AXIS 3.0 Changing the Security Market [302562]

FINAL Project

AXIS 3.0 [anonimizat]-Andrei

2014 – 2016

ACADEMIC SUPERVISOR:

Prof.univ. dr. [anonimizat] 2016

TABLE OF CONTENTS:

Chapter I – INTRODUCTION AXIS COMMUNICATIONS

ABOUT AXIS COMMUNICATIONS: the People & the

company………………………………………………………………………………………………….4

1.2. MILESTONES IN AXIS’ HISTORY…………………………………………………..6

1.3. CANON INC. & AXIS COMMUNICATIONS A.B. ACQUISITION…..8

1.4. [anonimizat] 3.0 (2016)…………………..9

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2.1. GLOBAL SECURITY & [anonimizat]………………………………………………………………………………11

2.1.1. MARKET CHARACTERISTICS………………………………………13

2.2.2. PESTLE ANALYSIS………………………………………………….15

2.2. AXIS & COMPETITORS LANDSCAPE………………………………19

2.2.1. KEY VENDORS & REGIONS IN THE VIDEO SURVEILLANCE MARKET ……………………………………………………………………………………………..19

2.2.2. [anonimizat] & CENTRAL EUROPEAN MARKET……22

2.2.3. AXIS ROMANIA………………………………………………………22

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3.1. ORGANIZATIONAL DIAGNOSE…………………………………………………….24

3.1.1. AXIS TECHNOLOGIES………………………………………………24

3.1.2. AXIS PRODUCTS & SOLUTIONS……………………………………29

3.1.3. AXIS MARKET SEGMENTS…………………………………………35

3.2. ORGANIZATIONAL STRUCTURE …………………………………………………37

3.3. AXIS “GO-TO-MARKET” MODEL & FIGURES………………….….40

3.4. SWOT ANALYSIS………………………………………………………………………….44

Chapter IV. [anonimizat] 3.0 FROM PRODUCTS TO SOLUTIONS………………………………………………………..47

4.1. INNOVATING THE FUTURE…………………………………………..47

4.2. AXIS OFFERING 3.0………………………………………………….… 49

Chapter V. EXPECTED OUTPUT……………………………….55

BIBLIOGRAPHY………………………………………………….59

ANNEXES……………………………………………………….…..59

BUSINESS CASE: Facial recognition

BUSINESS CASE: Video surveillance system for Aéroports de Lyon

Chapter I – INTRODUCTION AXIS COMMUNICATIONS

ABOUT AXIS COMMUNICATIONS: the People & the Company

Axis Communications is a Sweden-based company and is listed on Nasdaq Stockholm. Axis was formally founded in 1984 [anonimizat]. [anonimizat]-model.

The business model has resulted in Axis becoming the global market leader in network cameras and video encoders. Today, we’[anonimizat] a variety of network video products and creating various Internet of Security Things products to broaden the use of IP networks.

Nowadays, Axis has presence in 51 countries and is continuing to expand on both a global and local level.

The objective is to be the global market leader and have a strong position in all markets where the company operates. There is a strong focus on strengthening the company’s presence in emerging markets and continued investments are made in order to get closer to the end customer and to introduce new product concepts in more mature markets. Meanwhile, the number of employees increased by 198 people in 2015, to approx. 2.500 employees in total.

Axis Communications is the leader expert in his field of business, having 2 fundamentals: Technollogy innovation and Human capital. Axis’s heavy investment in research and development has led to many industry firsts, including the world’s first network camera, the video encoder, HDTV and thermal network cameras. Nothing of all these, would have been possible without a very close cooperation with the partners.

We are One: our people-focused approach has helped us build a strong culture. We’re always open to new ideas, new perspectives, new partners and new ways of doing business, and we bring this openness to our relationships with our partners and customers. In Sweden, we call this ‘Lyhörd’ and it’s a really important part of the Axis culture.

We also believe in honesty and transparency, and so we encourage customer feedback and co-creation. That’s why we build our solutions on an open platform, so they’re flexible, scalable and fully adaptable to all of our customers’ environments.

A name you can trust

If there’s one thing Axis is renowned for, it’s quality. Quality is paramount across our entire value chain – from research and development to production, right through to recycling after use. And, it’s just as important within the relationships we have with our partners and customers. The same high standards are applicable in safety and security, giving customers solutions that are reliable, functional and as user-friendly as possible. And, we apply those same exacting standards to our customer service.

1.2. Milestones in Axis’ history

1984-1990 – IBM mainframe and minicomputer print servers: our first product was a protocol converter that enabled the connection of PC printers to IBM mainframe 3270 networks. Despite being the last entrant to the market, we became number two in the world thanks to our innovative products and the fact that we were the only ones loyal to our partners in this business. During this period, we also opened our first US subsidiary.

1990-1995 – A leader in networking technology for printers: during the emergence of the Internet, we were pioneers in network connectivity. With a focus on TCP/IP printing and later multi-protocol print servers – an Axis industry first – we grew at a rapid pace. We released our first ETRAX® chip, embedded devices with internet access, established offices in Asia and became number two in the industry.

1995-1998 – Network access to everything – Thinservers: In 1995, we successfully launched a network optical storage solution and became the world’s leading supplier in this category. We name this technology “Thinserver technology” which is known around the world today as the Internet of Things (IoT). Here we established a trend 20 years too early.

1996 – The world’s first network camera: we invented the world’s first network camera, Neteye 200.

It revolutionized the industry, transforming video surveillance from analog into digital. Equally important was our decision to retain our indirect sales model, revolutionizing the way the CCTV industry operates. Neteye 200 was shown for the first time at N+I tradeshow in Atlanta. One of our very first customers was Mr. Steve Wozniak of Apple who ordered 2 of the original Neteys. It received several industry awards.

1998 – The world’s first video encoder: while marketing the Neteye 200 it came to our knowledge that customers liked it, but had analog cameras, which were not possible to replace with the Neteye. Therefore, we continued to extend IP connectivity to more types of hardware, such as the first video encoder (1998). Video encoders were a huge milestone, allowing users to integrate their existing analog CCTV system with the latest IP technology. Since our first network video products had very low performance we also invested in our first video chip, the ARTPEC-1.

1999 – The Axis 2100, setting the standard for the modern network camera: another major milestone was the introduction of the world’s most popular network camera at that time, the AXIS 2100, which held the top spot for five consecutive years. This camera was the first to use our own-label video chip (ARTPEC-1) as well as utilizing the Linux operating system for imbedded products, which set a standard on how network products were to be designed.

In order to drive the sales of networked video we also established the industry’s first partner program in the year of 2000.

The AXIS 2130 PTZ Network Camera with its pan, tilt and zoom functions, enabled wide area coverage and great details which took surveillance to a new level. It was developed together with Axis and Canon where Canon provided the mechanics and Axis did the video encoder using the ARTPEC chip. This was also the first year we saw serious competitors doing network cameras, something that made the technology legitimate and analyzed by industry specialists.

2002-2010 – A time of innovation: by 2002, we had successfully transformed from a connectivity specialist into the global number one in the network video market. In 2004, we introduced the first network camera equipped with Power over Ethernet (PoE) and MPEG-4 compression; and launched the first HDTV resolution network camera. Power over Ethernet turned out to be a major driver of this industry as we learned that network cameras only require 1/3 of the amount of cables compared to analog cameras and no need for a certified electrician as power was fed over the network, not by separate power supplies.In 2008 we introduced the AXIS 1755 Network Camera that deliver video in HDTV format. The network and the camera sets the standard for the new resolution. This cemented Axis leading position and established HD-TV as the new standard in video surveillance.

2010 – 2014 – Global acclaim: in 2010 came another Axis world-first – thermal network cameras. And, in 2011, we launched the revolutionary Lightfinder camera – the world’s most light sensitive camera that was able to see colors, even at night. It received the Wall Street Journal Technology Innovation Award in 2012. A year later, we went back to our roots and started a new wave of attaching intelligent devices to the Internet. The first such product was the AXIS A1001 where we entered the physical access control market. With this, we saw the opportunities in enabling more markets with networked technology. This we call the Internet of Security Things.

2015 onwards: in February 2015, Canon Inc. announced a public offer to acquire all outstanding Axis shares. Canon is today the majority owner. As a part of the Canon group, we are run as a separate entity and are continuing to deliver high value to customers through our global partner network.

Today, we’re focusing on a new wave of innovation. We’re continuously making advances in camera technology such as light sensitivity, dynamics, color reproduction and resolution in our network cameras. Beyond that, we’re also successfully moving into new markets that we call the Internet of Things, such as access control, network horn speakers and IP Video Doorstations. We’re driven by our vision to come up with new, innovative, smart solutions that meet user needs – and we’ll expand our portfolio to keep achieving that.

1.3. CANON Inc. & AXIS COMMUNICATIONS AB ACQUISITION

In February 2015, Canon Inc. made a public offer to Axis’ shareholders of SEK 340 per share and for a total of $2.8 billion acquired Sweden’s Axis Communications AB. Axis has a new, strong and long-term owner. Axis is continuing to operate as an independent company with a retained focus on strengthening its own operations and working towards clearly-defined targets. Access to Canon’s world-leading technology further increases the potential to strengthen Axis’ competitiveness. As an important part of our ambition to operate as an independent company with firmly established local roots, in 2016, we will start the construction of a new headquarters in Lund.

Since the beginning, we have been a company with our heart in Lund and this investment means that we will strengthen our long-term establishment in this dynamic growth region close to universities and colleges, which will allow us to continue conducting leading research and development. With a new strong principal owner that shares Axis’ view on long-term commitment, innovation and global leadership, I am convinced that we will improve our competitiveness and drive developments at an even faster pace.

Furthermore, on the 1st of September, 2016, Canon & Axis Communications announced that the two companies will join their efforts for sales & marketing strategies in major regional markets. In Europe, the Middle East and Africa (EMEA) and North America, Axis will assume responsibility for the marketing and sales of Canon’s entire portfolio of network video products and solutions.

In the Japanese market, Canon Marketing Japan will continue to sell Canon’s network video product portfolio and, in addition, will partner with Axis, leveraging its robust sales network and client assets to expand sales of Axis products to customers in Japan.

1.4. LONG TERM GROWTH AMBITIONS, AXIS 3.0 (2016)

“The video surveillance system market has continued to realize rapid growth,” Canon said in a statement. The company said the network surveillance camera business would be a “driving force for future growth within Canon Group.”

For sure, taking in consideration the political and econolical climate, the global demand for network cameras is expected to grow further more with 16 up to 22% annually (according to diffrent market reasearch reports from IHS and TSR), a great part from this being from the Asian and Latin Americas. Taking in consideration the global context, Axis’ goal is to grow 20% annualy, as our President & CEO, Ray Mauritsson, declares it,” This means that we cannot just meet change, we drive it. To succeed in this, we will continue to invest in innovation and dedicated employees, boost our presence in emerging markets and improve organizational efficiency in line with our expansion”.

Chapter II – AXIS COMMUNICATIONS EXTERNAL ENVIRONMENT

2.1. GLOBAL SECURITY & VIDEO SURVEILLANCE MARKET

In the next five years, the video surveillance market is expected to display an annual growth rate of 10%. In 2014, the video surveillance market was worth USD 14.3 billion and in 2019, this market is expected to be worth USD 23 billion. During the same period, network video demand is forecast to grow by about 16 percent annually. In 2014, the network video market was worth USD 9 billion and in 2019, the value is expected to have increased to USD 19 billion. The strong growth rate for network video is primarily driven by increased demand in major growth regions, greater penetration in small installations and rapid technological advancements, which are creating new business opportunities.

According to the IHS Report report (end of 2014):

.

Also, while there is much opportunity for leading IT vendors in video surveillance, it is greatly concentrated within only a few vertical segments and for sure, key verticals are Governement, City Surveillance and Transportation, as follows:

2.1.1. MARKET CHARACTERISTICS

Critical factors having a major impact upon the growth of security market are the following:

Increase of population density and need to prevent crime & protect them; also, surveillance cameras is viewed as critical for law enforcement, as there is growing public acceptance for video surveillance and use of technology to help ensure the safety of citizens;

The build of smarter cities: there are high investments in a better infrastructure, energy infrastructure, smarter new houses aso; also, there is a high need in building environmently and socially sustainable cities – for example: network camera solutions can measure traffic flows and provide real-time intelligence to traffic controllers, carefully monitor large areas around power plants, ports and other critical infrastructure to help protect against sabotage and terrorist attacks, help protect passengers and employees of public transportation systems, prevent vandalization and protect government buildings and schools.

The IP based technology is continously developing as the hyper connected world is too, being another factor with a great impact upon the development of the security market. The network camera technologies are allowing cameras to be integrated with physical access control systems and used together with software solutions, mobile devices and cloud technology. Integrated security systems that combine network cameras with physical access control systems and software solutions, are now used to heighten security in for example schools, hospitals and government buildings.

According to: wwww.asmag.com: the development of advanced video analytics solutions has created a new area of use, namely around video as visual intelligence, commonly referred to as business intelligence. Network camera end-users who want to optimize their business processes are increasingly looking to surveillance solutions for answers.

Another key change in the security market is transition from analogue cameras to the digital ones, having as direct efffect changes in architecture systems also. With IP network cameras, core architectures continue to be used in some situations (e.g. in airports), but are now noted for their performance, scalability, and ease of management. It is also possible to build distributed, edge systems with vast distances between cameras. Edge systems are characterized by their relatively low-cost, simplicity, and ability to plug-and-play. Furthermore, an edge-to-core model has evolved to address the multifaceted needs that are common in government, city surveillance, and transportation.

The transition of the video surveillance market from analog to network cameras has caused a convergence of the IT and physical security sectors. This has in turn led to pronounced changes in the way that security projects are think, built, and managed. From the point of view of security end-users, internal IT employees gained a higher gained for sure a higher influence, when it comes to the acquisition and in day-to-day oversight of surveillance technologies. Also, on the supply side, IT integrators are gaining a growing share of the video surveillance market, especially within the most storage-intensive verticals.

According to our VP Global Sales Bodil Sonesson, the two main drivers behind this shift are more sophisticated video analytics and increased integration of IP video surveillance with other systems forming the Internet of Things (IoT):“Throughout the year we have seen ever increasing demand for advanced video analytics solutions, across all market segments and verticals,” Sonesson said. “For example, in retail, video analytics feed into business intelligence and business analytics software. “In city and transport surveillance, audio analytics alert cameras of incidents such as a gunshot before they become visually identifiable. In critical infrastructure, thermal cameras detect intruders and work seamlessly in tandem with extreme low-light cameras for further identification and classification.”

The latest World Economic Forum's Global Risks Report identifies failure of critical infrastructure and severe social unrest as two main global risks during 2015: „ the demand for IP-based security solutions continue to grow in all market regions and the most prominent driving forces for this are urbanization and technology development,  both global in nature”.

2.1.2. PESTLE ANALYSIS

Political factors

“While no single event can be cited as the cause of major shift, we are all well aware that unfortunately, the world is becoming more insecure due to a range of political, economic, and cultural factors,” said our VP Global sales, Bodil Sonesson.“But, surveillance technology has also been improving, with better quality images, smart analytics, etc., thereby helping society to better monitor environments, solve incidents, and prevent attacks.” From the rise of terrorism and war-induced migrant crisis to modern technological developments that have spiked privacy concerns, 2015 has seen the world struggling to come to terms with the fact that security is indeed an issue that has to be dealt with.

Axis is impacted by global macroeconomic trends, like any other international or multinational company in the world. Although the economy recovered during 2015, macroeconomic challenges remain in several of the regions where Axis has its operations. A weak economy indirectly affects customers’ openess to invest, investment capability and financing possibilities. Terrorism and political turbulence in many countries can have an adverse impact on Axis’ global expansion. And during 2015, the sales trend was primarily affected by the performance in Eastern Europe and the Middle East.

Another, partly political question, is social acceptance of camera surveillance as well as the privacy issues which may arise in this context. Globally, Axis encounters everything from a very positive attitude to a more sceptical view of camera surveillance. There are no currently known plans for significant changes with regard to legal regulations or restrictions. As market leader, Axis continually strives to communicate the benefits of a safer and more secure environment with network video as a natural component.

According to “Global Video Surveillance Market Forecast & Opportunities, Report 2018”, the video surveillance market revenues are forecasted to grow up to around three folds globally, whereas, IP/Network video surveillance market would be growing by almost four folds in terms of revenue by the end of 2018 and is anticipated to grow at the CAGR of around 25% during 2013-18. The same report shows that the highest demand will be in China, United States, India and United Kingdom, majorly due to the increasing terrorist threats & attacks, growth in IT infrastructure and other security concerns.

Economic factor

For sure, in terms of growth in this market, there are large differencies considering diffrent geographic regions. The exchange rate is another significant key factor, as it continued to play a significant role in Russia and Latin America, thou their interest in digital security systems continued to grow, as well as in any emerging country. And China remains the largest market for network video. And not forget also, the BREXIT effect on the security market, which conforming to diffrent experts in the field has un uncertain impact.

Sociological factor

Other key factors driving the growth of the video surveillance market are rapid growth in urbanization, rising global population and development of smart cities. Further more, the rising acceptance of surveillance systems by the public and private sectors coupled with the growing need for security are driving also the global video surveillance market. The increased maintenance cost of existing surveillance system is leading to video imaging of everything. Also, decrease in the prices of cameras and other video surveillance equipment is creating a demand for the system.

Previously, global video surveillance was only used by government and law enforcement entities but now it is used widely by businesses and everyday consumers including in industries like retail, banking, education and transportation. It can also be used for control and regulation purposes. The change in the quality, price, maintenance and installation of the devices increased the market and consumer demands. But now, video surveillance is already playing a vital role in maintaining the security of developed countries or in developing countries, especially like China or India.

Technological innovations

The strong growth rate for network video is driven also by rapid technological advancements, which are creating new business opportunities. As mentioned, the regional markets differ in terms of degree of maturity and growth rate. The strong local presence in all major markets gives Axis competitive advantages through increased knowledge about customers as well as trends. Meanwhile, a continuing globalization trend is leading to more uniform security thinking, particularly in global companies with installations in many countries that are demanding smart, company-wide and cost effective solutions on a large scale. Mature markets in North America, Europe and Southeast Asia account for about 70 percent of Axis’ sales.

Furthermore, the market Axis targets, is largely driven by a technology shift from older analog surveillance equipment to modern network technology solutions. Axis is a dominant player in the global network video market and is expanding strongly.

Market shares and market leadership can be maintained through careful competitive intelligence, a capable global sales force as well as vigorous and rapid product development.

Axis’ strategy is to maintain the pace of the technology shift by continually training customers and system integrators in the benefits of network video, and thereby increase understanding of the new technology. Axis’ research and development department works continually to develop new high-tech products. Some of the most significant innovations are network cameras, intelligent applications, thermal network cameras, Axis’ Lightfinder technology and Power-over-Ethernet (PoE). There have also been huge advances in image quality, such as the implementation of HDTV.

Environmental factor

Sustainability is an integrated and important part of Axis’ business. As market leader in network video, Axis has a major impact on many people’s lives and therefore takes long-term responsibility for how its operations affect employees, distributors and partners, end customers, suppliers, investors and society. Axis takes environmental, economic and social responsibility and also in relation to business ethics.

The company’s goals include:

– reducing carbon dioxide emissions per ton-km in freight transports : reducing carbon dioxide emissions per ton-km in Axis-controlled transports to customers; increasing ocean and road transports in relation to air transports;

– reducing electricity consumption per employee;

– ensuring that suppliers have a management system in place for environmental as well as other sustainability aspects;

Focus on the product’s life cycle

In 2011, Axis created a Green Product Design group comprised of environmental, product development, and design engineers. The group develops and implements tools for integrating environmental considerations with product development. Axis also conducts product life cycle analyses of existing and new products in order to map their environmental impact in the entire value chain.

The carefully conducted product life cycle analyses will in the future form the basis for a scorecard with guidelines that help product developers and designers make more sustainable decisions. For example, Axis is actively phasing out the use of polyvinyl chloride plastics (PVC) in its products.

Other examples include using more recyclable materials, reducing the number of components by implementing modular design, and making products more energy-efficient for the end users. Currently, about 95 percent of the materials in Axis’ products are recyclable or can be incinerated, according to Swedish recycling standards.

Life cycle analyses show that the largest environmental impact of Axis’ products is associated with energy consumption in the end-use phase. 60% to 80% of a camera’s environmental impact comes from the energy consumption by the end customer, so even a marginal improvement in energy efficiency will have a large positive effect.

On a gloabal level, most of the manufacturers now use recycled material for product boxes and have reduced or eliminated environmentally harmful inner packaging material. Many manufacturers also use recycled plastics to manufacture their products. This includes the manufacture of digital video cameras, video displays and computers.

According to securitymagazine.com: „These manufacturing changes have been, in part, due to legislation designed to reduce the environmental impact of electronic and electrical equipment, and one of the most far-reaching of these laws is RoHS (Restriction of Hazardous Substances). Although European in origin, RoHS is a global initiative and almost every manufacturer is implementing RoHS compliance in their factories. In the United States, California and Massachusetts have enacted similar legislation and it’s only a matter of time before other states follow suit”. Axis also continues to optimize product packaging in order to reduce shipping volumes and lower carbon emissions from product transports.

Legal factor

In terms of Axis’ impact – the legal requirements in the form of local rules and regulations exist but are not deemed to impact the group appreciably. Stricter legal requirements from public authorities in specific areas can imply new business opportunities and may sometimes also limit the possibility of operating in the local market concerned. Through a central development department it is possible, when required, to rapidly adapt specific products to new demands.

2.2 AXIS’ & COMPETITORS LANDSCAPE

The development of IP Network cameras pioneered by Axis Communications has been the main game changer and this has had most influence in reshaping the competitive landscape for video surveillance equipment.

2.2.1 KEY VENDORS & KEY REGIONS IN THE VIDEO SURVEILLANCE MARKET

The growing network video market is attracting more and more players, which is leading to increased competition, price pressure and fragmentation (approx. 400 competitors acting in this market). Most of the companies that were previously active within analog camera surveillance today also have product offers in network technology. The competitive situation is particularly intensive in several Asian markets, which are characterized by a large number of local players and price pressure.

In terms of global competition landscape:

Axis is the technology leader in IP Network cameras with a strong growth over the last 10 years. The regional markets differ in terms of degree of maturity and growth rate. The strong local presence in all major markets gives Axis competitive advantages through increased knowledge about customers as well as trends. Mature markets in North America, Europe and Southeast Asia account for about 70 percent of Axis’ sales. In the last 2 years, Axis faced serious competition from Chinese manufacturers HIKVision and Dahua;

Beside Axis Communications, the global market includes competitors like:

global groups such as Bosch, Sony, Panasonic, Samsung Techwin and HIKVision;

Bosch, Panasonic, Samsung and Sony are also the group leaders together with Axis; their efforts are to maintain their position from now on also, while having fierceful competitors like HIKVision or the below new entrants.

HIKVision is the leader in the China market, but has a strong presence in North America and some European markets. They have the most price competitive camera portfolios in the world, but not the edge IP cameras;

other notable companies like: ACTi, Arecont, Avigilon, Dahua, DVTel, Flir, Honeywell, Indigovision, Infinova, Mobotix, Pelco by Schneider, Silent Sentinel,Tyco, Vanderbilt, Vivotek, Ubiquiti and Uniview;

Honeywell, Tyco and Pelco are not leaders because they entered rather late into development of IP camera; Pelco was the formar leader of US market in terms o analogue camera prior its acquisition by Schenider;

ACTi, Arecont, DVTel, Indigovision, Mobotix, Silent Sentinel and Vivotek are the new entrats with significant sales growth. These all are specialists in camera manufacture and have a good product portofolio;

Avigilon, Flir, Infinova, Ubiqity and Uniview have very price competitive products and/or a strong market share in fast growing regions. Uniview is, in China, the number 3 manufacturer of cameras and is further set up its operations in other developed markets in the whole world. Flir and Ubiquitity have a strong position on the niche market that promises fast growth prospects, thermal cameras and wireless communications. Infinova now based in the USA went public with an IPO on China Stock Exchange, in 2010. In 2012, they acquired March Networks Corporation, a leading provider of IP video management solutions and in 2014 they acquired Swan Communications, an Australian security and video surveillance manufacturer.

Taking in consideration Axis’ presence in the three regions (end of 2015): EMEA grew by 12% currency and Americas by 4 %, while Asia decreased by 9%. The trend in Asia was mainly due to decreased sales in China as a result of intense competition from local players. During the year, IHS Research presented its yearly report on developments in the global market for video surveillance equipment. In the report, Axis was ranked number one in the Americas and EMEA regions and number six in Asia, based on market shares. The market presence was strengthened with own employees in both established and new geographical markets. Both in established markets and in emerging markets, Axis has continued to release innovative network surveillance solutions, strengthen the network of loyal partners and train the market within the framework of the company’s global training programs.

Also, IHS declared at the end of 2015 that China would emerge as a leading region for product development with European and North American research and development centers taking a back seat when it comes to driving the market. Some of the leading Chinese companies now have the world’s largest teams devoted to video surveillance R&D. “With complete product portfolios and cost-competitive-qualified products, more Chinese suppliers are also seeking opportunities in the global landscape, gaining share in non-domestic markets,” IHS said in a statement.

2.2.2 AXIS’ EMEA – EUROPEAN & CENTRAL EUROPEAN MARKET

Axis still has a leading position in EMEA. Sales increased by 18%/ 2015. The market trend differs in different parts of the region. In Western and Southern Europe, some recovery was noted during the year. Demand continued to be strong in the Middle East. In large parts of Eastern Europe, political and economic uncertainty had a negative impact on sales. In total, 1,578 people work in the region and Axis currently has presence in 25 countries.

Europe Axis has a strong position in the European market. Europe is considered to have a high penetration rate for network video and large parts of the market know about the advantages of digital technology. The already strong partner network has been supplemented with new players in emerging markets and partners focused on small and medium-sized systems. Europe is a fragmented market and demand varies among the countries. After a number of years of weak performance, the countries in Southern Europe showed improved growth during 2015. Sales were boosted by continued investments in small installations and an increasing need for new investments due to the financial squeeze in recent years. In France and Italy, dedicated resources for small installations were added. This means that Axis’ local experts can offer onsite training to smaller installation engineer firms and resellers and further drive the technology shift in this market segment. In Northern Europe, sales developed positively with good demand in the UK and Scandinavia.

Central Europe showed a slightly lower growth rate. The market situation is still challenging in large parts of Eastern Europe. Economic and political uncertainty, particularly in Russia and Ukraine has reduced demand. There is an underlying need for network video but the uncertainty is resulting in cautiousness when it comes to larger infrastructural investments and new construction projects.

2.2.3 AXIS ROMANIA

Romanian Market it is considered by Axis an emerging one, having a very high growth in the last years.

In present, Axis has already implemented the “go-to-market” business model. We have two distributors focusing on different markets. We have IT Distributor and Security Distributor, both focusing on enlarging their portfolio of partners.

In 2016 we have over 400 partners in our Channel Partner Program, and still growing.

Axis’ strategy in Romania is to educate all the partners, grow revenue and offer better services & solutions to final customers. For this, we plan to keep on our company strategy and to communicate our values.

Axis in Romania is directly represented trough one Technical Sales Engineer and one Key Account Manager. As Key Account Manager, I will strengthen Axis’ position on the market through the following activities:

Searching new Partners with focus on Segments and Regions

Promotion of partner Program through events, regular meetings and trainings

Growing revenue on existing Key Accounts

Partners’ visits

Educate the Partner’s sales force

Promotion of more complex Axis Solution

PR & marketing support

Create stronger relation between Distributors and Partners.

We will maintain in Romania the same trend as the global one, focusing on Solutions selling.

Chapter III. AXIS COMMUNICATIONS INTERNAL ENVIRONMENT

3.1. ORGANIZATIONAL DIAGNOSE

Axis Communications has an indirect distribution business model and a network of 80.000 partners in 179 countries, including Central Europe (incl. Romania), out of which 7.000 are new partners. The indirect distribution model means that Axis sells through its distributors, which further sale to system integrators and resellers, which further sale to end consumer.

Together with distributors, system integrators, resellers, software developers, architects and consultants, the growing need for professional and innovative security solutions is being met. The collaboration with partners has been a strong driving force in the shift from analog to network video surveillance in large installations.

To achieve this, Axis Communications had to continuously innovate and to meet the needs of its customers. This is why Axis has today a wide range of products and technologies that can cover most of the business verticals (transportation, retail, bank & finance, city surveillance, critical infrastructure, education, manufacturing, healthcare and public sector). More than that, people at Axis developed many tools to support our partners in selling our products and also in the post-sale support.

3.1.1. AXIS TECHNOLOGIES

A rapid release rate of smart, innovative and sustainable products is a critical factor for continued growth. The investment in research and development has been consistent over the years. Axis currently has about 150 products in its portfolio. About one third of these are replaced by completely new or improved products every year. During the year, more than 30 new products were introduced. While network cameras represent the majority of sales, investments are increasing in software and entirely new products that support and complement the core business.

At the company-wide research and development department at Axis’ headquarters in Lund, clear processes are created for effective and successful innovation. The organization is driven with customer value, cost efficiency and sustainability in focus. More than 700 engineers work on developing products that rapidly meet today’s needs and tomorrow’s challenges.

Our dedicated focus on R&D means we have a long list of firsts, including the world’s first network camera, HDTV network camera and thermal network camera. We also pioneered network-based physical access control.Axis’ technology’s also picked up lots of awards along the way. We’ve won a Red Dot Design Award for our innovatively shaped AXIS P5415-E PTZ Dome Network Camera; the Wall Street Journal Technology Innovation Award for our Lightfinder technology; and the Detektor International Best Access Control Product Award 2014 for our A1001 Network Door Controller. Our channel partner program also received a 5-star rating by CRN Magazine.

The majority of Axis’ products are built on the proprietary network and image compression chip, ARTPEC®. ARTPEC® is optimized and adapted for products and applications within network video, which gives Axis a distinct advantage over other players in the market. Quality is ensured through a well-defined quality and testing process as well as through skilled and careful subcontractors. In order to minimize risks in the supply chain, from supply of components to delivery, Axis works with a number of subcontractors that are equally important from a competency and capacity perspective.

All products are developed exclusively by Axis and most of them are unique thanks to the its innovative built-in technologies like:

Electronic image stabilization

A technology that effectively minimizing effects from vibrating and shacking. A surveillance camera mounted in an exposed location such as on a high pole or a street sign near a busy road, can be shaken by winds or passing traffic, which will blur the video. In these situations, Electronic image stabilization, a feature in Axis network cameras which greatly improves video quality in situations where a camera is subject to vibrations, provides smooth and comfortable live viewing.

Optimized IR

Known Infrared technology for night vision optimized by Axis for low-power consumption, minimum heat dissipation, long-life LED that eliminates maintenance. It is designed for easy, cost-efficient and environmental friendly installation. It results in high-quality, low-noise video, even when the environment is completely dark.

Wide dynamic range

Axis WDR is a technology that enables cameras to provide detailed images of complicated scenes with extreme illumination. In a scene with extremely bright and dark areas or in backlight situations where a person is in front of a bright window, a typical camera would produce an image where objects in the dark areas would hardly be visible.
WDR solves this by applying various techniques to enable objects in both bright and dark areas to be visible.

Lightfinder Technology

It is an Axis technology that cannon be found on other camera brands. Compared with any analog or network cameras, the Lightfinder technology will give more life-like colors in low-light conditions.

The noise reduction of the Lightfinder technology is vastly improved compared with any surveillance camera on the market, which in combination with the light sensitivity of the sensor gives a superior image quality.

4K Ultra HD

This development is now starting to have an impact on the video surveillance market, as customers ask for higher image quality standard. HDTV has experienced enormous success the past years, driven by the consumer electronics market and its shift from CRT-based television sets to LCD- and plasma-based TV screens.. The possibility of clearer, sharper images is a long sought quality in the surveillance industry, i.e. in applications where objects are moving or accurate identification is vital. 4K Ultra HD is now starting to be adopted by the consumer market in the video surveillance arena it promises outstanding image quality and details. 4K Ultra HD provides up to four times higher resolution than standard HDTV 1080p resolution.

Exemple:

Zipstream technology

Axis technology that helps customers to reduce storage and bandwidth by an average of 50% or more without losing image quality.

3.1.2. PRODUCTS & SOLUTIONS

Axis offers a broad portfolio of network-based products and solutions to enterprise, medium and small customers, as follows:

Network Cameras:

Video encoders

With Axis’ video encoder solution, you can integrate your existing analog system with products that bring your system up to speed with the latest IP technology. Video encoders instantly provide you with the benefits of network video, as well as a platform to expand and update your infrastructure with network cameras, software and networking/storage devices. All Axis video encoders include features such as video motion detection and PTZ control.

Network video recorders

With an Axis Network Video recorder you get an easy-to-install and reliable High Definition solution perfectly adapted to Axis wide range of network products. The recorders are preloaded with all necessary software including video management software licenses. With Axis as the single point of contact, you can feel confident that any problem that may arise will be handled quickly and efficiently.  Our team of over 100 highly experienced Technical Support engineers world-wide can provide you expert assistance wherever you are, whenever you need it.

Audio products (New business)

We offer standalone network hornspeakers and audio accessories that complement our network cameras and video encoders. We also provide complete high-quality audio systems that are perfect for stores.

Accessories (mounting kits)

Axis provides a wide range of accessories that complements our network cameras and video encoders and assists in your network video installation. Whether the network cameras are to be placed in demanding outdoors environment, mounted on ceilings, walls or corners, or used for night-time surveillance, it is important to find the right accessories that fulfill these demands, and are quick and easy to install.

Video management software

Axis offers its own video management solutions that address, in particular, the needs of small installations and medium-sized systems, the increasing requirements for hosted video solutions (cloud solutions), and requests from customers demanding a single-vendor solution. Axis’ Application Development Partner program comprises hundreds of companies that provide video management solutions for all kinds of needs: from small to enterprise solutions with thousands of cameras.

Video Analytics

Video surveillance systems produce massive amounts of video. Due to lack of time or resources however, most of this video never gets watched or reviewed. As a result, security incidents get missed and suspicious behavior is not detected in time to prevent incidents. These challenges have played a large part in the development of video analytics.

Video analytics are software applications that automatically generate descriptions of what is actually happening in the video (so-called metadata), which can be used to list persons, cars and other objects detected in the video stream, as well as their appearance and movements. This information can then be used as the basis on which to perform actions, e.g. to decide if security staff should be notified, or if a recording should be started.

Axis Perimeter defender

Axis Digital Auto tracking

Axis Cross-line detection

Axis Video motion detection

Access Control

With Axis’ products for physical access control , there’s finally an open and future-flexible IP-alternative. Axis' physical access control products cover a variety of application needs, from identification and entry control to advanced access management and integration with other systems.

3.1.3 Axis’ market segments

Large installations

This is Axis’ largest market segment and the first part of the market to drive the technology shift from analog to network security solutions. This includes universities, hospitals, airports and public environments. This segment is characterized by complex solutions in order to create scalable surveillance systems that guarantee reliable installations and smooth integration with other security systems. In recent years, Axis has made a global and strategic investment in building a more market-oriented organization in close co-operation with system integrators, distributors, architects, security consultants and end customers. The main growth potential lies in the firmly established market channels through a local presence, exchange of knowledge and loyalty.

Medium-sized installations

The medium-sized installation is a fragmented market segment with various types of end customer integrators. This segment includes schools, offices and larger stores with 10–100 cameras. Both large global system integrators and local installation engineers address

segments with differing offers. While some end customers want advanced surveillance solutions on a par with larger installations, simpler and standardized overall solutions are also in demand. Axis has a comprehensive product and service offer and works actively with training and more standardized solutions as well as cost efficient products for medium-sized customers.

Example of medium-size installation:

Small installations

The penetration rate for network video is still low in small installations, which are dominated by analog technology. This segment mainly includes small stores and offices with 1–10 cameras. Installation engineers and end customers are demanding smart overall solutions, which are easy to install and use. This market segment is expected to grow faster than the market as a whole over the next few years. Axis is continuing to develop user-friendly and cost effective overall solutions in order to drive network video knowledge and demand in smaller installations and among end users.

3.2. ORGANIZATIONAL STRUCTURE

Axis Communications is a global company that has a direct presence in more than 50 countries, having approx. 2500 employees.

As we are a sales-driven organization, our Global Sales structure it is organized by function, as follows in the picture below:

Axis success comes also from the way of allocating the resources, learn, and educate them on how and what to focus.

At Axis, HR is one of the most important departments in the company.

Trough our HR philosophy we manage to get highly loyal employees and healthy profits.

Our Values-driven HR is based on:

Visible leadership

Flat hierarchies

Informal style

Innovative & passionate

Long-term commitment from all

Responsible managers

An example of how Axis works with its core values – Think big, Act as one and Always open – is its Core Values workshops. Core Values workshops have been conducted for employees at Axis offices all over the world during 2013. By exchanging ideas and perspectives, employees gained the opportunity to put into concrete form what Axis’ core values and corporate culture mean for their work.

Looking ahead, to maintain our successful business, we have continued with our HR strategies like:

Transmit Axis ‘DNA’ to our new colleagues

Keep our pragmatic approach

Keep the entrepreneurial spirit

Dare to lead the technological development and innovate in all areas

Listen both our customers and each other.

3.3 AXIS ”GO-TO-MARKET” BUSINESS & FIGURES

The Axis’ objective is to be the global market leader and have a strong position in all markets where the company operates. Meanwhile, there is a strong focus on strengthening the company’s presence in emerging markets and continued investments are made in order to get closer to the end customer and to introduce new product concepts in more mature markets.

Axis is dedicated to its business model since the company was founded in 1984 and we plan to keep it like this. With a well-developed network of distributors, system integrators and installation engineers, a substantial share of sales are made directly via partners without Axis’ actively participating in the sales process. With a high penetration rate, particularly in large installations, increased demand in small and medium-sized surveillance systems is expected

to be an important growth factor.

Based on this model, we approach the market together with our partners, and everyone has a specific role to play in order to succeed and to have satisfied customers.

We see in our business model a success since in 2016 we reached over 80.000 partners in 179 countries. Our partners programs are divided into four categories:

Channel Partner Program – is designed to help channel partners capitalize on Axis’ market leadership in the fast-growing network video market. We view our partners as an extension of our team, playing a key role in the go-to-market strategy and the overall success of our company.

The Axis Channel Partner Program is designed to help system integrators, value-added resellers (VARs) and installers accelerate their solution sales.

Application development Program – The Axis Application Development Partner (ADP) Program is designed to help software vendors streamline their software integration.

Members of ADP can develop applications that can be downloaded from Axis Camera Application Platform and installed on Axis network cameras and video encoders.

Axis Architect and Engineering Partners – is designed to help network architects, engineers and consultants design smarter systems.

Technology Partners – is designed to help hardware vendors connect video to network infrastructures for optimized end-to-end performance. The program is created for technology partners that along with Axis offer complete security solutions.

Thanks to the great relation with its partners, Axis managed to become world leader in network cameras and to have a rapid and healthy growth over the years, as follows below:

3.4. SWOT ANALYSIS

Chapter IV. ACTION PLAN – AXIS 3.0 FROM PRODUCTS TO SOLUTIONS

4.1. INNOVATING THE FUTURE

From the time when Axis introduced its first network capable surveillance camera, a lot has changed. Today the trend is more towards the convergence of IT and physical hardware with physical security, to see a shift shaping in the form of managed services. Because of the growing innovations and continuous upgrades the demand is for an open, flexible and scalable systems solutions with upstream analytics capability.

Improvements in network bandwidth and related infrastructure has drawn a great attention to Cloud Based Video Surveillance. Also the growing popularity of social media and the emergence of live video feeds like Meerkatapp and periscope, along with the growing penetration of smartphones is demanding for Crowd Sourcing Video Surveillance Solutions. Use of Drones and thermal cameras has also seen a growth, especially with the agriculture.

Growing number of smart cities and homes will enable larger adoption of video surveillance systems. Growth in the new ways of using video surveillance like behavioural analysis in retail store, employee management, and traffic management, so on and so forth, is expected to create new markets and newer trends.

The Global Video Surveillance Market is expected to increase to $40.8 billion by 2020 at a CAGR of 15.86% over the period 2014-2020. This growth will be fuelled by the increasing security concerns and growing number of terrorists attacks along with the growing popularity of IP-based video surveillance systems and Video Surveillance as a Service(VSaS). Furthermore the most of the growth will be fuelled by the growth in network infrastructure and the need to upgrade form obsolete analog systems.

Asia Pacific will see significant growth in the market share as countries like India and China show intentions to invest heavily in video surveillance. China has shown large interest in Cloud Based Video Surveillance. However, the economic conditions in Europe is believed to reduce demand in the European market. The market share for Middle East is expected to grow with boom in construction work and the upcoming events like the FIFA World Cup. Strong growth is also seen in North American market as more and more companies and government organisations are deciding to upgrade from the now obsolete analog cameras.

Axis shall drive the technology shift towards network surveillance solutions by development and marketing of high-quality innovative products, strong global cooperation with partners while maintaining the corporate culture. The overall goal of strengthening the market-leading position in the network video market shall be achieved through the following strategies for the three areas partners, products and global expansion.

Axis Recent Developments:

Axis for sure believes innovation is key for dominance. As we released industry’s first HDTV network camera, the AXIS Q1755 in 2008 and industry’s first thermal network camera, the AXIS Q1910, in January 2010. We hold patents for panning functionality, data storage and reduction method for digital images, Camera connectible to CCTV network, Video over Ethernet, Network camera assembly, support for continuous pan rotation in a pantilt camera and camera tampering detection.

Axis Communications also provides supreme technology for its products. Axis Zipstream technology, which is optimized for video surveillance, lowers bandwidth and storage requirements by almost 50%. Scenes, which contain important details like license plates, faces, and tattoos are recorded in full resolution, while image quality of irrelevant areas like lawns, white walls and vegetation is compromised by smoothing in order to lower the storage size. Security Industry Association (SIA) named Axis Zipstream technology a winner of 2015 Video surveillance Advanced Imaging Technologies. To continue the dominance Axis is expanding their product family by releasing products that enable live streaming and web casting. AXIS V59 PTZ is designed to stream or webcast audio and video in auditoriums, classrooms, sports venues etc.

The percentage of the sales in America and EMEA are 50% and 37% respectively, where as coming to Asia it is just about 13% mainly because of the dominant Chinese based companies like Hikvision and Dahua. Asia is a fast growing market and Axis is looking to create a loyal partner network, to achieve scalability and develop effective channels to the millions of end users. Axis is also facing a challenge from Avigilon, a Vancouver based company. At the ISC West 2015 tradeshow in Las Vegas, Avigilon unveiled Industry’s first single-sensor 7K (30MP) camera that delivers high-resolution images, at the same time minimizing storage and bandwidth consumption.

4.2. AXIS OFFERING 3.0

Axis 3.0 is a new step in Axis’s history and is focusing more on final customers’ needs and how solutions can bring them value. In Axis’ philosophy, a Solution has a clear value and solves a target group’s needs by providing a validated combination of products and services.

As market grows and technology is evolving, the customer needs complete end-to-end solutions from one provider. As a result, Axis started to develop new products and begin to offer solution services to the market.

Axis’ Solutions address all segments and verticals of the market:

Small – Axis Camera Companion, Companion Line

Axis end-to-end solution designed to meet the needs and requirements of small businesses

Optimized for low camera count with support up to 16 cameras per site

Dedicated product line with scalable recording solutions

Axis’ Secure Remote Access for mobile device use

VMS and mobile viewing app free for download

Medium – Axis Camera Station

A proven video management system

Optimized for Axis’ network video products

Quick system setup and intuitive operation

Efficient investigation and high definition identification

Extensive support organization

Enterprise – Different Solutions together with our ADP partners.

Axis offers complete security solutions together with partners in order to customize customers' needs

Application Development Partners

Technology Program Partners

Architect & Engineering Partners

Video Management Systems from 800 Application Development Program (ADP) partners

Axis core offering is the benefits we provide our customers, by offering products that are a major part of the customer’s integrated solution

Axis extended offering is the benefit we provide to meet the needs of an individual customer by tailoring the offering with relevant services and support.

One of the first Solution provided by Axis is Axis Perimeter Defender. The Solution is composed from three components:

Thermal Cameras

Axis Perimeter defender Software

Pre-sale & Post-sale services

Axis has a complete range of solutions, whether it is a need of a smart system for basic surveillance or a more advanced system for security on a larger scale. All of our systems are easy to install, and everything is designed with open IP standards that easily connect with your existing IT infrastructure.

The results in what regards sales brought Axis increased sales on Thermal cameras on global level.

Chapter V. EXPECTED OUTPUT

So our Vision statement was formulated in a time where we realized that we needed to drive change both within Axis and in the market. We knew that we were on journey towards a new Axis.

We have chosen the name Axis 3.0 to highlight the high level of change we expect. Axis 1.0 was the network printing company, Axis 2.0 went from Print to Video and now our challenge is to broaden our strong Video Surveillance position by becoming a service and solutions company, Axis 3.0.

By using 3.0 we want to illustrate that this is big change and journey and also big opportunity and representing the next wave of growth opportunity for Axis. The expected output is to increase relevance on the market, add value to our products, increase revenue & margins.

Conclusions:

Axis sees rapid development in the expansive Asian market

Focus on building up a loyal partner network

Significant opportunities in traditional, as well as new, fields of applications and customer segments

Strong position in the mature markets with a continuing strong interest for network video

New office in New Zealand

Strengthened presence in the emerging markets

Recruitment of new employees and increased number of Axis Academy training programs

Axis strengthens its market-leading position in the Americas

Growing interest in small and mid-size installations

Increased demand in the retail, education and critical infrastructure segments

Strong market position in the Americas

#1 security cameras, network cameras, video encoders*

New offices in Chicago and Los Angeles

High interest in network video in South America

Axis sees stable development in multi-faceted EMEA market:

Strong position in the region

#1 security cameras, network cameras, video encoders

Positive trend in small systems throughout the region

Strengthened offering and position in all market segments

Expanded partner networks

Axis Certification Program released in Central Europe

BIBLIOGRAPHY:

www.axis.com;

IHS Reports for 2013, 2014, 2015: Video Surveillance & Storage; Top Video Surveillance Trends for 2015;

www.memoori.com: ‘The Physical Security Business 2015 to 2020; Access Control, Intruder Alarms & Video Surveillance’ article;

www.securitymagazine.com: article on environment;

Appendix

BUSINESS CASE: Facial recognition

BUSINESS CASE: Video surveillance system for Aéroports de Lyon