-Stat, marketresearch provider, 1.5 billion tags were produced in 2005, while 33 billion areexpected to be produced in 2010. This represent 85% expected annual growth

of units sold.

Personal Identification

Another area of possible RFID growth is using passive RFID chips in passports,drivers licenses and other identification documents. However, using RFID innon-government issued Ids might become illegal. States such as California,Alabama, Illinois, New Hampshire and Rhode Island are considering eithercomplete or partial ban on the use of Radio Frequency chips by businessconsumers.

Sources1. Security Industry Association Research Update Report for the 1st Quarter,

20062. SecurityInfoWatch.com3. www.SecuritySales.com Market Statistics4. Frost & Sullivan (www.frost.com) market research firm

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Appendix A: Detailed Segment Description

Access Control

What Is Access Control?

Mechanical locks and keys are the most basic form of access control, butelectronic access control solutions are now the norm in commercial facilities andincreasingly in residential applications.

The use of electronic card readers, keypads, biometric devices or acombination of technologies that restrict the passage of persons, assets orvehicles from one point to another. Digital memory can keep track of who/whatwent where and when.

Access control is typically to control entry to parking lots/structures, buildingentrances, critical areas within buildings, elevators, etc.

Components of Access Control Systems

Credential:This is the identification device carried by the user to access controlled areas. Itcan take any of the following forms: electronic key/tag flat card suitable for photo ID lamination personal identification number (PIN) assigned to the user biometric (fingerprint, hand geometry, or iris)

In some instances, a card may offer more than one technology, thus allowing thecard to be used for either multiple applications or on multiple systemssimultaneously.

Access Control Readers:Readers are devices that only allow access to a preprogrammed set of identifierssuch as a numerical code, a magnetically encoded or pre-encoded set of data or abiometric template such as a fingerprint, hand geometry, or iris. Readersincorporating technology such as PIN, proximity, Wiegand, magnetic stripe, smartcard, or a biometric are designed to meet access control needs in a variety ofenvironments. Readers are available in multi-colors and styles, including low-profile, mullion mount, brass and stainless-steel vandal-resistant versions. Accesscontrol readers may be stand-alone units controlling one door each, or in largersystems may be connected to a door controller.

Door Controller:A door controller is the backbone of a multi-door access control system. Today,door controllers typically manage two, four or eight doors. Except in the case ofsmall or off-line systems, door controllers are connected to a centralized PC; thisconnection can be hardwired or done through a LAN/WAN or TCP/IP connection.Using distributed logic and information retained from the software managementsystem residing on the PC, the door controller processes information receivedfrom the reader. Dependent upon the system, the door controller has a number offunctions including locking/unlocking doors and sending alarms.

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Optional PC Administration:As the number of doors in an access control system increases, the easiest way tomanage the system is via central administration with a personal computer.Remote sites can be linked to the central network controller via LAN/WAN, TCP/IPconnection, modem, fiber optic, microwave or radio link. Today most accesscontrol systems run on Windows or LINUX based operating systems.

Applications

Who is using Access Control? Commercial office buildings both single and multi-tenant Property Management companies Government / Military Airports Educational facilities Public buildings (libraries, museums) Manufacturing Financial institutions Parking structures and lots

Prison Systems Healthcare And many more

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Biometrics

How Does Biometric Identification Work?

All biometric devices work by matching an individual's features to the onerecorded in the device's memory. That individual's record is commonlydistinguished by the use of a PIN (personal identification number). This one-to-onecomparison mode of operation is known as verification of identity of the "verify"operational mode. The user must identify him/herself to the device by way of apersonal number or card so that his or her identity may also be corroborated bythe device.

Comparing Bioidentifier Technologies

Trait comparison

The bioidentifier technologies that register and compare these characteristics

may be further divided into three categories: Behavioral Traits, Topological Traitsand Discrete Traits.

Behavioral Traits are habituated activities which a person does in a regular,learned or otherwise consistent manner. Examples are handwriting, keyboarddynamics and voice verification.

Topological Traits are unique, superficial, physiological characteristics whichremain reasonably stable enough throughout an individual's lifetime to serve asbioidentifiers. Among these are fingerprints, hand geometry and facial features.

Discrete Traits are characteristics which are neither behavioral nor topological.Discrete traits may not be acquired without the knowledge and consent of usersnor be used to track persons. Retinal vasculature is an example of a discrete trait.

Measuring comparison

Another way of comparing bioidentifier strategies is through the technique bywhich the trait is recorded or measured. Although there are some hybrids of thefollowing methods, the basic types of trait signature methodologies are by meansof:

1. The recording of "minutaie" or a set of minute feature detail types andlocations extracted from imaging of the trait, accomplished by physical contactmethod and/or electromagnetic scan such as in fingerprint or eye/iris scan;

2. Graphically based measurement comparison via physical contact method orelectromagnetic scan such as facial characteristics or hand geometry;

3. Sound (voice) recording analysis;

4.Non graphical remote electromagnetic trait acquisition and comparison whichdoes not record minutaie or video images such as retinal recognition.

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Biometric Verification vs. Automated Positive Identification Systems

Biometric verification systems operate on the principle that a device is able tomeasure a unique physiological or behavioral characteristic and compare thatcharacteristic with a record of the enrolled individual. An enrolled user firstidentifies him/herself by means of a code and then allows the targeted trait

(which was registered at enrollment) to be read again by the device to comparethat reading with the enrolled trait. In this manner, the device is able to verifywhether the individual is, in fact, the person whom s/he claims to be. Theadvantage of this process is that it validates or "verifies" the authorization of theuser of the card of code as a protection against its use by unauthorizedindividuals.

Automated positive identification (APID) systems also acquire a trait "signature"from an individual, but perform identifications in a fundamentally differentmanner. Individuals' characteristics are archived within the system's memory asthey are in biometric verification systems, but subsequent trait readings arecompared to all archived templates and "recognized" on the basis of whether amatch exists with anyone enrolled. The advantages of APID are that they

completely eliminate the device or code custody requirements for such things askeys, combinations, codes, cards and passwords which are the weakest links inconventional security and identification systems.

Recognized Biometric Identification Technologies include:

DNA Electrophoresis * Laboratory setting only Handwriting Dynamics Eye - Iris Scan Eye - Retinal Recognition Infrared Imaging Facial Characteristics Keyboard Dynamics Fingerprint/AFIS * Automated fingerprint Identification Systems

Voice Verification Application Hand/Physiological Geometry

Electronic bioidentifiers have been applied in a wide variety of securityapplications. Among these applications are:

Electronic access control Inmate booking & release/parole ID Safe & vault security Elimination of welfare fraud Time and attendance Information security ATM Benefits disbursement

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CCTV

What are the Basic Components of a CCTV System?Most CCTV systems consist of the following equipment:

1. CCD (Charged Coupled Device) CameraThe modern CCTV video camera is available in both monochrome (blackand white) and color. Cameras can be set in fixed positions or placed onpan-and-tilt devices which will allow the camera to be moved up, down,left and right. Using a zoom lens will allow a closer view of the person orobject you wish to see.

2. MonitorA monitor is very similar to a standard television set, however, it lacks theelectronics to pick up regular television. Monitors are available in bothmonochrome and color versions.

3. Time-Lapse RecorderThe video recorder commonly used in the security industry has the ability

to record up to one week of video on one tape. The most commonly usedtiming is the 24-hour mode. Having to change tapes only once a day andretaining large amounts of information are advantages of using this typeof recorder.

4. Coax CableCoax cable is the standard means of transmitting video in a CCTV system.Coax is the same type of cable used by cable companies to send televisioninto the home.

5. Control UnitIf a CCTV system has more than one camera, there must be a way tocontrol each video signal going to the VCR and the monitor. There arethree basic types of Video Control Units:Switchers: Units that provide full screen images, one camera after

another, typically for 3 to 5 seconds each. When one camera is on thescreen the other cameras are not being recorded.

6. QuadsA Quad sends up to four cameras to the screen and to the recorder at thesame time, each camera gets a quarter of the screen. All of theinformation from each camera gets recorded but only in small quarter-screen clarity.

7. MultiplexersThese units are high-speed switchers that provide full-screen images fromup to 16 cameras. Multiplexers can playback everything that happened onany one camera without interference from the other cameras on thesystem.

What is Resolution?Resolution is a measure of how clear and crisp an image on the monitor appears.Each piece of CCTV equipment in a system plays a part in the overall imagequality and the final image will only be as clear as the piece of equipment withthelowest resolution. If you are using a high-resolution monitor and a low-resolution camera, the monitor will display the image quality of the lowerresolution camera. This becomes increasingly important when recording thesystem. The image quality when playing back a tape is typically half that of yournormal monitor image. Be sure that the resolution of a system will fit your needs

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before installing the system.

What is Remote Transmission and Alarm Verification?Remote Transmission and Alarm Verification are new CCTV technologies thatallow a CCTV system to be monitored and alarm conditions to be verified from aprofessional central monitoring station anywhere in the world. The central

monitoring station responds to alarm situations not only by recording and viewingthe site, but also by turning on lights, opening or closing gates and doors andeven interceding with live audio. While this technology cuts down on false alarmsand gives authorities better information, such as license plate numbers andphysical descriptions, it also gives companies the ability to "look in" oninventories, point of sale displays and employees.

Where is CCTV Being Used?CCTV is being used effectively almost everywhere. From airports to day carecenters, even in our homes we are finding benefits in seeing who is at the frontdoor or watching the baby. You will find cameras protecting parking garages,apartment complexes and many of our workplaces. You'll find cameras in manypolice vehicles to document and help keep our roads safe.

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Fire Protection

What are the Basic Components of a Fire Alarm System?

1. Fire Alarm Control PanelA fire alarm control panel provides the necessary circuits to power the fire alarm

system. It receives signals from detectors and transmits the signal to thenotification devices. Fire alarm control panels also supervise the system wiringand the primary power source to the panel. Auxiliary power supplies in the controlpanel are required in the event of a power failure.

2. Initiating Devices Smoke Detectors: Devices that detect invisible and/or visible products ofcombustion. These detectors can be of the photoelectric or ionization type andcan also have a heat sensing element; Heat Detector: Devices that detect high temperatures or a certain change intemperature over a fixed time period, called rate-of-rise detectors; Pull Station: Fire alarm box containing a glass plate, rod or pull element thatmanually activates an alarm;

Waterflow Switch: Switch installed in the fire alarm sprinkler system thatmonitors the flow of water in piping serving sprinkler heads. This switch willactivate when a sprinkler head discharges.

3. Notification Devices (also called Indicating Appliances)Strobe and Horns: Audible or visible devices used for signaling an alarm conditionin a building. Horns must be of a certain decibel level over ambient noise toeffectively alert occupants to a fire. Fire alarm strobes typically employ xenontubes and light efficient reflectors to pulse at a certain flash rate to signal warningof a fire. The Americans With Disabilities Act additionally specifies stroberequirements for evacuation of the hearing impaired. These strobes feature anextremely high illumination (candela) to ensure that occupants, especially thosein sleeping quarters of hotels, will be adequately protected in the event of a fire.

How Does the System Work?

When a smoke detector senses particles of combustion, or a heat detector isactivated through an increase in temperature, or a pull station is manuallyactivated by an individual, an alarm condition is conveyed to the fire alarmcontrol panel through the initiating circuit. The fire alarm control panel thenresponds by activating the indicating appliance circuit, sounding the horns andfiring the strobes. Monitored fire alarm systems can simultaneously alert buildingoccupants and a central station of the fire department that there is an alarmcondition at the protected premise.

If there is a power failure in the building, the fire alarm system will still bepowered by a battery backup. This battery backup must be capable of functioningand activating an alarm for a specified length of time per NFPA (National FireProtection Association) requirements. In addition to having UL approval on allcomponents, fire alarm systems are also required to have smoke detectors andpanels listed with Underwriters Laboratories to ensure that they will beelectrically compatible.

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Unlike stand-alone residential smoke detectors which have reset buttons, firealarm systems must be reset at the panel. Action must be taken to investigatethe cause of fire before the system can be reset, ensuring the highest level ofprotection and life safety.

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Home Automation

A home automation system is a central processor that receives signals fromseveral electronic devices (or from events like sunrise) and responds bytransmitting appropriate signals to other devices. For instance, upon receiving an"input" from an occupancy sensor that detects motion in the front hallway, a

home automation system might trigger the "output" that turns the hallway lightson and cranks up the heating in the home. The input could be an internal clockthat strikes 7 a.m., with the output being to start the coffee pot, draw open themotorized drapes in the bedroom and start spinning a slow CD.

User Interfaces

A home automation (or "home control" or "whole-house control") system normallytakes the form of a central processor unit (CPU) and several user interfaces. TheCPU initiates or routes communications signals throughout the house. Userinterfaces can be:

keypads

touchscreens

panic buttons

TV screens

computers

telephones

hand-held remotes or other devices that consumers use to send/receive signalsto/from the CPU.

Home Automation Networks

Regardless of how a home's electronics communicate with each other, they mustcommunicate over some kind of residual network. The networks can be wireless(infrared or radio frequency), or wired, the more widely used approach today.

Wired communications offers several options. Components may be hardwired toeach other, so that, for instance, one dedicated wire connects a bank of lights inthe living room to the home automation system. For new constructionapplications, hardwiring is normally considered the best option -- the proper

cables can be installed before the walls go up. For retrofit applications, when itcan be costly or difficult to fish dedicated wiring behind the walls, "softwiring"might be a better option.

Softwiring employs cabling that already exists in the house to route signalsthroughout the house. The cables are the AC wiring that can be accessed throughstandard electrical outlets and telephone wiring that can be accessed throughphone jacks. Although softwire communications has improved tremendously overthe years and can support even elaborate home automation networks, it is often

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considered to be less reliable than hardwiring since multiple devices share thesame wiring, and noise may be present.

Home Automation Standards

So many types of products--PCs, light switches, coffee makers, thermostats,

televisions, etc.--can be integrated into a home network. Yet these electronics aremade by a wide range of manufacturers who build the products withoutintegration in mind. When an array of products from disparate manufacturers allcoexist on the same network, the communications between them can getmuddled. Installers may spend months writing programming codes to allow onesystem to communicate with another. To facilitate cross communication in awhole-house network, the home automation community is attempting to developsome technological standard -- in the form of a chip -- that can be built into homeelectronics.

The oldest standard is X-10, the SMART HOUSE standard that has been utilizedfor years, but in a limited fashion because of the proprietary nature of thetechnology. Other more open protocols under discussion include the Consumer

Electronics Bus (CEBus) and LonWorks; however, no industry standard hasprevailed. Manufacturers have been reluctant to build intelligence into theirproducts until they are confident that other compatible products will be available.

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Monitoring

What is Proprietary Monitoring?

Proprietary monitoring is a business that maintains a monitoring center or centralstation on its protected premises, or performs those functions for its own

properties off-premises.

What is Contract Monitoring?

Some alarm companies monitor the alarm systems they install by maintainingtheir own central station or monitoring centers, but the majority of alarmcompanys contract with third party central stations to provide professionalmonitoring services to their clients.

How Does it Work?

An alarm control device (panel) interfaces with a communications network to

deliver an encoded electronic message for response. The control can be a closedcircuit television system or an alarm system.. In some cases, the central stationmay initiate video or audio surveillance, but in most instances alarm activationtriggers a the encoded signal, which is then transmitted to the central station.

The central station decodes and processes the data it receives and acts accordingto pre-determined instructions. Within seconds, the predetermined response isunder way.

What Significant Changes have Occurred in Electronic Security Monitoring?

Electronic monitoring began well over one hundred years ago when Edwin Holmesdraped cotton-coated wires across Boston directly to the first central station inAmerica. Various direct wire technologies dominated the industry until the

invention of the "tape dialer" some forty years ago. On alarm activation, thealarm would access the user's standard telephone line and play a pre-recordedmessage indicating to the police or fire department that assistance was needed.Without the need for direct wires, the market for alarms was greatly expanded.

In the early 1970's another technological breakthrough created major changes inthis field, i.e. the creation of the digital communicator. This new device called ahost receiver to transmit pre-encoded data and was more secure and far morereliable than the tape dialer. More significantly, however, this development led tothe formation of the contract central stations that prevail today.

Alarm users subscribe to, and have their alarm systems monitored by, aprofessional monitoring service. By 1975, the first third party contract monitoringservice was founded to provide alarm companies and their clients with nationwidecoverage, which also relied upon the new WATS (Wide Area Telephone Service) todeliver the encoded messages over great distances on the telephone network.

There are now millions of alarm systems utilizing digital communicators that aremonitored by central stations throughout The USA, Canada and Europe.

Who are the Subscribers of the Third-Party Contract Monitoring Services?

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Subscribers of contract monitoring services are as diverse as the generalpopulation, and include homeowners, commercial & retail firms and remotelocations. It is no longer just for businesses and the well-to-do. Affordable alarmsand alarm monitoring makes having electronic security system a modernnecessity. Home automation and industrial environmental control monitoring arealso growing segments of this market. Personal emergency response systems

(PERS) exhibit strong growth, and play an active role in health care costcontainment.

What Types of Conditions are Monitored by Third-Party Contract MonitoringServices?

From the most common to the most unusual emergency conditions, centralstations monitor them all. Burglar alarms, fire alarms, emergency medicalconditions, panic alarms, carbon monoxide detectors, temperature, water level,etc. If a sensor can detect a change in circumstance, the contracted centralstation can monitor it, direct the proper response - and probably does! Here are afew the more unusual applications:

Agricultural - After experiencing a number of explosions, a hog confinementcenter in the Midwest installed a special gas detector to report highconcentrations of methane.

Industrial - A photo processing plant monitors dozens of variables, includingambient heat and light, to safeguard the quality of its product, and your family'sphotos.

Commercial - A store in a high crime area signals the central station when itopens and closes. Its system uses listen-in and talk-back microphones to protectboth property and personnel.

Residential - The common home alarm system senses not only intrusion andfire, but also water in the basement, low temperature and carbon monoxide.While the family vacationed, the heat in their home failed and a water pipe burst.

The water sensor activated a digital communicator, notifying the central station,which called a neighbor with a key. A plumber was called and the amily returnedto a warm, cozy and dry home.

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System Integration

What is System Integration?

To understand the trends relating to security systems integration, one must firstunderstand the meaning of the term. What exactly is "security systems

integration?" Even as definitions are debated among suppliers, end-users andindustry suppliers, what it often comes down to is this: It means whatever thecustomer says it means.

For example, for a bank security manager it might mean "combining security,safety and prevention into one package." For the facility manager of aneducational institution, it might mean "less paperwork and more control of thetotal system." In the government realm, it might mean "the ability to combine thenew technology with the old." In the industrial/manufacturing setting, it couldmean "ease of use" or "systems information collected and compiled on one pieceof equipment."

For every customer who admits to not knowing the meaning of security systems

integration, there seems to be one who says it means "everything." Somecustomers admit to being "behind in this area," which makes them even moreanxious to "get on board with updated technology." Many feel the urgency to stayahead of the curve; all are looking for effective solutions for specific needs.

In the broadest sense, security systems integration is most successful when itmeets users' expectations. The technology is most valuable when it does the job.

INTEGRATION "GLASS:" HALF EMPTY

When 34.7% of respondents to a survey say their organizations' security systemsare currently integrated, one can only interpret the number while keeping in mindthat it includes respondents whose ideas of what constitutes integration vary

widely. But even considering the variables, it is clear that the integration glass isfar less than half full; the industry has a ways to go to meet all its customers'needs in this area. Expectations also vary according to industry segment, as dothe numbers. Responses from utility organizations suggest they have the highestrate of integration at 41.7%. Educational institutions have the lowest rate at18.8%. These numbers are from the 1998 Security Systems Integration Trendsstudy, whichAccess Control & Security Systems Integration magazine undertookto profile the state of security systems integration and to shed light on how end-users are putting technology to work to achieve their security goals. Conductedby PRIMEDIA Intertec Planning and Research department, the study is based onresponses to a mail survey of security personnel at companies and institutions.

Of the 34.7% of respondents who say their organizations' security systems arecurrently integrated, more than half - 65.7% - say they are also integrated withother systems. Some 48.9% are integrated with fire/emergency managementsystems; 28.5% are integrated with communication/telecommunication systems;15.7% are integrated with HVAC; and 15.7% are integrated with time andattendance.

Integration with other company locations is another widespread trend among the34.7% of respondents who say their systems are integrated. Of that portion, some40% say their systems are integrated with other locations. The highest incidenceof multi-location integration can be seen among banks (64.3%) and utility (64.0%)

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respondents, a likely product of the multiple units and smaller sizes of thesetypes of organizations.

Verbatim comments from respondents again emphasize the variety of integrationscenarios. Here are some typical responses:

"All devices are integrated through my computer with three remotesite locations."

"Card access and alarm monitor points report to a central station."

"Card use in some areas triggers a camera to record immediately."

"(We have a) single system for alarms/access control. Certain alarmscause actions, i.e., lobby lockdown upon intrusion/panic."

"Access control system incorporates identification badges which areused to access buildings, parking lots, and to record time and attendance."

"Software and hardware alarms and intercom activation call upcameras and initiate alarms on the electronic access control system."

WHAT COMES NEXT?The technology is not standing still, and neither are the users who responded toour survey. Inspired by technological advances - but rooted firmly in the goal ofmaking their systems perform more effectively in the context of their businessenvironments - more than a quarter of respondents (26.2%) say they plan toredesign their security systems in 1999. Other plans for the coming year includeintegration of the security systems (15.6%), integration with other systems(14.3%), and integration with other locations (13.7%).

Looking further ahead, 25.6% of respondents plan to redesign their securitysystem in the next five years; 22.9% will integrate their systems with othersystems; 18.4% plan to integrate their security system, and 14.6% plan tointegrate their systems with other sites. Only 29.6% have no plans to integrate inthe next five years.

Some 50% of respondents indicate that their organizations are moving towardsystems integration. The top 10 components targeted for inclusion in anintegrated system, led by alarms (66.3%), are cameras (61.2%), CCTV equipment(59.9%) and cards and readers (55.1%).

WHO DECIDES?Our survey asked about who is involved in the decision-making process forsecurity systems and separately about decision-making for "integrated systems."Only 18.1% of respondents indicate the MIS director/network administrator isinvolved in decisions relating to integrated systems, and only 13.3% say MISdirectors are involved in decisions about security systems. The securitymanager/director is more likely to be involved in both instances: 66.8% forsecurity systems; 49.9% for integrated systems, according to respondents. The

chart on page SS-5 illustrates the survey responses about the involvement ofother players in a company or institution in making these decisions.

Why do companies install security systems? Several factors rank high as involvedin the decision-making process with "need for security," not surprisingly, toppingthe list at 5.01 (on a six-point scale). Of more specific influencing factors,employee confidence was rated top (4.84), followed by liability/costs (4.73),customer demands (4.61), and price of systems (4.54). Rated less importantamong respondents was reduced staffing (3.7). Some 37.5% of respondents say it

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is less difficult to convince management to spend money on security systemscompared to five years ago. Another 39.1% say it is about the same, while 18.9%say it is more difficult.

BUDGETS UP OR DOWN?

Money is plentiful among security budgets, according to respondents, 41.5% ofwhom say their security budgets have increased in 1998 versus last year. Another40.1% say their budgets have remained constant; only 13.4% say they havedecreased.

Companies watch carefully where the money is spent, and many look to cost-justify security expenditures. Among survey respondents, 38.1% say theircompanies "always" seek to cost-justify investments in security hardware andsystems; 28.2% "often" do, another 21.1% "sometimes" do. Costs are most often

justified by lower incidence of crime/violence (61.5%); employee confidence level(52.2%), or less loss/shrinkage (41.0%).

Verbatim comments touched on other cost justifiers, including "compliance withregulations," "human factors," "public perception" and "state mandate."Respondents indicate that a four-year time period would be consideredacceptable for a security system to "pay for itself."

HOW IMPORTANT IS SECURITY?Respondents indicated that the executive management of their organizationsplace a relatively high importance on all types of security. Rated on a 6-pointscale, "people security" scored a 5.26 and "facility security" scored 5.25;somewhat lower scores can be seen for "asset security" (4.78) and "informationsecurity" (4.84).

WHO ARE THE RESPONDENTS?Of the 790 respondents to the survey, 20.5% are directors of security/safety;18.9% are managers of security/safety. Also surveyed were 18.6% companymanagement; 10.8% facilities managers; and 8.7% "other security personnel."

Titles are not always easy to compartmentalize - respondents gave varied titlesfrom "security investigator" to "crime prevention specialist" to "regional lossprevention" to "railroad police." Areas of responsibility also ran a gamut from"fraud issues" to "nuclear site access" to "counter-terrorism." Clearly, surveyrespondents were a varied group.

The respondents work for all types of employers likely to use security systems.The largest group is educational institutions (14.2%), followed by hospital/healthcare (11.5%) and non-military government organizations (10.4%).

Survey respondents are responsible for security functions from access control(84.2% of respondents) to perimeter security (70.1%) to electronic surveillance

(65.8%). Likewise, survey respondents choose from a truckload of equipmentoptions, with 87.5% using alarms; 81.0% using cameras; and 69.6% using cardsand readers. Component choices were sometimes determined by which industrythe respondent works in: 83.3% of utility respondents indicated they usedperimeter security versus 61.8% of the overall respondents.

Documents

Security Industry Report