Security technology makers now looking to speed the process

July 21, 2013

As demand for security technology — from metal detectors to imaging scanners — has grown, the companies that produce and operate it have seen a boom in business.

But the surge may be ebbing in the United States, and these companies, including two with offices in the Washington area, say they’re increasingly looking abroad to sell their technology as well seeking ways to improve existing systems to deal with travelers’ most common request: Make the screening process faster.

Take Rapiscan Systems, which is based in Torrance, Calif., and has an office in Crystal City. The company produces a range of security technology, including the baggage scanners used by the Transportation Security Administration. Rapiscan has provided security at many of the recent Olympic Games, including at Salt Lake City and Beijing, said Peter Kant, the company’s executive vice president.

After years of growth — the business went from $121 million in sales in 2003 to nearly $400 million in 2012 — Kant said there are fewer opportunities for new work in the United States, particularly in defense.

So Rapiscan, the largest subsidiary of OSI Systems, is increasingly moving into services work, through which it can help users operate their systems more efficiently. In Mexico, for example, Rapiscan has 750 employees working at checkpoints equipped with the company’s scanners, he said.

“The technology is currently in a mature cycle,” he said. “The move now is how to keep or increase security operations” while trimming costs.

Both Rapiscan and Smiths Detection, a subsidiary of the British company Smiths Group that sells products ranging from X-ray baggage scanners to systems to detect radiation, are also looking to improve their products.

This month, Smiths Detection announced that its new explosive-detection system, which focuses on high-speed screening of checked baggage, has received TSA certification. The belt moves at 98 feet a minute, allowing it to screen up to 1,800 bags an hour, according to the company, which has its U.S. headquarters in the Maryland Western Shore community of Edgewood.

Rapiscan’s high-speed baggage-screening system, targeted at large bags, last month received a certification from a European aviation body, the company said.

Both companies are hoping to sell their technology abroad.

Kant said he sees potential work in India, Korea and Brazil, among others. Rapiscan just completed work at the Confederations Cup soccer tournament in Brazil and will be supplying security technology to the Winter Olympics in Sochi, Russia, next year.

Lance Roncalli, managing director and vice president of sales for the Americas at Smiths Detection, pointed to Africa, the Middle East and Latin America as potential growth markets.

“These aren’t products that people are going to necessarily stop buying,” he said.

In particular, he said, security breaches tend to drive growth. “When we have an event like the Boston Marathon, there’s always a big focus on, of course, not allowing that to happen,” Roncalli said.

“I wouldn’t say [security technology is] a fast-growth market, but it’s a growing market,” said Timothy Quillin of the financial services firm Stephens. “I would’ve thought that there would be some kind of a lull or decline off of those relatively high levels of spending post-9/11, but I think security spending just continues to go up.”

Still, it isn’t an easy business. Company executives say they’re under constant pressure to improve their offerings so they don’t miss new threats.

Roncalli said this has meant Smiths Detection must ensure that its technology can be improved over time. “If you deliver it today and you can’t add to the library of substances it can detect, it becomes obsolete very quickly,” he said.

Rapiscan found itself party to controversy after building body scanners used by TSA to screen travelers. After Congress and the public complained that the technology was too intrusive, the standards for the scanners were altered.

After Rapiscan said it couldn’t retrofit its technology to meet the new requirements in time, the TSA and the company agreed to end the deal — canceling about $5 million in remaining work — and to send the company’s scanners to other federal agencies.

Quillin said the debate over privacy hasn’t taken a significant toll on the outlook for security technology companies.

The balance “between security and liberty [is] an ongoing discussion, but I don’t think the discussions that we’ve had about privacy and liberty have changed in aggregate spending on security,” he said. “I don’t think that we as a society . . . have decided that we want to reverse course.”

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