Security 50: Optimism prevails as security returns to growth trajectory

Looking back at 2023, we can see the security industry operated in a world that saw overall growth. According to the World Bank, the average gross domestic product (GDP) for the world in 2023 grew 2.6 percent year-on-year. For advanced economies, the United States performed more prominently than the rest, rising 2.5 percent year-on-year. Emerging markets and developing economies gave a satisfactory performance, growing 4 percent in 2023. In particular, China’s GDP grew 5.2 percent year-on-year.

By: William Pao

The positive sentiment is also felt in this year’s Security 50, featuring the Top 50 public-traded companies in physical security based on their 2023 revenue from security product sales. This is in stark contrast with last year when a majority of Chinese companies on Security 50 registered 2022-2021 revenue declines due to various internal and external challenges. Looking at this year’s list, we can clearly see that Chinese companies are experiencing a rebound, in keeping with China’s positive economic performance in 2023 on such factors as a rapid economic recovery post-COVID, government stimulus to boost demand in various sectors, and satisfactory export growth.

2024 yearly review

As for this year, the consensus is that the security industry will continue to see growth. This is more or less corroborated by our findings, which show that for companies that provided 2024 H1 revenue figures, most of them are registering a year-on-year growth. This is indicative that security is finally experiencing a “return to normalcy” following COVID.

“In 2024, the security industry showed substantial growth, with the market returning to a sense of normalcy. i-PRO experienced consistent double-digit growth, and the sentiment was positive across the Americas, EMEA, and APAC regions. This growth was driven by our strategy to enhance engagement with system integrators and make AI edge computing technology a standard across most of our lineup,” said Gerard Figols, Chief Product Officer at i-PRO.

“The security systems integration industry saw many factors that contributed to growth, including an increased focus on physical and cyber security integration, a rising demand for cloud-based security solutions, growth in smart building technologies and IoT integration, continued modernization of systems and expanded adoption of AI and analytics – all contributing to enhanced security capabilities for streamlined processes and better efficiency, scalability and flexibility,” said Eric Yunag, EVP of Product & Services at Convergint.

Indeed, growth in security this year has largely been driven by rising demands for advanced technologies, especially cloud and AI.

“A significant growth driver has been the increasing adoption of cloud-based solutions and SaaS models. This shift, which has been gaining traction for some time, is now fully underway, with larger enterprises leading the movement toward cloud or hybrid deployments. Additionally, the demand for artificial intelligence (AI) and Intelligent Automation (IA) solutions is becoming more prominent in security, although much of the current AI-related hype still needs to deliver concrete results,” said Despina Stamatelos, Senior Commercial Manager at Genetec.

“Cloud and AI are not new trends, yet we are observing changes due to increased adoption and customer recognition whereby the channel, in particular integrators/installers, are transforming their own businesses to best sell these technologies,” said Jon Cropley, Principal Analyst, and Josh Woodhouse, Founder, of Novaira Insights. “For example, systems integrators are selling cloud solutions, packaging VsaaS and/or ACaaS with their own managed services, beginning to transition their own business models to recurring revenues. In the short to medium term these type of changes will have a greater impact on the industry overall than manufacturers integrating more cloud or AI into their products.”

Edge AI solutions, meanwhile, should not be ignored, either. “Edge-based AI analytics and cloud solutions were prominent technologies in 2024. One of the challenges for cloud-based use cases is that transferring video data to/from the cloud can be costly. Performing AI-based analytics solely in the cloud adds to this cost and can add unacceptable delays, which is why edge-based analytics processing is essential. Processing AI-based analytics within the camera on uncompressed images increases accuracy while ensuring that only the lightweight metadata describing events and attributes is transferred to the cloud for further analysis,” Figols said.

Notable M&A cases

This year also witnessed some notable merger and acquisition cases as the industry continued to consolidate. These include Vitaprotech Group’s $145 million acquisition of the security business of Identiv; Honeywell’s $4.95 billion acquisition of Carrier’s security business, which included LenelS2 (the deal was announced in December 2023); and Milestone’s mergers with BriefCam and Arcules – deals that combined the companies’ strengths in video management software, video analytics and VSaaS to deliver complete video security solutions for users in different scenarios.

“2024 has been a year of major mergers and acquisitions in the security sector. Notably, leading security companies have aggressively pursued deals with AI-driven analytics firms, enhancing their capabilities in predictive surveillance and automated threat detection. For many in the industry, this consolidation trend has proven beneficial as it has accelerated the deployment of innovative technologies and helped streamline the development of more integrated solutions,” said Aditya Khemka, MD of CP PLUS.

Ongoing challenges

Despite the positive outlook, certain challenges still linger. One of them is the continued rampancy of cyberattacks, some of which were launched using networked security devices.

“The threat of cyberattacks has not decreased during 2024, with more high-profile breaches, major data hacks, and more warnings about the potential for sophisticated attacks sponsored by hostile states. So, cybersecurity remains one of the biggest challenges facing the security sector,” said Alex Lee, Senior Sales Manager at IDIS. “Addressing this challenge requires comprehensive data protection strategies and robust physical security measures. For video technology vendors and suppliers, designing cybersecurity into their surveillance devices and software that encompasses multi-layered defenses is vital.”

Meanwhile, stricter regulations regarding data privacy, particularly for AI-based facial recognition and behavioral analysis technologies, have posed additional hurdles.

“Companies in 2024 have had to navigate complex legal landscapes while ensuring their solutions remain both compliant and effective. Moving forward, these challenges are expected to persist,” Khemka said. “Nonetheless, at CP PLUS, we believe that while the challenges are formidable, they have also presented opportunities. The focus on innovation has led us to partner with tech giants that bring different perspectives to solving these issues. We are also trying to adopt collaborative efforts with governments and regulatory bodies to help shape policies, thus ensuring smoother compliance.”

Yunag cited the following as some of the challenges facing the industry: labor shortages and skill gaps within the workforce, supply chain inefficiencies, rising budget restrictions, and increased security concerns regarding critical infrastructure. “These concerns are especially prevalent as many organizations still rely on complex, traditional security system architectures. While these challenges are likely to continue into 2025, leaders can look to overcome them by developing highly customized training programs to ensure their employees are upskilled on the latest skills and technologies, implementing innovative security program strategies to help streamline daily processes, and strengthening industry relationships and partnerships to modernize system integration capabilities,” he said.

Finally, regional conflicts – in particular the wars in Ukraine and the Middle East – have also created an impact, bringing opportunities as well as risks. “Regional conflicts had a noticeable impact on the security industry. Demand for surveillance systems increased, particularly in sensitive areas such as critical infrastructure. The conflicts increased the need for fast, AI-supported surveillance solutions for real-time threat detection. In addition, higher government spending on defense and security supported market growth,” said Thomas Lausten, CEO of MOBOTIX.

“The international order is less stable now than at any time since the end of the Cold War, with devastating regional conflicts and the growing threat of worse to come,” Lee said. “For businesses and governments, the negative consequences are multiple and varied and hard to predict. Still, they are perhaps best summed up as increased instability, less foreseeable risks, and potentially far worse harm. From disruption to global shipping to the impact of forced migration, from increases in international tension leading to the imposition of tariffs to the development of new weapons and new ways of waging war, we are living in a more dangerous world.”

That said, businesses need to diversify their supply bases and adopt more flexible manufacturing strategies to overcome this challenge.

Next year

As for the near term, the security industry is on a growth path. According to a recent joint report by SIA, ASIS and Omdia, the 2022-2026 compound annual growth rate for the physical security equipment market is forecast to be 8.2 percent, and 6.9 percent for the physical security services market.

That said, growth is set to continue in 2025 as the industry faces greater certainty and continues to adopt advanced technologies and solutions. “2025 is set to be a more positive year for growth. Some of the geopolitical disruptors in 2024 were caused by a packed election schedule worldwide. 2025 will see more effects from the new governments established in many countries in 2024, with new government investment plans enacted and greater certainty for private sector investment decisions,” Cropley and Woodhouse said.

“We anticipate growth to continue into 2025, with key drivers being the ongoing adoption of ACaaS and VSaaS. These technologies will remain central to the industry’s evolution as organizations look for scalable, flexible, and efficient security solutions,” Stamatelos said.

Lausten echoed their points. “Looking ahead to 2025, further growth is expected, building on the progress made in 2024. Ongoing urbanization, increased investment in smart cities and continued geopolitical instability will drive demand for advanced security solutions. Key growth drivers include the increased rise in AI and software-based analytics, particularly behavioral analytics, the expansion of cloud-based security platforms and a greater focus on cybersecurity and NDAA-compliant systems. The increasing focus on sustainability and energy-efficient solutions will also influence the market in the near future,” he said.

“Some expect that 2025 will bring new innovations, particularly in the areas of quantum cryptography and autonomous drone surveillance. Quantum encryption, with its potential to secure communications against even the most advanced cyber threats, could redefine the future of cybersecurity. Autonomous drones equipped with AI could play a larger role in monitoring vast, remote areas with minimal human intervention,” Khemka said. “On the horizon, next-generation biometrics such as gait recognition and voice identification could also become mainstream, offering more sophisticated methods of securing sensitive environments. These innovations will help address the ever-evolving challenges faced by security professionals, ensuring that the industry remains ahead of the curve in terms of both physical and cyber threats.”

Diversifying from security

For 2025, there is also the trend – and this is particularly noticeable in China – that companies diversify away from security, focusing on solutions beyond security in different fields such as education. For example, some Chinese companies provide solutions that not only keep the campus safe, but also monitor if there’s any bullying going on, or if students are happy in class to understand the performance of the teacher. Some companies now position themselves as IoT/digitization companies, offering online meeting/streaming solutions and even EV charging solutions.

Conclusion

Overall, we can see the security industry is experiencing a return to normalcy after the devastation from COVID-19. Growth is expected for this year as well as next, primarily driven by increased adoption of AI and cloud. While challenges such as continued cyber-threats, a tougher regulatory environment, and ongoing regional conflicts remain, security players are nevertheless optimistic that they are on a growth trajectory that will last for the next few years.

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