Special Edition       January 2004
Published By Acuity Market Intelligence
Biometrics Market Outlook 2004
Welcome to 2004 - Last year was a mixed bag of progress and pain for the
biometrics industry. Though, once again, industry revenues fell short of
expectations and many vendors struggled to stay afloat, developments in both
the public sector and commercial arena indicate genuine market expansion
is on the near-term horizon.
Public Sector -
The long awaited US VISIT RFP was released in November. This $10 billion
dollar behemoth - considered by many to be the holy grail of biometrics adoption -
has raised as many questions as it has answered. Are we really ready to implement
a biometrically enabled program of this magnitude? Do we really have the requisite
knowledge and expertise? Only time (and the RFP responses due in May) will tell.
In Europe, progress towards large-scale public sector projects also advanced.
The UK initiated a voluntary 10,000 user test in advance of full deployment of biometric passports
and the EU Commission's Justice and Home Affairs Council moved ahead with
draft proposals laying down a uniform format for visas and residence permits for third
country nationals which include biometric identifiers.
On the commercial front, 2003 saw at least $100 million US of capital infused into the
biometrics market and the ushering in of a new phase of industry maturity.
The scope of deployments began to become truly large-scale with financial service and healthcare
logical access applications of 5000 plus, a single sensor company, AuthenTec, shipped over 1.5 million sensors,
the one millionth iris ID was completed in United Arab
Emirates and possibly the largest biometric ID project ever
(seeking Guiness World Record status) on track in the Tirumala Temple in India.
In addition, a small but growing minority of market players began applying
rigorous analysis and targeting to their nascent market development efforts.
So, what will this new year bring?
Once again, it is crystal ball time. Here are a few
of Acuity's 2004 market prognostications...
1)   EU Takes the
Lead on Public Sector Programs - Europe's traditionally more
measured approach to large-scale systems development will begin to shift public sector ID project leadership
across the Atlantic. The EU's commitment to eGovernment and to addressing overarching social and systems issues (privacy,
data protection, interoperability, shared resources, distributed versus centralized
program implementation and control, ownership and individual rights) in advance of issuing RFPs,
pays off as integrated, interoperable biometrically enabled ID systems proliferate across Europe.
This shift in leadership will accelerate as the US struggles to resolve issues associated with
supplier-defined programs, foreign reciprocity by non visa waiver countries and domestic civil
liberties challenges. By the end of the decade, Europe will have established the
models and standards for how these programs ought to be developed and introduced
into democratic states. The newly founded European Biometrics Forum (EBF)
will prove critical to this market evolution as they aggressively pursue the cohesive,
appropriate and socially responsible use of biometric technologies.
Traction; 2005 Land Grab - While
the majority of biometrics companies struggle to survive, an emerging minority of highly focused
organizations pursuing targeted opportunities report solid, incremental growth.
These players will achieve market traction to the extent that they can effectively lay a foundation
and position themselves for the much more intense market share scramble coming in 2005. Players that do
not establish a market foothold, including tight integrator relationships (see #3) that can be used as an effective
launching point for the land grab, will
find themselves out of luck when the market heats up and customers look to market leaders for solutions.
3)   Technology Provider/Integrator
Relationships Solidify – The loose affiliations and strategic relationships that have characterized the early market
phases of industry development begin to tighten up - permanently.
As research and test programs morph into real business, integrators
sort through the pack and pick thier favorite core technology and mid-size solutions providers. Companies
lacking a clear strategic focus and those that cannot consistently deliver on price/performance,
product and service reliability, operational efficiency and quality support
will start to drop like flies. The big competitive shake-out begins in 2004
and many casualties will have fallen permanently into "The Chasm" by the end of 2005.
Flows – At
least $100 million US of capital flowed into biometrics companies - public and private -
worldwide in 2003. To quote from last year's Acuity forecast "though it would seem
that the torrent has dried up, fear not. There is PLENTY OF MONEY for investment". This not
only remains true for 2004, but in all likelihood this year's tally will at least double
last year's amount. As integrators begin to pick the winners for large-scale public sector
projects and commercial deployments build momentum through targeted application of
repeatedly demonstrable convenience and cost savings,
last year's investors will begin to smile and even their most hesitant colleagues will
open their wallets and begin to bang the biometrics drum.
5)   One of the "Big
Boys" Bids Adieu - In the scramble to re-assess their position,
at least one of the biometrics market mainstays fails to adequately adjust and
by the end of the year is no more. This will be no face-saving merger. At worst
a complete shut-down. At best a dressed up buy-out of a company that continued down a failed path
in repeated denial of ominous warning signs.
This loss, while seemingly detrimental to the industry, will actually clear the path for players with
clear strategies and realistic business plans and represents nothing more than a natural
evolution of this emerging technology's market.
Biometrics 2003 Notable Faux Pas
Last year also saw some rather pronounced faux pas by some of the big
names in the biometrics industry. While no one likes to dwell on the sour notes, these
events influence the perception of our industry and ought to serve as reminders of where
we need to focus efforts to improve our credibility. The organizations mentioned below are easily identified
due to their media notoriety. As is often the case, the most familiar names tend to bear the brunt
of all our sins...
Sagem gets caught with their hands in the cookie jar:
The Nigerian National Identity Card program proved to be a
nasty mess when Sagem SA's local business partner, Niyi Adelagun, was arrested (along
with a number of high ranking government officials) for "corrupt and false enrichment".
Whoops! The $214 million contract for the implementation of the National Identity Card Scheme was
supposedly awarded to SAGEM after due process. However, it turns out SAGEM agents
in Nigeria, including the Regional Area Manager of Identification Systems,
French national Jean Pierre Delarue, along with Adelagun, were respnsible for distributing
bribes to the charged Nigerian officials.
Biometrics in and of themselves are frightening and threatening enough to many individuals
and organizations without association with illegal activity This is particularly true in regards to
the willingness of democratic societies to do business with companies providing
biometric technology to governments with less than stellar records on
civil rights, let alone companies accused of participating in local corruption.
Iridian plays musical CEOs: What was going on with Iridian this year?
On May 13th the iris recognition technology provider announced the appointment of
Frank Fitzsimmons, former COO and acting CEO, to the
position of CEO. This was followed two weeks later by the announcement that
Cletus B. Kuhla, co-founder of Iridian progenitor IrisScan,
had been appointed President and CEO. And then in an interesting reversal, Iridian
announced the appointment of Frank Fitzsimmons as President and CEO
on October 28th. This type of organizational wrangling does little to
instill confidence in either the particular vendor or the biometrics market as a whole
and suggests more time is being spent on political infighting that strategic business development.
Viisage-ZN deal stuck in low gear: On March 28, 2003 Viisage made a well-conceived
and decisive strategic move announcing their intention to purchase ZN Vision Technologies
of Germany. ZN would become a wholly-owned
subsidiary and serve as the facial recognition company's European base of operations.
The acquisition was expected to be finalized in July, though seven months later the deal lingers.
Deadlines have been extended several times with a current target closure date of January 31, 2004.
In all fairness, the delays are apparently due to Securities and Exchange Commission issues
regarding Viisage's accounting methodologies. Nonetheless this on-going inability
to close the deal represents a kind of immobilization somewhat
endemic in the biometrics industry and flies in the face of expectations that
emerging-technology market players ought to be responsive, quick and nimble.
Market forecasts fall short: The numbers are in for 2003... well the estimates anyway...
and, once again, fall short of market forecasts. Granted this is the unfortunate norm for
emerging technology markets (and biometrics is no exception) where analysis methodologies
developed for well-established, predictable
and slow growth (less than 10% annually) markets are applied to immature, unpredictable,
wildly fluctuating emerging markets. Post 9/11 projections by various organizations
including IBG, IBIA and
Frost and Sullivan indicated global revenues (in US dollars) of between $500 million
and $1 billion in 2003 for biometrics core technology.
Actual numbers look to be closer to the $240 to $400 million range. This is all part of a
rather painful cycle in which vendor
sale projections and end-users purchase forecasts are correlated and published in reports
that are then sold back to the source organizations to be used as justification
for capital acquisition and strategic planning.
What's wrong with this picture? Though most sophisticated managers,
executives and investors know the data is questionable, they seem addicted to the process
and unable to break themselves
away from reliance on this habit. Lest we not forget the vendors providing the base data who
either consistently underperform or exaggerate their financial potential are no less part of this
dismal cycle of confusion.
( BTW: Acuity does not generate these type of broad-based market projections for precisely thee reasons, but
rather depends on highly targeted, interactive scenario modeling tools to provide a basis for
strategic market and opportunity analysis)
Biometrics Market Data & Analysis
Want more biometrics market insight?
Acuity Market Intelligence
offers a range of targeted products and services designed to meet the needs of organizations
large and small. Vendors, integrators, end-users and investors will find a wealth of data, research and
market analysis tools at the
Deployment Database - Searchable, sortable excel
spreadsheets including more than 300 biometric deployments. Data for each deployment includes Vertical Market,
Vendor, Technology, End-user type, Location, Contracting Agency, Enrollment and more.
Market Sizing Models - Fully interactive, customizable scenario modeling tools.
Users control a series of variables which include adoption rates, pricing,
weighted market factors, aggressive and conservative market growth, etc.
Targeted Market Briefs - One to four page vendor and technology independent analyses
that include data charts, segmentation matrices,
market evolution models as well as written analysis.
Vendor Lists - Technology and Vertical Industry specific
searchable and sortable lists of Core Technology Vendors, Solutions Providers, Integrators,
Contact Information, Positioning, Products and Services, Customers
Visit the Acuity Market Intelligence Data Store
For detailed biometrics market analysis, custom research and consulting services,
contact Acuity Market Intelligence.
Acuity services include: market-tracking, opportunity analysis and sizing,
solutions evaluations, due diligence, executive briefings and strategic consulting.
Acuity cuts though market hype and hyperbole to provide targeted industry insight and analysis for emerging
Biometrics Market Intelligence
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Wishing you a
happy, healthy and prosperous 2004!
Biometrics Market Intelligence
Acuity Market Intelligence
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Acuity Market Intelligence.
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