Hawk ISM borders security investment in Europe

Biometric Technology Investment in Border Management:

ISM Applied Intelligence Biometric Technology Investment in Border Management White Paper

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Impact Mapping Of Key Factors on Security Solution Investment, 2011/12 Border security is an important domain in the homeland security industry particularly if it incorporates airports & seaport domains. The heightened threat of terrorism, illegal immigration and organised crime in recent years, coupled with the enlargement of EU membership and the expansion of European programs has defined priorities for spending across a range of technologies. The technological focus of investment will continue to be biometrics, surveillance, and detection & screening systems, with new cross- overs from military technologies. The drivers of investment and technology adoption vary considerably across different domains, and the rapidly evolving roadmaps of each type of technology create a complex set of parameters for decision-makers in deciding on a particular integrated system. This complexity has limited end-users’ choices Critical Very High Negative Factor System Complexity Economic Crisis Procurement Practices Level of threat Compliance Throughput Infrastructure Development Very Important Important Medium Positive Factor Probability Impact High Size of circle denotes relative weighting Source: ISM 3/16/2011 2 ISM Applied Intelligence Borders Management Investment Trends EU policy & programs among the fully-integrated solutions be provided by leading primes or partial systems from a small group of vendors, because of the absence of open platforms. This situation is evolving through the convergence of different technologies which has brought greater emphasis on the IT and networked capabilities. Nevertheless, this situation is exerting pressure on integrators to justify the benefits of their solutions, in their configuration, flexibility, functionality, and ROI. When considering the range of surveillance and biometric technologies available, the choices and trade-offs can be complex. Moreover a TCO approach to the investments are increasingly raising the question of how the systems can adapt to incorporate new generation technology that may only be 4-5 years away without undermining the immediate justifications for the investments.

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The promise of more effective and functional technology, with the prospect of greater efficiency benefits for the operators is turning from marketing ‘hype’ to a indirect restraint on investment. The uptake of biometric systems, however, are more likely to be the focus of investment across various border domains and applications as systems are evolving as a technology for e-documents, physical access control, advanced ID management, and criminal identification across Europe. While the pace of adoption varies the trend towards multimodal biometrics is clearly developing in some applications where authentication and flexibility are dominant pre-requisites for future systems. Face biometrics and Iris recognition are projected to exhibit a faster rate of growth through deployment in e-Passports and other e-Documents, and are already established for access control in sensitive areas of airport security and border control. © Hawk ISM 2010 3 ISM Applied Intelligence Borders Management Investment Trends In 2010, the prospects for investment are most obviously impacted by reductions in security spending among member states, though momentum has already been set by European Union initiatives through various border security related projects such as Euroborders , European External Borders Fund, SIS-II, and VIS etc.. These and other programs have fuelled investment to the point that many countries in Europe now have many appropriate security solutions for surveillance and detection, and this dilutes the urgency with which current investment priorities are being viewed. To some extent, this is reinforced by the current stage of technology developments, where a ‘wait-and-see’ approach is not only easy to justify in the current economic climate by simply extending the decision-making time-frames, but also because delaying investment may allow more time for a more advanced technology to be offered. Source: ISM

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Investment Patterns Total investment in European border security is expected to achieve around €745m in 2010, representing a decrease of 3.4%. Expectations for 2011 however are more pessimistic, with a projected decline of almost 8%, due predominantly to a fall of 15% among new member states. Conversely investment in Western European states should achieve a healthy 5.3% in 2011, and pick up further from 2012 to a sustained growth of over 8% thereafter. The net effect of this trend is that clear. While 63.2% of investment in 2010 was within New Member States, for the period to 2014, cumulative investment by new member states is expected to represent 54% of all European border investment. In real terms this represents a decline in annual investment from around €500m in 2009 to only €310m by 2014, based on conservative expectation of economic recovery in the next 4-5 years. The overall decline in investment across Europe is predominantly evident in surveillance and detection systems both of which are expected to register declines of around 5% in 2010. Surveillance is expected to see a more significant drop over 2011 and 2012 within an overall declining trend for the next four years. The decline in investment in detection & scanning systems is expected to bottom-out in 2013, after registering a fall of almost 7% in 2011, and 4% in 2012. Conversely, investment in biometrics systems is not projected to decrease, though only nominal growth is expected in 2010/2011 before more substantial investment growth is projected from 2012 of 8-9% annually. To 2014, the cumulative investment in European borders investment is likely to reach €3.44bn, of which surveillance will account for 36.3%; while detection will achieve 34.5%, and biometrics 29.2%. 4 ISM Applied Intelligence Border Management Investment Trends © Hawk ISM 2010 Source: ISM

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New Member States Spending among new member states of Central Europe has follow a different set of priorities, driven by the compliance requirements of Schengen standard, particularly for border crossing systems including IT the SIS II and biometric systems for the VIS. More recently regional investment was boosted by the integration of Romania and Bulgaria as much as the increase in illegal immigration that is a by-product of the economic crisis. Migration has specifically lent priority to movement-optical sensors & surveillance technology in addition to physical border infrastructure, but the risk of terrorist penetration, drug & people trafficking, and smuggling have also brought focus onto detection technologies and investment in more operational equipment and staffing priorities. There remains more scope for investment among accession states that initiated their investment programs over three years ago and are faced with requirements to upgrade on the systems initially installed. One factor that hampers the predictability of investment for the purpose of forecasting is the procurement process, which is neither simple nor consistent among the new member states, and is subject to some degree of corruption, and a degree of fragmented responsibility in decision-making and budgets. New Member states are projected to invest €1.85bn in border security systems between 2010 and 2014. Beneath this lies a very broad and inconsistent range of country-level trends, but this nevertheless contributes to an overall decline in projected investment to 2014. Most notable is the decrease in surveillance from around €250m in 2010 to €145m by 2014 which reflects the fact that much of the hardware is recently installed. Similarly for scanning & detection, investment is projected to fall from €164m in 2010 to around €100m by 2014. 5 ISM Applied Intelligence Border Management Investment Trends © Hawk ISM 2010 Source: ISM

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Biometrics The biometrics industry has been growing slowly since 2000, but has only recently reached more widespread acceptance outside specialist building security applications. This is most evident in border management applications. Investment in biometrics systems are expected to increase as border control systems using biometric technology are shown to be effective and increasingly affordable across the European Union, for e-Passports and other travel-related documents, national ID programmes, and border management control. The major biometric technologies being deployed in the border management are fingerprint, facial; and increasingly retinal pattern, voice and iris recognition. Within the broader homeland security domain, law enforcement and security services is another area where biometrics is expected to significant further growth. Applications such as databases to facilitate forensics & investigations, fingerprint, face and voice biometrics are increasingly used, and wider adoption is expected throughout Europe, to create a regional database. The convergence of physical and logical access control through the use of smart cards incorporating embedded fingerprint biometrics is a major driver for the market. It is likely to become the standard in many Governmental bodies for secure identity management and show further growth at critical infrastructure facilities such as rail, seaports and utilities, which are beginning to implement biometric technology across various application segments. Advanced ID management systems are already deployed to authenticate and identify workers’ requiring access to sensitive areas and also other contractors and service providers in airports, ports, government facilities and petrochemical industries. 6 ISM Applied Intelligence Borders Management Biometrics © Hawk ISM 2010 The European Commission 2252 passport regulation and International Civil Aviation Organisation 9303 mandate have spurred the development of biometric passports, which in turn has driven demand for installation of both bimodal and multimodal systems in airports. As air travel has been a prime security focus since the 1970s it is natural that passports were to be a vehicle for adoption of biometric identity, as it is less subject to the political and civil liberty concerns of national ID card initiatives. While the migration to biometric passports is ongoing it is proving to be a valuable proving-ground for biometric systems and will naturally lead to an acceleration in their adoption outside airports, to other sea and land border. The rate of uptake does not provide a replicable basis for projecting the adoption in other domains, which have different investment priorities for infrastructure and replacement of legacy procedures, but the appetite for investment biometric is clearly quite dynamic. Biometric national ID, and driving licenses are expected to see further development across Europe over the forecast period, which strengthen the blanket adoption of biometrics, and the Schengen visa, with embedded fingerprint biometrics, is already deployed and likely to continue to drive investment in border control solutions. The iris recognition immigration system (IRIS) programme, is a basis for registered or trusted traveller programs to pass through border control quickly through automated barriers. This program is expanding slowly, as the experience and implications in Israel, the Netherlands, and the UK are being judged. There remain certain barriers to its adoption across Europe, but the it’s expansion would have a considerable impact on traveller experiences, border management, and operations.

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7 ISM Applied Intelligence Borders Management Biometrics © Hawk ISM 2010 Investment Patterns Total investment in biometric technology in European border security is expected to achieve around €179m in 2010, representing growth of 2.2% and slowing slightly in 2011. However the rate of growth is expected to accelerate from 2012 achieving around 8% from 2012, which will increase annual investment to €200m by 2012 and over €230m by 2014. Over the forecast period, investment among Western European states is expected to represent a cumulative value of €716m, or 71% of total European biometric spending for borders. Growth among ‘old’ EU states is projected to achieve over 5% in 2011, and over 10% in 2012 and to 2014. This represents a 10-fold increase in annual spend compared to New Member states which will see annual investment rise by a little more than €5m over the same period. In context, the prospects for biometric systems is strong. Total investment in biometric systems across all homeland security domains, is projected to double across Europe from around €290m in 2010 to €560m in 2014. The uptake of biometrics in borders is acting as a spur to the broader acceptance of biometric technology evident in the statistics that cumulative investment in biometrics should reach €2.09bn between 2010 and 2014. Furthermore, borders currently represents 66% of all biometric spending in homeland security domains, but likely to fall to a share of only 41% by 2014, as spending increases rapidly from 2011. Source: ISM

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8 ISM Applied Intelligence Borders Management Biometrics The uptake of biometrics is likely to accelerate as vendors continue to demonstrate the benefits of combining stand-alone technologies. The convergence of physical and logical access control through using smart cards with embedded fingerprint biometrics, is a major opportunity in critical national infrastructure that is likely to become the prevalent solution for identity management and drive the further acceptance of biometrics across Europe beyond 2014. Furthermore, the implications for integrated biometric and surveillance systems would represent a significant opportunity when affordable camera technology is effectively integrated with facial recognition software, and other efficient biometric recognition functions for identification of mobile subjects, tracking, and intruder detection around airports & ports, perimeters & borders. © Hawk ISM 2010 Total Spending 2008 2009 2010 2011 2012 2013 2014 Western Europe €m 116.0 117.8 121.8 128.3 141.4 154.5 170.2 New Member States €m 54.3 56.7 56.7 53.6 56.0 57.8 61.6 Total Europe €m 170.3 174.6 178.5 181.9 197.4 212.3 231.8 Growth 2008 2009 2010 2011 2012 2013 2014 Western Europe % 1.6% 3.3% 5.4% 10.2% 9.3% 10.2% New Member States % 4.5% neg -5.6% 4.5% 3.3% 6.5% Total Europe % 2.5% 2.2% 1.9% 8.5% 7.6% 9.2% Share of Total 2008 2009 2010 2011 2012 2013 2014 Western Europe share 68.1% 67.5% 68.2% 70.5% 71.6% 72.8% 73.4% New Member States share 31.9% 32.5% 31.8% 29.5% 28.4% 27.2% 26.6% Border Security Investment in Biometric Systems: Europe by region, 2008-2014, € million Source: ISM This technology is particularly relevant to crowd monitoring and surveillance systems in transport hubs, and on transport networks. One particular opportunity that is likely to drive future interest is network protection and cyber threats. While the risk of cyber attack has focused attention on the external threat, security risk managers are still aware that pertinent threats exist within the organisation. Most cyber security systems are vulnerable to internal compromise. Moreover the incidence of industrial espionage is increasing rapidly, and security managers are increasingly aware of the potential value of integrating biometric solutions with a whole range of access control, authentication, and CCTV systems. The use of smart cards or similar substitutes, to replace existing static measures with biometrics authentication for both physical and network access, would significantly mitigate some of the internal security risks that organisations face.

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Impending Technology Advances to Watch Portable Iris Recognition cameras with longer range are offering new applications by law enforcement, and border management. Due eye cameras which acquire images of iris and face biometrics are gaining momentum in transportation, and border management. 3D face recognition systems are yield very low error rates and should gain broader acceptance for access control to highly sensitive facilities, which will also enable a broader range of multi-modal solutions. More portable hand geometry systems with one-to-many search functionality based on a 20-byte template. 9 ISM Applied Intelligence Borders Management Biometrics 2010/11 prospects Investment in biometrics in homeland security applications is expected to register €288.8m by the end of 2010, and reach €338.5m in 2011, representing growth of over 17%. Finger and face biometrics is likely to account for over 90% of investment though there will be encouraging growth in iris technology in airports, border and sensitive access control applications where hand geometry is also emerging. Within this annual growth of around €50m investment for borders is likely to represent less than 7% as procurement cycles have been extended in response to government spending reviews and the expectation that the economic climate will improve in 2012. Hence some spending has already been deferred from 2010/11 to 2012, and there is likely to be some downward movement in contract prices in 2011. © Hawk ISM 2010 Author Dan Solomon, Senior Partner. For more information about Biometrics Markets and Security Domain Analysis in Europe & the Middle East contact: d.solomon@hawk-ism.com Source: ISM Biometrics - Total Investment in Homeland Security by technology, Europe, 2010

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ISM Applied Intelligence 10 © Hawk ISM 2010 www.hawk-ism.com About ISM ISM (Hawk Intelligence Source Management) is a unique European-based intelligence & source consultancy firm. Our expertise in domain & intelligence analysis offers specialist and direct application value to organisations working within Aerospace, Defence & Security fields. Analysis & Markets Added Value Analytics Technology Intelligence Risk Analyses Strategy Consulting Workshops For more information about investment in border security or critical infrastructure contact: D.Solomon@Hawk-ISM.com Disclaimer This paper has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Hawk ISM, its directors, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. All Rights Reserved. © Hawk ISM