The economics of security

Feb. 15, 2013
Industry expected to grow, but spending on large government projects could stall

Over the last five years, the American economy has been on a roller coaster ride – from the bust in the housing market that has slowly started to recover to the stalemate over the debt ceiling and Congress driving the country right to the edge of the fiscal cliff. However, temporary bargains among Democrats and Republicans on Capitol Hill have only served to kick the proverbial can down the road. If lawmakers can’t come to an agreement by March 1, an automatic round of across the board spending cuts known as sequestration will take effect, with the Defense Department being the most heavily impacted.

"In 2011, Congress passed a law saying that if both parties couldn’t agree on a plan to reach our deficit goal, about a trillion dollars’ worth of budget cuts would automatically go into effect this year. These sudden, harsh, arbitrary cuts would jeopardize our military readiness, they’d devastate priorities like education and energy and medical research. They would certainly slow our recovery and cost us hundreds of thousands of jobs," President Barack Obama told members of Congress in his State of the Union address this week.

Many people in the security business feel that that the industry is, to a large extent, recession-proof. The argument is that people and organizations need to protect the assets they have, especially during tough economic times. There is a lot of truth in that statement and projected industry growth trends tend to support it.

According to a recent report from Cleveland-based research firm The Freedonia Group, the U.S. market for security products and systems is expected to increase 6.3 percent annually to nearly $20 billion in 2016. The biggest drivers for this growth, according to the report, will be rebounds in construction and capital investment spending. In a separate report, the research firm forecast that global demand for private contract security services (alarm monitoring, security systems integration, guard services, etc.) will increase by more than 7 percent a year to $244 billion in 2016. Real and perceived risks of crime and terrorism were cited as one of primary growth factors.

Not everyone believes, however, that the security industry will go unscathed if the U.S. and Western European economies don’t stabilize. Dr. Magnus Ekerot, CEO of U.S. operations for German-based camera maker Mobotix, says that many European governments are suffering because they have failed to institute suitable taxation levels to support their growth.

"The European economy - the macro economy situation in Italy, Spain, France, and the UK - those are four big, big markets when it comes to industry and are a large part of the GDP of Europe. Major investments there are down to zero," he explained. "Our market, the surveillance market, is to a large extent funded by governmental projects – infrastructure projects, railroads, roads, telecommunications, and airports," Ekerot told SIW at the Mobotix National Partner Conference last month. "If you cannot support that and if you cannot invest in that, then (security) development will suffer."

Like Europe, the government is one of the main engines that drive the deployment of security technology and personnel in the U.S. Whether it’s the mandatory implementation of new card readers in government buildings or a grant used by a local school district to install a surveillance camera network, the impact of the federal government on security can be seen everywhere in our nation. If lawmakers continue to play a game of chicken with our economic policies, the security industry will inevitably see the consequences.