Opportunities for Integrated Security and Surveillance ... · Falcon Integrated Systems 2014 Disclaimers The information contained in this document is the proprietary and exclusive

Opportunities for Integrated Security and Surveillance Systems (IS3) in the Americas Falcon Integrated Systems February 2014

Proprietary and Copyright Protected Falcon Integrated Systems 2014

Disclaimers

The information contained in this document is the proprietary and exclusive property of Falcon Integrated Systems except as otherwise indicated. No part of this document, in whole or in part, may be reproduced, stored, transmitted, or used without the prior written permission of Falcon Integrated Systems.

The information contained in this document is subject to change without notice.


Executive Summary

This whitepaper identifies and evaluates the potential for adoption and sales of Integrated Security & Surveillance Systems in North, Central and South America. Integrated Security & Surveillance Systems (IS3) are defined as any combination of security and surveillance radar, electro-optical imaging and command and control systems used for the purpose of securing a facility or operational space. The addition of other sensors and systems to the IS3 is allowed as appropriate to the environment or threat. Sales of these systems into various geographic markets can be further defined by classification into specific vertical markets. These vertical markets are defined as Government Force Protection, Homeland Security (Borders), Maritime/Coastal surveillance, Critical Facilities, Airports, Energy Production &Transport and Other Markets such as Transportation and Law Enforcement.

The surveillance and control of the operational area around key facilities and infrastructure is critical to maintain the proper function and safety of personnel, as well as the mission of the facility. Varied terrain and physical surroundings can provide unique challenges to any surveillance and security system. Rarely can any single sensor or command and control technology provide a complete security solution in all environments. The further expansion of terrorist threats as well as the partnership between terror organizations and international crime organizations can provide serious and changing threat environments. The application of proven integrated surveillance technologies, paired with the appropriate data fusion, infrastructure and an updated concept of operations, can provide significant situational awareness as well as an "adaptable" response capability.

The challenges to sales of Integrated Security and Surveillance Systems vary. Some of the challenges are a weak economic environment, a lack of a timely and significant threat and the perceived complexity of the IS3 technology. Each of these resistance factors can be offset through education and demonstration of the technology. The ultimate success of the sales effort is dependent on the customer acceptance of the value of the solution in comparison to competing systems.


Technical Baseline

The technologies that are used for most security and surveillance systems have not changed substantially since the invention of the radio. Until recently, guards that were responsible for the protection of sensitive resources have used essentially the same tools that have been used for more than fifty years --- barbwire fences, radios,

flashlights, and guns. The addition of affordable video surveillance is the single largest change to this equation in the last 30 years. Video based security systems can seem to reduce the need for first responder manpower. While video technology is widely accepted as the gold standard for security systems, video surveillance may not substantially improve the response to events. In fact by the time a first responder is alerted to a violation and responds to the point of alarm, the reduced manpower assures

that the aggressor may not be intercepted prior to committing a crime. The most optimistic view is that increased video surveillance gives first responders better "forensic tools" to use to solve the crime after it has been committed. By adding new sensor technology and integration of that sensor information with advanced imagery and modern command and control systems, first responders are given the first truly significant "leap ahead" in security and surveillance capability since the end of World War II.

Surveillance and positive control of the security zone around critical facilities and installations is vital to continuity of operations and safety of personnel. By using advanced integrated surveillance technologies, combined with next generation ubiquitous command and control systems, and updated concept of operations, security leaders are able to adapt to threats and meet new challenges as they occur. Surveillance and security systems that give first responders the ability to Observe first, Orient to the threat, Decide on the proper course of action, and Act upon this plan will

provide a significant "leap ahead" from current security and surveillance technologies.


The advanced technologies that allow one to Observe First are security and surveillance radar systems, unattended ground sensors and traditional intrusion detection sensors. The next technologies to leverage are those that give an operator the ability to Orient to the threat. Multi-spectral cameras paired with video analytics give

operators the ability to verify and identify potential targets as soon as detected. Finally, the ability to Decide and Act is supported by command-and control systems that can blend all relevant sensor data into actionable information and display that information in a single integrated Common Operating Picture (COP). Display and distribution of real-time, information will put first responders in the right place at the right time to prevent hostile action. Adaptable, ubiquitous command and control (C2) puts information directly into the hands of the decision makers and first responders. Information can flow to them first hand wherever they are in the facility or the world. Integrated Security & Surveillance Systems are force multipliers. Using advanced technology in conjunction with a compatible concept of operation will give existing forces more effective and efficient response capability. Deployment of IS3 technology is a disruptive approach to security that pays off with a more effective security system that can adapt to new threats efficiently and quickly. IS3 gives security operators the ability to adapt to and respond to problems before they result in loss of capability or resources.


Selling IS3 in the Americas

IS3 technology is fairly new in the security industry. There are only two major contactors (FLIR, Honeywell) that have made serious efforts to sell "branded" IS3 to both commercial and government customers since 2006. Prior to that, most systems were sold to government entities for force protection and or special purposes. Since 2010 there have been several niche contractors that have used radar as part of a larger solution or as a stand-alone technology. Since 2006 the acceptance in the Americas of IS3 systems that include radar has been lukewarm. While there have been dozens of installations of integrated systems, security industry acceptance of radar based IS3 has not occurred. There are two reasons for this response: lack of threat and lack of focus. In North America, the use of IS3 systems that include radar has been almost totally focused on border security systems. These systems are now either delivered (MSS, MSC ) or are now in source selection (IFT). The threat at the border of narcotics, weapons and human-trafficking along with the potential for terrorist access has driven the acquisition of these systems. Beyond those efforts there has been some penetration of the airport market and some in critical infrastructure (dams). In Central and South America the threats exist, but the infrastructure and administrative systems to actually implement the technology is challenged. Most non-border related systems sold have been for unique requirements. These sales have generally been opportunistic and not the result of focused marketing campaigns. The success of the technology solution has been more a function of the success of the individual sales personnel. Even an effective technical solution can be tarnished by an ineffective salesperson.


Vertical Market Analysis

Security and Surveillance Vertical Markets

The world-wide Total Addressable Market (TAM) 2012 -2017 is derived from commercially available marketing reports, known opportunities and adjustment for political changes. Estimates for the Americas are based on analytical cost models that are adjusted for Global GDP estimates. These projections are only estimates and should not be considered for anything other than broad planning purposes. The geographic markets under consideration are North, Central and South America. Four countries in this region are part of the Top 20 economies in the world. The GDP of the countries that make up this region are listed in Appendix 1. The security and surveillance market can be divided into many specific segments. These segments are: government force protection, homeland security (borders), maritime and coastal surveillance, airports, correctional facilities, critical facilities, nuclear power, oil and gas production, electrical power generation and transmission, chemical manufacture, oil & gas pipelines, trains, law enforcement, water treatment & dams, ports and harbours. Many of these areas overlap and are very similar. For simplicity we will narrow the market projections to the following combined verticals: Government Force Protection, Homeland Security (Borders), Maritime and Coastal Surveillance, Critical Facilities, Airports, Energy Production/Transport, Law Enforcement/Other Each vertical will be assessed for an estimated World-wide Total Addressable Market and an estimate of the TAM for specific regions. These are broad estimates and not based on specific programs or opportunities. The values are derived from multiple sources and should only be used for general estimation purposes.

Government Force Protection

World-Wide Total Addressable Market - $300M

North America - $69M

Central/South America - $18M The market is wide and deep across multiple services and countries. However, the drawdown from the war, economic uncertainty, the US budget sequester and re-alignment are all serving to limit the value of this market. The TAM here is specific to opportunities for Intelligence Surveillance and Reconnaissance systems and not total force protection spending. Another issue is the requirement in some services for performance testing and evaluation prior to purchase.


This has traditionally made this market even more difficult to access. Limits aside, the sheer magnitude of the budget means that the military force protection market cannot be ignored totally. However, it should be understood that the opportunity seen over the last ten years will not be repeated soon. Opportunities in the Special Operations and clandestine services as well as select high value systems will likely remain viable over the next five years. Efforts to expose the value and opportunity of IS3 to decision makers in these markets should be continued.

Homeland Security (Borders)

World-Wide Total Addressable Market - $16B

North America - $3.7B

Central South America - $960M The North American market is somewhat limited in that the US Department of Homeland Security , Customs and Border Patrol have already solicited opportunities for IS3 in their Integrated Fixed Tower (IFT) and Mobile Surveillance Capability (MSC) projects. These

projects are either already underway or just about to be awarded. (3rd Qtr FY 2014). These projects include ground surveillance radar, camera and C2 systems in either a fixed or mobile platform. Other opportunities for surveillance systems may exist for maritime, or low flying aircraft. The current systems either in use or being considered do not have the ability to detect and track either watercraft or light aircraft with accuracy. Man-portable systems are of interest in some areas and systems with greater than 5Km detection of personnel are of particular interest. Opportunities for border protection systems in Central and South America may actually be more viable than North America. The illegal traffic in weapons, drugs, and humans has become a top

priority in Mexico and Columbia. Money to address these issues are either promised or available if the right solutions are presented. The challenge to IS3 is the fact that many if not all of the borders are extremely rugged, remote from infrastructure and are not optimal for medium or long range radar. Another factor working to the advantage of an IS3 that contains an overwater surveillance capability is the fact that many borders contain either river, lake or ocean segments. This fact should be exploited when offering IS3 systems in this region.


Maritime/Coastal Surveillance


North America - $2.99B

Central South America - $780M Maritime domain awareness (MDA) is defined by the International Maritime

Organization as the effective understanding of anything associated with the maritime domain that could impact the security, safety, economy, or environment. The maritime domain is defined as all areas and things of, on, under, relating to, adjacent to, or bordering on a sea, ocean, or other navigable waterway, including all maritime-related activities, infrastructure, people, cargo, and vessels and other conveyances. In the United States the Department of Defence (US Navy ) has doctrinal responsibility for MDA. As part of the Department of Homeland Security, the US Coast Guard implements day to day surveillance and protection of our coastline, ports and harbors from illegal trade, smuggling, human trafficking and transportation safety. The market for IS3 as part of a coastal surveillance system would be contained in a large national surveillance program. At this point these requirements in the US are not out for solicitation. Some requirements in Central and South America are open for consideration. There may be other national systems which exist in name but they seem to be un-integrated and potentially non-functional in some areas. The largest opportunity in this market may be in the domain of port and harbor security along with anti-smuggling systems. Technologies that can leverage AIS, cargo information systems, deal with a lack of infrastructure and have combined land, air and sea surveillance capability should be attractive to many customers.

http://en.wikipedia.org/wiki/International_Maritime_Organization

http://en.wikipedia.org/wiki/International_Maritime_Organization


Critical Facilities



Central South America - $8M Critical facilities are described as significant landmarks, industrial production or transport facilities, dams, locks, mining locations, government facilities and any other piece of infrastructure that would, if disabled, cause a significant impact to the health and well being of the community. Generally these locations are commercial in nature and privately held. The challenge to sales to these facilities is that they must be approached on an individual basis. "National programs" to secure most of these locations do not exist to our knowledge. This requires that the sales force seek out each individual opportunity, approach and convince multiple decision makers in order to make the sale. All of this being said there continue to be on-going efforts in all three geographic locations to secure critical facilities. For example natural resource processing facilities (mining, transportation systems) in South America are particularly interested in using IS3 to secure their assets.

Airports


North America - $5B

Central South America - $1.3B

Integrated Surveillance and Security Stystems for airports enjoy growing popularity. According to commercial sources there will be over $20B invested in airport security

between 2012 and 2017. However of the $20B, more than 75% will be spent in India and China. In this case, the need for security and surveillance hardware is offset by inexpensive guard labor, a highly competitive traditional security technology industry and significant acquisition bureaucracy. In the Americas there are dozens of medium and large airports that could use IS3 technology to provide a


complete security envelope for the facilities. One impediment is that International standards for performance and reliability of IS3 has not been established by any government or agency. Standards and legal requirements for passenger inspection security are well established. Standards for perimeter and wide-area security are less well established. US Government regulations simply state the following:

(2) Provide for detection of, and response to, each unauthorized presence or movement in, or attempted entry to, the secured area by an individual whose access is not authorized in accordance with its security program. (US Federal Regulations Title 49: Transportation PART 1542—AIRPORT

SECURITY, Subpart C—Operations) Some facility operators are taking steps to secure their airfield perimeters with additional layers beyond boundary fencing. Currently there are several large security integrators that specialize in airport security systems to include inspection, access control, video surveillance, operations and maintenance. Siemens and Honeywell are two examples. Partnering with these integrators may be the fastest way into this market for the near future.

Energy Production/Transport



Central South America - $15M

This category includes oil and gas production, pumping, pipelines, port facilities and power plants. Many of these are located in remote areas that are suitable for IS3 deployment. In the US, the growing production of natural gas fracking facilities provides an opportunity for deployment of systems in sensitive areas. Political opposition to fracking has not reached a level of discontent that producers are concerned enough to see extra security as a necessity beyond standard industrial security measures. The deployment of IS3 systems around gas accumulation and pumping facilities is of higher potential given the catastrophic nature of their failure.

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Protection of pipelines is problematic for IS3 because of their relatively long narrow geometry and location in remote geographic areas. While the detection and assessment capability may exist, the response capability may be very limited or cost prohibitive. A wiser choice of protection zone may be limited to pumping and transfer points. Electricity production and transmission stations are seen as a vulnerable part of the power generation infrastructure. Recent interest by power companies in special protection of transmission stations provides an opportunity for IS3 systems. Limitations of geography and response capability are again problematic. Protection of nuclear power plants is also a potential submarket in this vertical. In the US, security measures are highly regulated, scrutinized and tested. The proximity of power plants to water for cooling is a consideration for IS3 technology. A provider that has valid solutions for both waterside and landside detection and assessment will be favored. Despite repeated efforts by the IS3 industry there has been little penetration of this market space.

Law Enforcement/Other



Central South America - $6M

The law enforcement market by definition is geographically distributed, locally funded to a large extent, and motivated by day to day crime prevention. The opportunities for IS3

systems may be limited to special operations and regions with special environmental requirements (Western deserts). There could be some interest in mobile systems both man-portable and vehicle portable. Applications may exist for vehicles with sensors that are operational while on-the-move. The funding for many departments to purchase special purpose equipment comes from Federal Grants. Departments must be contacted on a

one-on-one basis and very often they use "boiler-plate" grant applications provided by the technology company whose equipment they are interested in buying. Central and South American local and federal law enforcement may be a more lucrative market in that many times these forces act more like special operations and internal security forces. Their requirements may be more similar to military force protection requirements than North American police.


Marketing Opportunities

Development of a marketing campaign in the Americas for IS3 capability should be focused on both the geographic market and the vertical segment being considered. A prioritization of market opportunities should also be completed prior to embarking on a campaign. There are several organized opportunities for marketing to specific customers in both North and South America. In some cases the universal attendance at the events makes them useful for both geographic regions. Some of the opportunities are listed below. Government Force Protection

AUSA,

Modern Day Marine,

SOFIC,

ASIS,

FPED

CANSEC

National Guard Association (NGAUS)

FIDAE Homeland Security (Borders),

Border Security Expo

ASIS

FIDAE Maritime and Coastal Surveillance,

ASIS

American Association of Port Authorities

SEA AIR SPACE Critical Facilities, Airports,

ASIS,

ISC West

ISC Brazil

American Association of Airport Executives

National Nuclear Security Conference

FIDAE Energy Production/Transport,

ASIS,

ISC West


National Petrochemical Association Law Enforcement/Other

IACP,

ASIS,

ISC West

Texas Police Chiefs Annual Conference

Start Location

Border Security Expo 3/1/2014 Phoenix, AZ

FIDAE - Defense & Air show 3/1/2014 Santiago, Chile

Texas Police Chiefs Annual Conference 4/1/2014 Addison, TX

Nat petrochemical (NPRA) 4/1/2014 San Antonio, TX

ISC West 4/1/2014 Las Vegas, NV

ISC Brasil 4/1/2014 Sao Paolo, Brazil

Sea Air Space 4/1/2014 National Harbor, MD

Amer Assn of Airport Execs 5/1/2014 San Antonio, TX

CANSEC 5/1/2014 Ottawa, Canada

SOFIC 5/1/2014 Tampa, FL

National Nuclear Security Conference 6/1/2014 San Jose, CA

Amer Assn of Port Authority 7/1/2014 Baltimore, MD

NGAUS 8/1/2014 Chicago, IL

ASIS 9/1/2014 Atlanta, GA

Modern Day Marine 9/1/2014 Quantico, VA

IACP 10/1/2014 Orlando, FL

TRADE SHOW SUMMARY


Summary

Opportunities to sell IS3 technology into the Americas are good. However, several barriers to success must be dealt with. First the technology must be equal to or superior in performance to that which is already on the market. This point must be proven through testing and demonstrations. The pricing must be attractive, meaning that current systems are already under pressure from high end video surveillance equipment. Sales will not be made on the superiority of the sensor alone. The value proposition of reduced infrastructure, high reliability, low life-cycle costs and ease of installation must be realized. Finally, the IS3 systems should be easily integrated with other sensors and C2 already on the market. In terms of marketing the presence of any new technology must be accompanied by targeted marketing in the sub-markets with the most potential. Demonstration assets must be made available as well as skilled operators for demonstrations to potential buyers. The technology must be positioned as both innovative and reliable. A campaign based on the superiority of the technology will only appeal to the most selective of clients. While this is important, it will not move the product down the customer acceptance curve as quickly as overall system value and flexibility of the solution. IS3 technology is disruptive to the market and to adversaries. It has the power to change how an adversary acts as well as provide superior life-cycle value to the user. A successful provider of this capability will make this argument come to life and insure that clients realize the full value of the technology they are considering.


Appendix 1 National Gross Domestic Product for the Americas (based on International Monetary Fund Rankings 2012)


Contact Us

Howard Borst

Falcon Integrated Systems

14803 Hickory Post Ct

Centreville VA 20121

www.Falconintegratedsystems.com

(202)445-5511

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Opportunities for Integrated Security and Surveillance ... · Falcon Integrated Systems 2014 Disclaimers The information contained in this document is the proprietary and exclusive