PSIM to be Worth $2.79 Billion? Tricks ExposedAuthor: John Honovich, Published on Jul 15, 2012
A new report projects the Physical Security Information (PSIM) market to be worth $2.79 Billion USD - a shockingly high number for a market that has struggled for so long. In this note, we examine the key tricks used to arrive at such a bullshit bullish number.
Paid awards provider and 'analyst' Frost & Sullivan's new PSIM report estimates that PSIM sales were just $142.9 Million in 2011 but by 2021 will be $2.79 Billion USD. This projects 20 times growth over the period - a huge increase.
Indeed faced with such growth, Frost ominously implores:
"Video and access security system companies should tie up with PSIM players not to be edged out of the market"
The only thing stopping the PSIM market? Evidently IP cameras:
"The security industry is still dealing with its shift to integration/convergence and IP, which is why most enterprises are unaware of PSIM."
Fluff for PSIM Vendors
The claims are laughable and are a shallow attempt by PSIM vendors to pump up their market. Strugglig PSIM players have been bought out on the cheap by large vendors (e.g., Nice / Orsus, Verint / Rontal, ADT / Proximex). Ultimately, it is less an issue of not being aware, than it being too costly and not providing a clear enough value (see our survey results). For background on PSIM market size, see our review of 4 PSIM market projections.
Tricks With Time Frames
Using 10 years for projections is unrealistic and uncommon. Typically, analysts use 3 or 5 years as it becomes increasingly difficult to accurately project markets in the far future.
The benefit of using 10 years is that you can create far larger estimates that look much more impressive. Indeed, if they had chosen 5 years with the same implicit growth rate, the total estimate would only be $666 Million USD - 75% less than the huge number trumpeted in the press release.
Annual Growth Rates
Behind all projections is an implied annual growth rate. For this one, the rate is 34.7%, meaning that the PSIM market needs to grow by 34.7% each year for the next ten years to get from today's puny $140 million USD to the future's $2.79 billion USD.
Maintaining such growth rates for such a long period is very hard. Maybe IP cameras have done so over the last decade but that's pretty much the only surveillance industry example.
Dropping the implied growth rate to 'only' 25% and the total PSIM market size in 2021 would then be just half of Frost's projection - ~$1.35 Billion USD. While picking the correct growth rate is difficult and contentious, small changes can massively impact total size, especially over long periods.
The Truth About PSIM
The PSIM market, after the sellouts in the last few years, appears to be growing modestly with unexceptional product development and minimal external investment. All of these things combine for weak growth drivers. Looking ahead, advanced security management functionality will continue to be added by access and video manufacturers, with such capabilities gradually increasing in use. However, multi-billion dollar projections and sustained exceptional growth are unjustifiable.
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