Volume 2, Issue 1

February 2007

Inside this Issue

Editor's Intro ..."We're Back!"
Recommended Events
Industry Consolidation ... Finally
Ingram Goes POS With Biometric
The UK versus the National ID
Real ID Reality Check
Will PIV go the way of TWIC & Registered Traveler?
80 Million Iris's Enrolled in India
Thinking Like a Market Development Guru ...

It has been a while since the the last edition of the eUpdate. I hope you will forgive the lapse.

The good news is that demand for Acuity's services has increased geometrically - a trend reflecting increased demand across the identification solutions market. (I also became a mother at the end of 2005, which has increased demand for my personal services as well! ). The not so good news, publication of the eUpdate has suffered.

With a bit of breathing room and improved resource allocation, I can now bring my attention back to sharing some of Acuity's experience, observations, analysis and crystal ball gazing with you.

Acuity is not alone in experiencing increased market demand. Security/terrorism driven border management and control continues to drive business especially in the EU, ATM and mobile phone based financial transactions continue to gain traction in Asia, and enterprise physical and logical access markets are materializing in the US (and not just in the minds of hopeful vendors and wishful pundits).

The nature of the business is also changing. End users are more sophisticated, industry requirements more specific, and vendors are finally making the move towards problem solving rather than technology touting.

Believe it or not, though I would never go so far as to say it is the year for biometrics ( bad flashbacks anyone?), this market is finally showing signs of maturity and with it genuine pro-active market development. Acuity is confident that 2007 will bring about the entry of new, more sophisticated market players, significant advancements in key technologies, and a sense of competence, tempered with humility, in regards to what biometrics can and cannot do.

...Now if we can just get past those niggling large government ID programs that seem to be in a perpetual state of almost happening: Registered Traveler, TWIC, UK National ID, Real ID ...

As always, your feedback is welcome. And please feel free to forward your copy of the eUpdate to colleagues and encourage them to subscribe.

Finally, we moved recently so please note out new mailing address:

Acuity Market Intelligence
540 W. Linden St
Louisville, CO 80027 USA

Sincerely,


C. Maxine Most

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Industry Consolidation ... Finally

This past year was a harbinger of things to come in terms of ongoing biometrics market development. Two presumed market leaders emerged.

L-1 inhales competitors at an unprecedented rate.

L-1's 2005 $100M investment in Viisage has spawned a new breed of biometrics player: A multi-biometric company claiming solutions status spanning core technology, secure credentialing, document authentication, and fingerprint and government consulting services. In a matter of months, L-1 has incorporated key industry players including Identix, Iridian, SecuriMetrics, and Integrated Biometric Technology. Regardless of L-1's success in capitalizing on this aggressive market play, the company's level of commitment (i.e. investment) and rapid acquisition strategy has brought a new level of credibility to the marketplace and bodes well for all.

Pay-by-Touch steam rolling into POS market

With "transaction processing" written all over their trailblazing, Pay-By-Touch seems determined to become the defacto choice for retail operations wanting to take the biometrics plunge. They have built a substantial consumer base (3M+ enrolled and counting) by improving consumer convenience and reducing retail transaction fees. They too have been on 2006 buying spree that began with closing the deal to acquire their main perceived competition - BioPay. Two additional acquisitions - the purchase of S&H Solutions and 1,000 merchant accounts from Camelot Systems - helped solidify their position as "leading biometric authentication network for loyalty and payments, and the only company that integrates biometric authentication, payments, personalized marketing, and payment processing". With a $265 M warchest, there is no question they will continue to scoop up any industry player ( biometric or not) that poses a threat or has promising complementary technology or services.

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Ingram Goes POS With Biometrics

Ingram Micro, the world's largest technology distributor is now in the retail POS and data capture equipment game. Just to get a sense of how big these guys are, Ingram offers "solutions and services to nearly 165,000 resellers by distributing and marketing hundreds of thousands of IT products worldwide from nearly 1,400 suppliers". As part of a new market expansion strategy, they have established a new division dedicated to the retail sector and will be providing everything form barcode scanners, receipt printers and scales to Automated ID and Data Capture (AIDC) products including RFID, smart cards and biometrics.

While it is doubtful the industry will experience a sudden onslaught of POS based biometric sales - though Pay-by-Touch is certainly working hard to make this happen - long term prospects are greatly enhanced by this move. Ingram has not only tacitly endorsed POS based biometrics but has also created a mammoth global distribution channel. Something biometrics is in great need of for every industry and application area.

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The UK versus the National ID

The action is non-stop in the UK National ID debate. Score to date: UK -3: National ID -0. But seriously, it must seem to many watching this so called "debate" that the chances this program will materialize anytime in the near future are fading fast. This is yet another example of legislators getting ahead of themselves before fully understanding the issue and implications of creating a large-scale civilian ID program.

Not to single out the UK in this matter ... just look at the US-VISIT exit program. It was quite clear from inception that US-VISIT exit would require significant infrastructure investment (e.g. road construction at the Canadian and Mexican borders), yet somehow the US Congress now seems shocked that that the exit part of the program has been put on permanent hold by the DHS because "the technology is not ready". The bottom line is that there was never a reality based plan or adequate resources allocated to solve the problem. True, there are technology issues but they pale in comparison to the logistical and operational ones.

And as for the UK, it is more than likely that when the political smoke has cleared, he UK National ID will suffer a similar fate. The complexity and expense - not to mention the public dissent- is bound to lead to indefinite postponement.

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Real ID Reality Check

Let's all move to Maine. All least in this State the elected officials have the smarts to take a hard look at the realities of the Real ID Act. In a near unanimous vote on a non-binding resolution (a popular move in the US these days), Maine's Senate and House of Representatives approved a joint resolution urging President Bush and the Congress to repeal the Real ID Act of 2005. It simply states "the Maine Legislature refuses to implement the Real ID Act of 2005."

The sound bite form Maine Senate Majority Leader Libby Mitchell says it all: “The federal government may be willing to burden us with the high costs of a program that will do nothing to make us safer, but it is our job as state legislators to protect the people of Maine from just this sort of dangerous federal mandate.”

A quick visit to Senator Mitchell website provides the full text of the resolution which is impressive in it's brevity and cogent assessment of the issues.

Maine is not alone. Georgia, Wyoming, Montana, New Mexico, Vermont and Washington state are expected to pass laws or adopt resolutions declining to participate while Arizona, Georgia, Hawaii, Massachusetts, Missouri, New Hampshire, Oklahoma, Utah and Wyoming already have active legislation against Real ID.

(eUpdate readers may recall that in June 2005 Acuity published the following: "The only good news is that this unfunded federal mandated is likely to face such strong opposition from States struggling with sky rocketing Medicare costs, onerous (and expensive) federal education testing requirements and significantly lower tax bases due to federal income tax cuts, it will die a painful death long before it has the opportunity to become a total debacle." )

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Will PIV go the way of TWIC & Registered Traveler?

Is it just me, or is there something seriously wrong in Dodge? Once again, please excuse the American colloquialism but if I am not mistaken it has been more than 5 years since 9/11 and we are just beginning to see stirrings in the much-lauded TWIC and Registered Traveler programs. The US DHS just issued a $70M contract to Lockheed to produce ~800 thousand cards without specific plans for readers and a fair bit of scuttlebutt from unnamed sources close to the project that the price quote is so low as to be suspect and the cards are unreliable. Registered Traveler now appears to be firmly in the hands of the commercial sector, which is not an issue unto itself but certainly raised concerns about the priorities, and/or competence of the TSA under the DHS.

So now enter PIV. How much faith should we have that this program to create uniform standards for US government IDs will genuinely come to fruition and not fizzle out as did it's ambitious predecessor programs? The track record to date is not so good. Yes, some benchmarks have been met but only by the most generous standards. And after a year of inter and intra agency chaos, OMB FINALLY moved beyond the rhetoric of political appointees and listened to the civil servants who said there had to be a single agency solving the problem and managing the project. There are some very smart folks working on this project and they have managed to produce enough cards by the deadline - even if the DoD's Mike Butler (on loan to GSA for the project) had to spend the night in a Philadelphia parking lot and drive the first batch to DC the next morning.

This is a true story. According to Government Computer News, Mike Butler, chairman of the Government Smart Card Interagency Advisory Board, master of the DoD's CAC program and on loan from DOD to GSA, drove to Philadelphia Thursday afternoon to bring the cards back to Washington. The cards were not ready when he arrived and because the manufacturing plant didn't have enough notice (24 hours is the requirement), he was not allowed inside the building. So, Butler spent the night waiting in his car in the parking lot. At 6:30 a.m. the following morning, Butler received 30 cards and hit the road, arriving in DC just in time for GSA's ceremony.

The bottom line: A Legislative or Executive mandate is one thing, figuring our how to define, design and implement large scale ID programs is quite another.

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80 Million Iris's Enrolled in India

According to the folks at LGE Iris, the State of in Andhra Pradesh in India has successfully enrolled 80 Million individuals in a government program designed to control and manage the distribution of state-issued food ration cards. This is the first truly large scale biometric deployment intended for 1:n searches where use of "n" accurately describes the size of the database. Now that the enrollment phase is complete, it will be interesting to see how quickly and with how few gotchas this system can be made 100% operational. This application certainly has the potential to change the discussion from "possibility" to "practicality" in regards to deploying interactive biometrics for populations of tens of millions.

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Thinking Like a Market Development Guru ...

From the Gurus of emerging technology market development - The Chasm Group - a recent edition of Philip Lay's Under the Buzz email "viewsletter" discusses short, mid and long-term planning with an emphasis on what he calls "Horizon 2" planning. Acuity refers to this as the market development path from short-term priorities to long-term vision which requires a clear strategic map for transitioning from initial market entry points to expanded market presence.

Though Lay is the managing director of TCG Advisors - a Chasm Group practice focused on restructuring enterprises for emerging market opportunities - this piece is well worth the read for anyone interested in technology based market development. Under the Buzz is published periodically and you can review this edition and all previous issues and subscribe for free on the website.

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Copyright 2007 Acuity Market Intelligence, LLC. All Rights Reserved.
The editor makes no guarantees on the opinions expressed herein. This publication may be forwarded electronically in it's entirety. However, no part of this publication may be published in any form without explicit consent of the publisher.