Foreign Dependence

India is essentially a pure import market as regards the electronic security industry with almost no local production. Neeti Chopra finds out why India's hospitality industry is import-dependent for security equipment and where it stands vis-à-vis international markets

Over the years, the safety and security market in India has expanded steadily in tandem with the growth of the economy. However, owing to the technological nature of the products, importing remains the key source of procuring safety and security equipment. Local manufacturing is limited to a marginal share of the overall market since there are very few manufacturers in the country.

"Indian hospitality is as concerned as the world when it comes to providing security and shows an attractive potential for manufacturers. But it still has to go a long way to go in terms of installing various reliable security equipment like electronic locks, electronic safes, closed circuit televisions, access management systems and so on. Incidentally, five-star hotels are doing their bit in ensuring proper electronic security is provided to its valued guests," says Adrian Goldwyn, country head, Onity India. The company is one of the leading manufacturers of electronic locks for hospitality as well as other sectors. The market for ELocks and ESafes is still around 50 per cent of the total room base.

It is not that India doesn't have the potential to manufacture. But Indian companies are too wary to invest in a big way because the market is already crowded with imported and well-established brands. Moreover, with the benefits of import licenses available with the industry, it becomes more economical to import the products.

Ajay Khanna, owner, Eagle Forgings, explains, "In hospitality industry, 85 per cent of high end renovated hotels use imported safety and security equipment. Although productivity in foreign countries is expensive and manufacturing in India is 10 to 15 per cent cheaper, the Indian market has not yet developed to that extent to manufacture high-tech equipment for hotels."

Market Size And Share

The safety and security market includes locks, safes, security boxes and doors, surveillance cameras, CCTV, burglar/fire alarms, entry/exit screening systems, outdoor perimeter protection sensors, wireless equipment/technology, installation tools, supplies and accessories, fire extinguishers, and rescue devices. The most widely recognised companies include Tata Honeywell, Johnson Control, Digital Alarm Technologies (DATS), Turbo Consultancy Services, Siemens Building Technologies, Datamatics, Group 4 Securitas Systems and Alba Control Systems. The most developed markets for the security industry in India now are found in Delhi, Mumbai, Bangalore and Kolkata.

The hospitality sector basically looks at two categories of equipment - Video Systems and Access Control Systems. Anant Maheshwari, director, South Asia, Honeywell Security Group, explains, "Three years ago, the value of the safety and security market in India was estimated at US$ 50 million which was inclusive of video products, access control and intrusion alarm systems. Since at that time it was not at all economical to manufacture products in India, importing was considered a reasonable option. Today, the market is growing at the rate of 30 to 40 per cent. The size of the market and the requirements are increasing in volumes with global MNC products coming into the market."

Interestingly, MNCs are bringing not only products but also international business philosophies to the security market of India. For instance, India has been a priority for Honeywell Security Group. Therefore, the company is building its support systems and team in India to provide the benefit of its global experience to its Indian business partners. "India is a cost conscious, high volume, growing security industry. The market shows good prospects for higher end products that provide better quality and reliability. Honeywell brand is becoming stronger in India. Honeywell Security Group will be setting up the headquarters for entire South Asia region in New Delhi by March 2005, which will act as a demo and training centre. The company is looking at planting the infrastructure in terms of providing technical support," says Maheshwari.

Owing to lack of professional training, the small dealers mainly trade in sample products, while more sophisticated products are usually provided to the users directly by distributor-integrators. Foreign manufacturers supply directly to distributor-integrators who then supply to small dealers in northern, southern, eastern, western and central India There are 15 to 20 major distributor-integrators in India that provide all kinds of security products.

Though USA controls a large portion of the security equipment market, in recent years, US suppliers have faced strong competition from European firms that have established a good relationship with end-users. Korea, China and Taiwan suppliers dominate the low-end market of access control, and CCTV systems by offering about three to four times lower-priced but much shorter lifetime equipment than the US products.

Quality Holds The Key

The ongoing expansion of the country's high-end housing projects, hotels and top-quality commercial property is stimulating a greater demand for safety and security equipment. Indian market is developing towards quality consciousness. Although the first class hotels are buying products from local suppliers with ISI standardisation as far as safety is concerned they still believe that Indian market cannot take over the world in terms of security products.

Take an example. The fire and safety industry with a market size of about US$ 30 million is growing at the rate of 15 per cent annually. However, less than 50 per cent of fire and safety products in the market are locally assembled products. What Indian equipment lacks in terms of quality is the reliability factor.

As Kapil Shandilya, fire safety officer, Radisson Hotel, New Delhi explains, "Most of the detectors are manufactured in India but mostly five-star hotels prefer products that are manufactured by international firms. The reason being Indian firms cannot match the international advanced technology. Local production is not competitive enough in terms of quality and price. Moreover, in hotels and high rise buildings, the equipment used should be customised. In future, we are looking at new products like face masks, escape hoods and water monitors entering the Indian market."

Le Meridien New Delhi has invested Rs 3 crore for imported safety and security installations. According to S S Sohi, director engineering, Le Meridien, New Delhi, had there been quality local products, hotels would not have gone for imported ones. "Price sensitivity is obviously an issue but we can't take chances when it comes to the security aspect. Production in India will make the equipment cheaper. Secondly, repairing of international products is a costly affair. If that can be done locally, then it would be cost effective for the hotels," he said.

Five-star hotels go in for international equipment because they can afford to make huge investments, but what about other category hotels? Says Goldwyn, "As the import duties are high, hotels that do not earn foreign exchange find it expensive to install these units."

The lack of hardware production facilities is also an obstacle for local production to take off. Reason? Unlike other countries, India is more inclined towards manpower security than electronic security. Security guard services account for nearly 60 per cent of the total market and equipment does for the remaining 40 per cent. High tech security equipment is primarily used in luxury commercial buildings and outlets, first class hotels and housing units.

Conclusion

The safety and security market of India is less than 10 per cent of the Asian market. But it is one of the fastest growing markets. India needs security in terms of geography. The future trend is towards importing more sophisticated, high value-added and customised products. But before that it is high time for four-star and three-star hotels to realise the advantages of electronic security and thereby complement it with the manpower security.