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.

Commercial - 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.

 

2)   2004 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.

 

4)   Capital 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...

 


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 Acuity website



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, that includes Contact Information, Positioning, Products and Services, Customers and Partners.


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 technology markets.


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Wishing you a happy, healthy and prosperous 2004!


C. Maxine Most

Editor, Biometrics Market Intelligence

Principal, Acuity Market Intelligence

cmaxmost@acuity-mi.com

 

COPYRIGHT NOTICE: This special edition of BMI is protected under copyright by Acuity MI, LLC DBA Acuity Market Intelligence.
2004 Acuity MI, LLC. All rights reserved. The Editor makes on guarantee on the views and opinions expressed herein.