The assessment is based on the perspective of a variety of industryexecutives, including manufacturers, distributors, end-users, and a wealthof third party and secondary research sources. This report includes factand opinion-based information and is presented with charts, discussion, andanalysis that describes and assesses the raw data.

• The information in this study pertains to the US market for homelanddefense-related products and services.
• The analysis of the market is based on the end-user dollars spent bycustomers in the industry, or sometimes referred to as end-users.
• Issues that are addressed in the present regarding the industry's sizerefer to the fiscal year 2002, unless otherwise stated.
• This report assesses products and services, whose purpose could be broadlyclassified as contributing to the common defense of the US home soil, andwhose end-users could be commercial or governmental, but not households orindividuals. It excludes opportunities in aerospace defense and offensivemilitary support.

Acclaro Growth Partners conducted the research for this study through theuse of data from both primary and secondary sources.Acclaro Growth Partners gathered the data and conclusions presented withinthis document for current and potential market participants and investorsthrough analysis of primary and secondary research.

The primary survey included interviews with knowledgeable professionalsvia telephone, email or fax. The telephone interviews were conducted byengaging the respondents in a conversation rather than through a traditionalsurvey format. This approach allowed the respondents to offer candid opinionregarding the issues and provided more detailed and qualitative insights. Inaddition to conducting telephone conversation with leading industryparticipants, we requested market information, statistics, articles andrelevant documents and opinion on strategic issues from these professionals.

The secondary research was used primarily to obtain an overview of themarket, relevant statistics, the different industry segments and players toidentify the target professionals for primary research. The secondarysources used in this report include:

• Government data
• Industry association data-
• Information published by manufacturers, distributors, retailers,regulators, consultants, research firms, and other industry participants-
• Published information and annual reports on company websites-
• News and economic data published by independent news agencies andinformation portals-
• Online databases

The challenges faced while gathering information for the report were asfollows:

• For the purposes of this study, we defined the market for homelandsecurity-related products and services to include products and serviceswhich can be sold to commercial entities as well as the government.However, this definition varies across different industry associations andindustry players. Hence the information collected from different industryparticipants was not necessarily as per our definition.
• During our research on the market size for different product categories,some of the industry participants were not able to offer their perceptionsof exact percentage shares. We developed our own hypotheses and solicitedinput on our assumptions. In most cases, contacts were able to comment onthe relative validity of these assumptions. The final step in our processwas to gain a level of consistent "comfort" with our revised estimate ofsize, growth, segmentation, etc. We have used views of industry expertsduring primary research and published figures on overall growth in thehomeland defense segment to arrive at the market size of the homelanddefense industry.
• For security reasons, government officials and their contractors can bereluctant to divulge figures and offer comment on specific issues.
• We have relied heavily on primary research to derive estimates of thefuture growth rates of different industry segments and the overall marketsize in terms of end user dollars spent.
• The market and segment sizes estimated by this study are based on end-userexpenditures. The figures will disagree with the manufacturers' revenuestatements in segments that feature subcontractor or middlemen.

Table of contents:
Introduction

• Description of the report
• The scope of the report
• Research methodology
• Primary research
• Secondary research
• Key challenges
• Research timeframe
• Introduction to Acclaro Growth Partners

Executive Summary

• Industry size analysis
• Industry Segmentation by Product Areas
• Market percentage breakdown by product category
• Discussion of product category segments
• Industry Growth Analysis
• Overall market growth
• Factors affecting growth
• A. 9/11
• B. Government Spending
• C. Technology R&D
• D. Recession
• Industry trends and key industry drivers
• 1 Corporate Security Models after Government Standards.
• 2. Deep potential for private and public cooperation and information sharing.
• 3. Product Repackaging
• 4. Long-term market need for solid dependable services and products
• Key factors for successful participation in the industry
• 1. Proven Track Record
• 2. Economies of scale production and the financial wherewithal to weather the ups and downs of government contracting.
• 3. Strategic Partnerships
• 4. First Mover Advantage
• 5. Timely Customer Service
• Opportunities and challenges for industry participants
• Opportunities
• 1. Strategic Planning.
• 2. Business Contingency Planning
• 3. System Integration
• 4. Multifunctional products
• Challenges
• 1. Deviation from original business plan to meet opportunities.
• 2. Fickle Government Contracts due to spending cycles may hurt small
• companies.
• 3. New Bureaucracy of the Department of Homeland Security.
• 4. First Mover Advantage.

The Response Management Segment

• Market Definition
• Motivation to implement solutions
• Market Size: $ 5.3 billion in estimated FY 2002 spending by end-users
• Market Segmentation
• Market Growth: 70% currently, less than 10% by FY 2005
• Relative Opportunity Map
• Areas of Growth and Opportunities
• Industry Threats
• Critical Success Factors
• Competitive Analysis
• Industry Response to September 11th
• Leading Players
• Market Definition
• Market Size: $1.5 billion in estimated FY 2002 spending by end-users
• Market Growth: 200% currently, 174% by FY 2005
• Market Segmentation
• Relative Opportunity Map
• NBC Defense Equipment and Training Sector
• Sector Segmentation
• Sector Growth: 200% currently, 400% through 2004, 200% after 2004
• Industry Threats
• Areas of Growth and Opportunities
• Critical Success Factors
• Vaccines and Antibiotics Sector
• Market Segmentation
• Market Growth: 200% currently, 200% in 2003, 50% by 2005
• Threat to the Segment:

The Private Security Services Segment

• Market Definition
• Market Size: $24.5 billion in estimated FY 2002 spending by end-users
• Market Segmentation
• Market Growth: 20% currently, 8% by FY 2005
• Relative Opportunity Map
• Areas of Growth and Opportunities
• Industry Threats
• Critical Success Factors

The Access Control Segment

• Market Definition
• Market Size: $16.5 billion in estimated FY 2002 spending by end-users
• Market Segmentation
• Market Growth
• Relative Opportunity Map
• Surveillance Sector
• Definition of the Surveillance Sector
• Market Size: $8.83 billion in projected FY 2003 spending by end-users
• Market Segmentation
• Market Growth: 84% currently, 99% by 2005
• Areas of growth and opportunities
• Industry Threats
• Critical Success Factors
• Competitive Analysis
• More on the Biometrics Sector
• Biometric products and applications relevant to Homeland Security:
• Sector Overview
• Sector Size: $250 million in estimated FY 2002 spending by end-users
• Sector Segmentation
• Market Share by Technology
• Sector Growth: 28% currently, 25% by 2005
• Areas of Growth and Opportunities
• Sector Threats
• Critical Success Factors:
• Competitive Analysis
• Industry response to September the 11th:
• End-use Markets served:
• Leading Players (2001)
• Smart Cards Sector
• Sector Definition
• Sector Size: $337 million in estimated FY 2002 spending by end-users
• Sector Growth
• End-use markets served
• Areas of Growth and Opportunities
• Sector Threats
• Critical Success Factors:
• Industry response to September the 11th
• Key Players
• Physical Security Sector
• Sector Definition
• Sector Size: $7.3 billion in estimated FY 2002 spending by end-users
• Sector Growth
• Rivalry of Competition.
• Opportunities for Integration

The IT Segment - Information Analysis and Infrastructure Protection

• Market Definition
• Market size: $11.28 billion in estimated FY2002 spending by end-users
• Market Growth
• Market Segmentation (in estimated FY2002 spending by end-users)
• Relative Opportunity Map
• Areas of Growth and Opportunities
• Threats to the Segment
• Critical Success Factors
• Competitive analysis
• Leading players