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Are we secured? Who will buy security systems in India?

Shashank Maheshwari
Founder & CEO, Umbrella Protection Systems Pvt Ltd
Abstract
India is characterized by low policing and high proneness to crimes. Electronic monitoring and
warning systems is emerging as a viable alternative for people to ensure their security. Electronic
monitoring and warning systems industry has been growing by more than 25% every year. This paper
tries to examine the industry characteristics, customer preferences and their implications for
organizations in this industry.
Fast growth rate, moderate entry barriers and low exit barriers suggest that this industry would
continue to provide safe and stable returns. This industry is likely to witness entry of new players and
expansion of existing firms in India. Companies will be better off by targeting business people who
stay in bungalows. Women are likely to be more influential to make procurement decision. Smaller
families will be keen to procure system if suitably priced.
Keywords
Security Systems, India, Industry Analysis, Customer expectations, Industry attractiveness
Indian economy is full of paradoxes. On one side some Indians are among the richest of the world,
there is also a large population that is struggling for food. The economy is characterized by large size,
fast growth, high saving rates but it also represent high economic disparity. It is 9th largest in the
world by nominal GDP ($ 1.846 trillion) and 3rd largest by purchasing power parity ($ 4.469 trillion).
The average gross salary of an Indian in 2010 was around $1,330 yearly. However, a Gini 1 coefficient
of 36.8 in 2004 shows significant uneven distribution of wealth. Such distribution adds to the social
divide in the country. This also adds to separatism activities like Naxal Movement. Increasing Naxal
Movement and terrorism enhances the need to ensure ones own security.
The country is also characterized by low policing. It is estimated that there are 106 police personnel
per one lakh population in India against a recommendation of 222 police personnel per one lakh
population by United Nations (Times of India, February 22, 2014). Rising security risk and underpolicing makes it mandatory for people to adopt technological solutions for security. One of the
possible mechanisms emerges from electronic monitoring and warning systems.
Industry of electronic monitoring and warning systems in India is in nascent. India currently has
approximately 5.5 million security guards employed by about 15,000 security companies
(securitymanagement.com, Nov 2011)2. This sector is likely to continue to grow at the rate of more
than 40 per cent per year. It is evolving at a fast pace with the changes in electronic products over the
years. The height of terrorism in the 70s saw the adaptation of nondescript and locally assembled
Bank Alarm systems. In the mid 80s System Integrators (SI) started finding a place in the market. It
expanded with rapid acceleration in the 90s. While most systems worth the name were imported,
indigenously assembled systems in those days too were largely import based.
Private security systems have ever been growing. Even before the infamous terrorist attack in Mumbai
in 2008, the industry was experiencing an annual growth rate of 25 per cent per year. The growth rate
has been higher since then.
With a market capitalization of INR 5 Trillion in 2009 and a growth rate of 25 per cent annually3, the
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present market capitalization is around INR 10 Trillion and it is projected to be around INR 19 Trillion
by the end of 2015. This industry is growing at a fast pace. With advancement in technology,
increasingly electronic security systems are getting adopted. These security solutions are further
enhanced by providing services like 24hr monitoring or the Central Monitoring Service (CMS).
In this paper we have tried to examine the industry characteristics, customer preferences and their
implications for organizations in this industry.
Research Design: Given the nascent stage of this growing industry, researcher decided to undertake a
study to understand the market needs differentiated on diverse factors and scales. This study will help
us to understand the industry further and help the companies succeed better in this business domain.
Methodology: In the first part of the study, the author undertook the analysis of the industry based on
secondary data. In the second part, to examine customer preferences, author undertook a survey. The
questionnaire was discussed with 5 experts in the industry to ensure face validity. The questionnaire
was physically given to 100 respondents with a promise to collect next day. Forty respondents returned
duly filled questionnaire. This ratio of 40% response compares favorable with other similar studies in
India.
Data was subsequently codified and analyzed by using SPSS. Inter-group comparison were undertaken
by ANOVA test. As the study is exploratory and aims at understanding the industry, researcher did not
have a priory hypothesis. Researcher examined the pattern of responses to gain an insight and
developed propositions that can be further tested.
The Industry: With around 5.5 million people today, this sector was born in the 60s. As of 2007 there
were around 50 organized players. However the concept of Central Monitoring Service (CMS) has not
yet caught on in India, There are only 5 companies that offer CMS and Responsive services. Major
importing of instruments takes place from countries like USA, UK, Germany, Singapore, Japan,
China, and Taiwan.
Close Circuit Television (CCTV) surveillance constitutes around 55 per cent, which is expected to
grow at a rate of 45 per cent. The market of fixed Dome type cameras is nearly 4 times that of Box
type cameras. Acceptance of Speed Dome cameras is fast increasing as costs get reduced. Door
intercom and intrusion constitute only 2 per cent of the industry.
Access Control systems account for about 30 per cent of the market share. While access regulation is
desirable, the cost factor restricts the installation of good access controls systems to only large
organizations. The Intrusion Detection Systems in India do not hold a very strong position mainly due
to lack of awareness.
The product development, continuous price reduction through technological advancements and trade
liberalization are contributing to the growth of the industry. A reduced customs duty on imports from
350 per cent in the 80s to current 35 per cent and growth in the telecommunication, airports,
infrastructure and other major areas have been catalysts for the growth of this sector.
Electronic industry is characterized by fast product changes and continuous reduction in the cost of
production through rapid innovations. Further security systems are characterized by high consumer
stakes. Owing to high stakes in such dynamic environment, trust and confidence of consumer are
important factors to succeed. It takes time for any new entrant to develop such trust and confidence.
This can partially be overcome by developing innovative and reliable system. Developing products
with aesthetic appeal, which seamlessly integrates with the environment (like homes) while
performing their required tasks can improve the consumer brand relationship and loyalty thus
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converting the product and brand into a Lovemark4. As the research and development takes place,
proprietary products are regularly developed. The raw material for such development is easily
available. For first time entrants the learning curve is steep. Further, owing to fast technological
development, it is risky to maintain stock.
Any new entrant in this industry will require capital mainly for the research and development and for
production facilities. The entry barriers owing to capital requirement seem to be low. However,
catching the customer early is important. Customers get used to specific technology and they are found
to be reluctant to change it. The switching cost is low on monetary measures but more on time and
psychic cost of switching.
Majority of the strong players in this industry have developed their own distribution channel. For
example, Honeywell has complete solutions, which includes a well-defined distribution channel. To
enter such an industry a distribution channel has to be developed, which creates barrier for new
entrants.
Within this sector there is an intense rivalry among the competitors. There are many capable
competitors in this industry. Considering all the competitors including national and international like
Bosch, Honeywell GE, Pelco, Samsung, Sharp, HID, Europlex, GE, Cardax, Lenel, Syris, Solus,
Mbux, Kantech, Jablotron, GE, Tyco, Scurico, Senstar Stellar and Gallagher the players are plenty.
Out of these not all provide outstanding services due to their focus on specific segments of the
systems. Thus very few provide outstanding complete solutions to the customer needs.
The industry is expected to grow at an expected rate of 26 per cent. This makes the industry attractive.
The table below explains the proportion of each product sector and its expected annual growth. The
figures explain a great development and a huge potential market for this industry.
Table 1: Market share of different segments and growth rate
Product Sector

Proportion

Expected Annual
Growth
45%

CCTV (Commercial & Industrial Cameras, Housings, Monitors,


55%
DVR/NVRs)
Access Control (Controllers, Readers, Locking Hardware, Barriers,
30%
Cards)
Intrusion Detection (Perimeter & Building Alarm Controllers &
2%
Detectors. Including Electric Fences)
Intercom (Audio &Video Door phones)
2%
Others (Metal Detectors, X-Ray etc.)
11%
Total
100%
(Source: The Indian Security Industry Market, Security Today, May 2007)

30%
20%
30%
30%
26%

Fast growth rate, moderate entry barriers and low exit barriers suggest that this industry would
continue to provide safe and stable returns5. This industry is likely to witness entry of new players and
expansion of existing firms in India.
Pressure from Substitute Products: Physical guards, pooled security arrangements by Resident
Welfare Associations (RWA) are substitutes for electronic security systems. India currently has
approximately 5.5 million security guards employed by about 15000 private security companies
(securitymanagement.com, Nov 2011). This sector is likely to continue to grow at the rate of more
than 40 per cent per year. It can potentially limit profit potential of the industry. However, this industry
is getting increasing characterized by low wages to guards, lack of training and frequent turnover.
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Service quality has been a major concern in this highly competitive industry. Hence, demand for
electronic security system would continue to grow in near future.
Bargaining Power of Buyers and Suppliers: Corporate customers, given high volume, available
options (including imports) and low switchover cost carry substantial bargaining power. However,
retail customers do not enjoy such bargaining power. There will remain pressure on price that would
be accepted by corporates. However, margins will remain attractive in retail segments. Similarly,
owing to availability of alternate suppliers, low switchover cost, bargaining power of suppliers would
remain low. Some of the component suppliers with patent technology might enjoy high bargaining
power.
Customer Preferences: Researcher undertook a survey and conducted two-tailed test of Analysis of
variance (ANOVA) to examine how customers differ on different aspects of security systems.
Following variables were examined that could have potential influence on customers choice.
1. Gender (Man/Woman)
2. Relationship (Single/Not single)
3. Size of the Family (1,2,3,4,5,6 or more than 6 members)
4. Geographical location (Urban, rural, metropolitan, other)
5. Annual income range (0-2 Lacks, 5-10 Lacks, and more than 10 Lacks)
6. Profession (Business, service, students)
7. Type of house (Apartment in a building, Bungalow, Other)
8. Need to feel physically safe to concentrate and do work properly (Five Point Likert Scale)
9. Concern about the security of the place when nobody is there (Five Point Likert Scale).
10. Satisfaction with the present security level at the place (Five Point Likert Scale).
11. Felt need for more security at the place (Five Point Likert Scale).
12. Felt need to receive regular updates about the place when the person is not present there (Five
Point Likert Scale).
13. Description of the kind of security system that one would like to have at ones place.
14. Willingness to buy a good security system (Five Point Likert Scale).
15. How much would one be willing to pay for a good centralized security system.
The table below shows how concerns of people differ in different segments.
Table 2: Dependent Variable: Concern about the security of the place when nobody is there
Factor
Gender
Relationship status
Size of family
Geographic location
Profession
Type of house

F Value
0.289
0.063
1.039
0.272
1.617
3.627

Sig. Level
0.594
0.803
0.418
0.763
0.212
0.036

Security concerns are different for people in different types of housing. The result shows that concerns
for security significantly are higher among people who live in bungalows (Mean 4.64/5.00) than those
who live in apartments (Mean 3.76/5.00). The mean of 3.76/5.00 for apartments indicates that security
concern for people is high in all kinds of residence but it is higher for those who stay in Bungalows.
This has significant implications for product developments and focus of companies in this industry.
People in business (Mean 4.50/5.00) and service (Mean 4.12/5.00) are more concerned about their
security than students (Mean 3.53/5.00). However, the result is not statistically significant (sig. 212).
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Table 3: Dependent Variable: Need to feel physically safe to concentrate on work


Factor
Gender
Relationship status
Size of family
Geographic location
Profession
Place of living

F Value
0.003
0.317
1.095
0.369
0.778
1.081

Sig. Level
0.955
0.577
0.386
0.694
0.467
0.350

The mean on this variable is 4.16/5.00. It shows that all respondents feel that it is important to feel safe
to concentrate on work. We observe that there is not a significant level of difference between the
groups on this variable. The need for feeling secured is important for all irrespective gender,
relationship status, family size, geographical location, profession and place of living. It confirms that
physical security is a very important concept for people to work properly. This has significant
implications for enhancing productivity of people. Organizations can leverage on this aspect to
enhance employee productivity.
Table 4: Dependent Variable: Satisfaction with the present security level
Factor
Gender
Relationship status
Size of family
Geographic location
Profession
Place of living

F Value
2.111
0.005
0.767
0.983
3.730
1.230

Sig. Level
0.154
0.942
0.601
0.384
0.033
0.304

There is a difference in the satisfaction level of men and women with respect to the security level of
their place. However it is significant at 0.154 level. Women (mean 3.88/5.00) are relatively less
satisfied with the security at their place than men (Mean 4.50/5.00). This intuitively matches with the
social reality. Women, in general, feel more insecure in the country. Crime against women has been a
matter of hot debate in the country for past many years.
There is significant difference between the satisfaction level of students, business people and people in
service with the existing security. Students are found to be most satisfied (Mean 4.54/5.00) with the
security at their place. Next come the service class people with a mean of 3.72/5.00 followed by
business people with a mean of 3.50/5.00. The results indicate that except students, all others are not
fully satisfied with the security level at their places. This indicates that the country will witness
significant jump in the demand for security systems.
Table 5: Dependent Variable: Felt need for more security
Factor
Gender
Relationship status
Size of family
Geographic location
Profession
Place of living

F Value
0.083
0.063
1.937
0.879
5.029
1.354

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Sig. Level
0.774
0.803
0.104
0.424
0.012
0.268

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Profession makes a significant difference on the choice of people about the security of their place.
With a mean value of 4.00/5.00 business people feel the most to have more security at their place. This
is followed by service class people with a mean of 3.32/5.00 followed by students with a mean of
2.38/5.00. This also matches with the felt insecurity by these three groups of people. The results show
that most of the demand for security systems is likely to emerge from business people. This has
significant implications for targeting a segment and promoting this product.
According to the data size of the family plays an important role in feeling the security of the place. As
the size of the family increases the mean value of felt security increases. However the mean is still low
on an absolute scale. This indicates that with increasing trend of smaller families the requirement for
security systems will also increase.
There is also a considerable difference among the security needs of people on the basis of their living
location. People living in stand-alone bungalows feel the strongest to have more security with a mean
of 3.45/5.00 followed by service class people with a mean of 2.96/5.00.
Table 6: Dependent Variable: Felt need to receive regular updates about the place when the
person was not present there
Factor
Gender
Relationship status
Size of family
Geographic location
Profession
Place of living

F Value
1.148
0.868
1.798
1.230
0.788
1.359

Sig. Level
0.291
0.357
0.130
0.304
0.462
0.220

The size of the family influences the need for regular updates about the place of living when the person
was away. The mean increases as the number of people in the family decrease. This might be because
of the security concern of the person of his family at home, which increases as the number of people
decrease in the family. This is consistent with the previous finding.
Further, the place of living has a significant impact on the felt need for regular updates about their
places. People living in stand alone bungalow feel more strongly that the regular updates will be more
helpful (mean = 4.27/5.00) followed by people living in apartments in a building (mean = 3.80/5.00).
Students are least concern about getting the regular updates bout their place with a mean of 3.58/5.00.
Table 7: Dependent Variable: Willingness to buy a good security system
Factor
F Value
Sig. Level
Gender
3.538
0.068
Relationship status
0.259
0.614
Size of family
1.343
0.263
Geographic location
0.783
0.464
Profession
3.037
0.060
Place of living
0.076
0.927
There is significant difference in purchase decision between two genders. Women, owing to feeling of
high insecurity are found to be keen to purchase the security system (Mean 4.50/5.00) as compared to
men (Mean 3.76/5.00). Further, business people are significantly keen to buy the system than service
people and students.

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Implications: The findings of the study carry significant implications for targeting and promoting
security systems. Companies will be better off by targeting business people who stay in bungalows.
Women are likely to be more influential to make procurement decision. Smaller families will be keen
to procure system if suitably priced.
REFERENCES
1. Distribution of family income - Gini index, The World Factbook, CIA, accessed on November
24, 2011
2. The Indian Security Industry Market, Security Today, May 2007
3. http://www.securitymanagement.com/article/india%E2%80%99s-growing-security-industry005676
4. Pawle, John and Peter Cooper (2006),Measuring Emotions Lovemarks,The Future Beyond
Brands, Journal of Advertising Research, (March), 38-48.
5. Michael E Porter, Competitive Strategy - Techniques for Analyzing Industries And Competitors

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