The state of security

Despite statistics showing a general decline in reported break and entry, robbery and other theft, cautious households and businesses are increasingly investing in security and preventative measures.

In a climate of heightened global fear of terrorism, increasing internet usage and accompanying cyber-crime, demand for security and investigative services is rising. Technology plays a key role in crime prevention in the digital age, from CCTV to online security and protection from fraud and identity theft. Servicing of ATMs and cash transport have also been growth drivers for the industry.

Private investigators, who currently number about 25,000 (which is about half of the national police force membership), continue to be mainly involved with investigations into fraud and fraud prevention, undertaking background work for lawyers including in areas such as Workcover claims, commercial inquiry, including pre-employment checks, and domestic investigation into areas such as partner fidelity and missing persons.

A key community concern with some of this work still relates to breaches of privacy and trespass in information collection and methods of inquiry and interrogation. Crowd controllers, many who are second jobbers, is also a rising area of industry activity, particularly at major events and entertainment venues. Licensing of these people has been introduced following concerns about some incident management procedures. The recent increase in violence around some licensed premises has increased the need and demand for crowd controllers.

In 2010-11, IBISWorld forecasts the Security and Investigative Services industry will generate revenue of $3.0 billion, representing real rise of 3.8% compared with 2009-10. Robust growth in the domestic economy will generate increasing demand for cash transfer and armoured vehicle services in line with buoyant retail sales figures and gambling expenditure. Government licensing regulations also increasingly require crowd controllers to be employed by pubs, clubs, bars and nightclubs and other venues serving liquor for on-premises consumption.

The industry comprises an estimated 1,894 enterprises operating at 2,418 establishments, both higher than the previous year. Employment numbers are also expected to rise at at a slightly lower rate than wages in 2010-11.

Industry performance: Key external drivers

Level of Criminal Activity

Actual and perceived increases in crime typically lead to an increase in demand for security services and associated systems. Public perceptions of a rising crime rate may, however, not actually be true.

Pervasive Technology – Banking – No. of ATMs

Servicing of ATMs has been outsourced to security firms and is a growth area for some companies. This has been assisted by high consumers take up rate of this new technology, relative to over-the-counter bank transactions. ATM machines have to be serviced seven days a week in some high use areas, with any faults also repaired efficiently.

Downstream Demand – General Insurance in Australia

Insurance companies are increasingly demanding that businesses and households upgrade their security systems as part of their policy renewal processes. This can include the hiring of security guards during trading hours.

Real GDP Growth

Fluctuations in economic activity affect on revenue garnered by this industry. During weak economic growth periods the demand for security, including the level of security required and prices paid, are typically reviewed and negotiated downwards by clients.

Competition from Substitutes – Information Storage and Retrieval Services – Security and Investigative Services

There has been some change in demand from using on-site, visible security persons towards using off-site or back-of-house monitored security systems, requiring less direct labour input and, therefore, costs to clients.

Key success factors

• Membership of an industry organisation: Being a member of the Australian Security Industry Association or similar body is important as standards must be met to qualify, so membership legitimises a company and enhances reputation.
• Use of production techniques that add value to base product(s): Being solutions-oriented rather than solely product-oriented is preferred by clients seeking an integrated security solution.
• Access to the latest available and most efficient technology and techniques: Having access to quality and up-to-date equipment and technology for electronic monitoring of homes and businesses is vital.
• Highly trained workforce: Recruiting and retaining suitably skilled, reliable staff is essential to provide a high level of service.
• Provision of development programs for personnel: Providing quality training to staff – either on-the-job, or through TAFE and similar courses – to keep up-to-date is important in terms of providing professional services to clients.
• Production of premium goods/services: Providing quality service to clients is essential to retain contracts and obtain good word of mouth recommendations.
• Having a good reputation: Maintaining a good public image and high level of integrity in client relationships generates good word-of-mouth recommendations and enhances reputation.

Barriers to entry

Barriers to entry in this industry are low and are steady. IBISWorld contends that the barriers to entry in this industry are low, as many segments do not require a high skill level or formal qualifications, and there is a small capital outlay required to commence operations.

The Security and Investigative Services industry generally has a low level of concentration with the top four players expected to account for under 42% of the available market share in 2010-11. While there are some major players, they do not dominate the industry or prevent new entrants. Some people commence operations by seeking out a number of small after-hours security contracts as a second job.

The industry is labour intensive and capital requirements are low. For patrols, the basic equipment required is a uniform, a car and communication equipment. For an alarm monitoring system, the purchase of digital dialler equipment costs between $5,000 and $10,000 and can be installed in a private residence.

A patrol must be employed to investigate any triggering of alarms. Alternatively, clients can be connected to an existing alarm monitoring centre via a sub-contracting arrangement until the financial break-even number of clients is reached and a separate company can be established. Some industry specific, state-based licences and regulations exist, but in many cases compliance is not onerous.

Robert Bryant is the general manager of business information firm IBISWorld. For more on this sector, head here.