The first 5 months of 2013 have shown that the physical security market continues to grow despite poor economic trading conditions in the developed markets of the world.

There are 2 reasons why growth has been robust.

• The first is the perceived increase in the need to protect people and property from theft, crime and terrorism.
• The second is the development of new innovative products that have improved the capability to detect crime in all its forms and through connectivity with other services improved the business performance of end user companies.

In the video surveillance industry, in one form or another, IP Video Network cameras have been at the cutting edge of innovation and in particular have provided connectivity to other IP devices to help provide total solutions that have increased productivity and reduced the cost of ownership.

One area that will continue to drive demand for IP cameras, because it will increase performance and further reduce total cost of operation, is on-board video storage using SD cards. Prices of SD cards have fallen dramatically and soon they will be able to store a years’ worth of video on the camera.

This technology is now gaining traction and is expected to open up new opportunities particularly in the small-to-medium business market where there are 16 cameras or less; because it will eliminate as much of the storage cost as possible. Another benefit of an edge-based system is less costly maintenance. With no server maintenance, no complex proprietary hardware and software, and no storage or scaling limitations, edge-based technology provides a simplified solution that requires relatively little on-going maintenance.

We regularly identify innovation designed to improve security equipment to meet the needs of particular applications which in the short term may not have such game changing implications as edge storage; but together these developments will make a significant mark on increasing the demand for physical security equipment. 2 recent examples of these include;

1. A camera created by a research team at the University of Illinois which is about the size of a penny and mimics insects' bulging eyes. It features 180 micro-lenses, giving it a panoramic field of view and the ability to focus simultaneously on objects at different depths. The bug's eye camera is likely to be developed for uses ranging from security cameras to surgical endoscopes.

2. Smart grid technology firm GridSense has introduced a wireless camera to inspect high-voltage assets rated up to 500kV. Introduced in 2013, the hotstick-mountable, high-resolution HighV Camera initially inspected a lower phase-to-phase voltage rating and the rating has now been increased to 500kV phase-to-phase. The HighV Camera, with its accompanying 7" Android tablet, meets the utility industry's need to safely examine energized, substation-level high-voltage assets in great detail. The present design is for mobile use but there are many thousands of remote sites in the US alone which would benefit from permanent installation.

Strategic acquisitions that bring together innovation to make "2+2 = 5" have also played a part in driving demand for physical security products.

Flir's M&A strategy in acquiring Lorex Technology supports a key strategic growth objective of bringing thermal and infrared imaging to the commercial and domestic market.

Lorex Technology is a market leading manufacturer of home and personal video surveillance products with very strong and successful retail sales channel relationships. As Flir continues to drive the price lower for infrared thermal imaging cameras and viewers, Lorex's retail channels and advanced eCommerce capability will provide widespread access to consumer markets for Flir's new thermal camera products.

In December 2012 Flir acquired Traficon a Belgium company that is a leading provider of video-based intersection control and roadway incident detection products. Traficon's core capability is its video image processing software for ITS applications. This technology requires little modification to be applied to security and other applications, so the Traficon acquisition brings high-performance video analytics capabilities to Flir.

Thermal cameras are often paired with video analytics for perimeter intrusion detection applications. Combining Traficon's video analytics capabilities with Flir's thermal camera technology completes the task of integrating a powerful roadway monitoring solution for cities and municipalities around the world.