Virtually overnight, homeland security went from an obscure sector to an economic behemoth. In 2000, U.S. spending on homeland security stood at $5 billion, according to Homeland Security Research Corp. Last year, total U.S. homeland security spending reached $23 billion. By 2015, Homeland Security Research projects spending will total $73 billion.
Although the homeland security market is growing, it poses some complex challenges for U.S. businesses, particularly for small and midsize companies, looking to market security products and services to the government. These companies have difficulty competing with larger defense contractors, with navigating the vagaries of government procurement and with the strength of overseas security companies.
"The smaller companies are lost in space," said Doron Pely, VP-product development at Homeland Security Research. "They have no way to connect with the government. The government is not used to dealing with them, and they don't have the deep pockets necessary to court Uncle Sam."
Pely said it's no surprise that traditional defense contractors--such as Boeing Co., General Electric Co. and Honeywell International--have been among the early contract winners since the founding of the Department of Homeland Security in 2003.
"There is a lot of advertising that goes on, but I suspect that relationships with [Department of Homeland Security] and State [Department] officials are more important to the major prime contractors," said Bruce Aitken, president of the Homeland Security Industries Association.
In the wake of the Sept. 11 attacks, Cisco Systems ran a branding campaign aimed at both government and private enterprise that touted its "self-defending network" and emphasized security. Although not a weapons manufacturer, Cisco is a defense contractor that generates significant revenue from the public sector, and its familiarity with the ins and outs of government contracts has helped it generate homeland security-related business.
Jeff Platon, VP-solutions marketing for security at Cisco, said the company has put much effort over the past few years into developing communications products that bolster security. One such product, he said, is a system designed to help U.S. Border Patrol agents determine from a remote location whether movement in a certain area is caused by an animal or a person trying to cross the border.
It is often difficult for companies that don't have longtime relationships, such as those Cisco has developed, to determine who the ultimate decision-makers are at the federal, state and local levels of government. In one of its reports, Homeland Security Research termed the problem "consideration soup," noting that the White House, 42 congressional committees and the media are among the influencers of policy.
Another challenge for U.S. businesses has been that, in general, they lag security companies from countries such as the U.K. and Israel, where terrorism has been a fact of life for decades and the security industries are robust, according to industry observers. "America felt insulated before 9/11," Aitken said. "We've been playing catch-up ball for five years, and we've got a long way to go."
Leo Gleser, president of ISDS, an Israeli company, has provided security for the 2004 Athens Olympics and other high-profile events. That kind of endorsement is difficult to duplicate in a marketing campaign. "My great advertising is [word-of-mouth] advertising from our clients," Gleser said.
NICE Systems, another Israeli company in the security industry, markets surveillance equipment as well as other products and services. Ian Ehrenberg, the company's VP-general manager in the video security division in the U.S., said NICE has benefited from its relationship with large defense contractors such as Northrup-Grumman Corp., which calls upon numerous subcontractors to fulfill large homeland security contracts. NICE has also placed advertising in security-oriented publications such as Government Security News .
Several homeland security magazines such as GSN and Homeland Security Today have appeared in the wake of Sept. 11.
In addition to magazines, homeland security-oriented exhibitions and conferences also appeared after Sept. 11. For instance, National Trade Productions launched the Government Security Expo and Conference in 2002.
Media covering the security sector as a whole have thrived. Between 2003 and 2005, advertising pages in a cross section of security segment magazines measured by IMS increased from 7,341.00 to 9,120.71, an increase of 24.2%. The growth in ad pages has slowed so far in 2006, with pages up 1.4% through July compared with the same period last year.
McGraw-Hill Cos. was one of the first media companies to dive into homeland security. It held a homeland security conference in Nov. 2001 and launched "Homeland Security & Defense," a paid print and online newsletter in January 2002. "There was a flurry of action," said Greg Hamilton, publisher-strategic media for McGraw-Hill's Aviation Week Group.
In the intervening years, however, McGraw-Hill decided that homeland security was not a standalone industry. It is intertwined with aviation, construction, energy and a number of other industries, so the company eliminated both the newsletter and the conference about two years after their launch and folded the coverage into its industry-specific media such as Aviation Week & Space Technology and Engineering News-Record , Hamilton said.
Through its media, McGraw-Hill covers security from both a governmental perspective and a corporate perspective. In addition to spurring the federal government to create the Department of Homeland Security, the terrorist attacks have prompted corporations to invest more in security.
"9/11 was an eye-opener [for businesses]," said Bob Bragdon, publisher of International Data Group's CSO (Chief Security Officer) magazine, which was launched in 2002 to cover issues of both physical and information security for businesses. Between 2004 and 2005, CSO's ad pages increased from 309.92 to 333.58, a 7.6% jump, according to IMS. Through July of this year, ad pages grew at a 36.1% clip.
But while advertising expenditures have grown, private-sector spending to secure potential terrorist targets hasn't met initial post 9/11 expectations, according to security industry observers.
"Unfortunately, my view is that it will take further terrorist attacks on U.S. soil before the private sector invests heavily in [homeland security]," Aitken said.