Global Security & Russia Outlook 2016

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“We Accelerate Growth”

Objectives and Highlights

The evolving dynamics of the security challenge

Top Transitional Technologies

Europe in Focus

Russia Security Challenges

Russia Security Forecasts by Sector

Russia Competitive Environment

Top Global Trends in 2016

3

Evolving Dynamics The security continues to face a number of challenges

New Technologies Cyber Security Security Funding Intelligence and Data

So

urc

e: F

rost &

Su

lliva

n

Squeeze on

government

budgets and across

CNI sectors.

Pressure on the

security industry to

offer greater

security for less

money.

New technology

that is more

advanced, less

invasive and cost

efficient are the key

requirements from

end users.

The use of data

and open source

intelligence will

allow greater

actionable

intelligence and

situational

awareness,.

Increased cyber

threats will play a

greater role in

security policy with

a clear need for all

industries to be

better equipped

and prepared for

attacks.

4

Border Control Hotspots Source: Frost & Sullivan

Security Challenges in Focus for 2016 Border Security and Migration

Direction of Migration (individuals and

prohibited items)

The illegal

movement of

narcotics and

people combined

with wider border

security issues

remain a key

priority.

Growing concern over the influence of Daesh

in Europe and across the Middle East has

driven debate around border security.

US /Mexico border

continues to pose a

security and political

challenge.

Ongoing US

investment in law

enforcement within

Central America will

also continue for the

long term.

As a result of ongoing security concerns linked to the movement of goods and individuals, an

increase in security budgets is expected in 2016.

5

Internet of Things Growing sensors, devices, and connectivity will allow more data, but cyber security for

devices will become increasingly difficult for end

users to manage.

Managed Services Movement of non-critical data

and operations have been outsourced to industry to improve operations and

reduce costs.

Unmanned Systems Deployed for specific

operations and events, increase in border security

and oil and gas

Wearable Devices Increasing prevalence of body-

worn cameras from total solutions including device and

data management from suppliers

Intelligence Leveraged from structured and unstructured data with

improved solutions to facilitate sharing information

Connected Citizens PSAPs and command centres

will start to take live feeds and information from citizens

using apps and smartphones.

Biometrics Commercialisation of

biometrics continues with greater use for authentication

to everyday life operations

Top Transformational Shifts in Security and Law

Enforcement in 2016 - Connectivity and Automation Continues

6

Europe in Focus for 2016 Collaboration across a range of imminent threats and issues is required

Security Funding Increasing Intelligence

Powers Increasing

SAFE HARBOUR SINKING

TRANSATLANTIC DATA

CABLES AT THREAT?

Part of Schengen Area

UAV’s no airspace

integration, no

registration, no radar able

to detect

North Africa Migration into Europe

Instability across the

Middle East, travel to

and from Europe of

people with links to

militant and terrorist

organisations

France: €600 M released

8,500 new law

enforcement jobs

Belgium: €400 M released

520 Army to patrol public areas

UK: 1900 extra intelligence personnel

£1.9 billion on cyber to 2020

Part of Schengen Area – new

border measures introduced

7

Russia– Dealing with high crime rates and terrorism threats

Games Investment 1

• The development of Sochi is a blue print for other Russian cities preparing for the FIFA World Cup in 2018

• Most recent total budget for the event reported as $8.15bn (February 2016).

High City Crime 2

• Russia has a very high crime rate in cities • Racial integration remains challenging • Notable investments in Moscow and smaller integration

projects in other major cities working towards a ‘safe city’ concept.

Protecting the National Assets 4

• Huge investment programs in infrastructure including railways, electricity, oil & gas and ports

• Oil & Gas security investment continues to grow • Global Ports, responsible for 30% of Russia’s containerised

trade investing to expand

Problems down South 3

• Threat of terrorism from the North Caucasus • Enhanced focus on the region as a result of Islamsic

State advances .

Porous borders for trafficking 5

• Southern borders remain porous with people and drug trafficking a continuing challenge

• The FSB has signalled its intent to invest in radars, UAVs, surveillance cameras and night vision technology.

8

Russian Security market 2015 – 2016

• Zero market growth / decrease till 2017

• Increased competition: volatility of exchange rates, damping, price

wars

• Market entries from related markets: IT, construction

• Simplification and unification

• Shift to economy segment, attention to service business model

• Import substitution (incld “attempts” for localization)

9

Critical Infrastructure

• Continued threat and terrorist

attack on mass transport

networks drive security need.

• The Russian Railways’

strategy is to invest $13.6

billion 2013 – 2020 to meet

increasing demand with $5.9

billion of spending in 2016.

• Upgrades include:

• Metro systems,

• High-speed rail networks

• Stations

• Additional investment

programs involving China and

Germany have also been

announced.

• Air passenger traffic expected

to increase from 66 million in

2012 to 85 million 2018.

• However Russian carriers saw

a 1.2% fall in passenger traffic

in 2015

• 80% of Russia airports

outdated

• Russian Federation Transport

Strategy plans to increase

airports from 315 to 357 in

2020.

• Specific demand for advanced

security systems.

• Move from state owned to

private owned and operated

airports.

• Major investment in refinery

and gas pipeline projects with

external investment coming

from China.

• However reductions in

investment are expected as a

result of falling oil prices with

Lukoil reducing spending for

2016 by $1.5 billion.

• Traditional focus on physical

security and monitoring

solutions.

• Significant investment in

SCADA systems and

modernisation

• Large cyber security solutions

requirement to drive investment

in the market.

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Competitive Analysis

DOMAIN LOCAL INTERNATIONAL

Oil & Gas Integra-S, Ipera, ANCUD, CROC

Border & Maritime

ANCUD, Asteros, Integra-S, CROC, Technoserv

Airports EcoProg, AMT, ICL, Elvees Neotek

Major Events Exacqvision, Asteros, Technoserv

Safe Cities (First Responders)

Asteros, ICL, Stins Coman, Integra –S, CROC, Lanit, Axxonsoft, Rostelecom

Border Control & Biometrics

Oberon, Integra-S, Eleron, Axxonsoft

Mass Transport AMT, Stins Coman

Utilities NCC, Kaspersky, Aladdin

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Source: Frost & Sullivan

Top Predictions for 2016

1

Cyber security will continue to dominate headlines in 2016. Frost &

Sullivan expects at least three major attacks on critical infrastructure that

will either stop or significantly affect operation.

2

With security budgets continuing to be restricted across a range of

industries and with the increasing number of threats, Frost & Sullivan

expects a shift towards new business models.

3

Following on the back of 2015, cyber security mergers and acquisitions

will see its busiest year yet in 2016 with the greatest investment in cyber

companies to date.

4

Following Canon’s acquisition of Axis Communications in January 2015

and the evolving nature of the network security camera industry, Frost &

Sullivan expects at least 1 additional significant acquisition in 2016.

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Source: Frost & Sullivan

Top Predictions for 2016 (continued)

5

6 Growing concerns regarding the movement of potential terrorists and the

growing strength and influence of ISIS will lead to a re-evaluation of border

security programs at both external and internal points within the EU.

7 Growth of wearable devices and IP-enabled devices are expected across

the industry, especially in law enforcement.

8

Discussions around the management and regulation of drone technology

has continued throughout 2015 and this will continue throughout 2016 with

further roadmaps planned.

Debate around the use of data and intelligence will continue in 2016.

Further legislation will be passed in a number of countries increasing

government and security organisations access to data.

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For Additional Information

Alexey Volostnov

Business Development Director

Alexey.Volostnov@frost.com

Anthony Leather

Senior Consultant

Aerospace, Defence & Security

(+44) 207 3438334

Anthony.leather@frost.com