9/11 spawned tech-security market

AFX, Sept 3 – During the Cold War, Canada’s National Optics Institute developed a system to detect which type of enemy tank or fighter jet was approaching. After the Soviet Union’s demise, such threats were deemed less likely, and the technology sat on the shelf.

Until 2003, when entrepreneur Eric Bergeron toured the institute with Sept. 11 on his mind.

"The flash I had was that we no longer look for Russian planes in the sky, but we do look for bad things in luggage," Bergeron said.

The X-ray analysis company that emerged, Quebec-based Optosecurity Inc., is only on the verge of putting its devices in real-life checkpoints. But its hopes are emblematic of the massive homeland security technology industry spawned by Sept. 11.

Contrary to the promises from technologists that began almost immediately after the attacks, these five years have seen few dramatic security improvements. But the market remains a source of riches — real for some companies, still largely dreamed-of for others — primed with billions of dollars from the U.S. and international governments.

Spending on domestic security across all U.S. federal agencies is expected to reach $58 billion in fiscal 2007 — up from $16.8 billion in 2001, according to the Office of Management and Budget. States and cities are annually contributing $20 billion to $30 billion more, Gartner Inc. Vice President T. Jeff Vining estimates.

Much of it lands with large defense contractors and systems integrators with long government ties and the heft to tackle huge projects. For example, Unisys Corp. got a $1 billion contract to set up computers, cell phones, Web sites and other network technology for airport security staff. BearingPoint Inc. won a $104 million deal in August to provide secure identification cards to federal employees and contractors.

Still, a lot of no-names are angling for a piece. Even a tiny slice could be revolutionary for them.

When Salient Stills Inc. was spun out of the Massachusetts Institute of Technology, founder Laura Teodosio figured its software — which enhances the quality of frames captured from video, making them clearer to publish or analyze — would find its biggest success with media companies.

But after Sept. 11, the FBI became a user, and Salient Stills’ customer focus shifted to law enforcement.

Today, revenue is less than $5 million, but it has increased every year. Teodosio credits the explosion in surveillance footage being captured by authorities and by regular people.

Optosecurity is at an earlier stage, having gotten only initial funding for upcoming trial deployments of its gear at North American airports.

Using the optical-recognition technology licensed from the Canadian institute, Optosecurity’s devices attach to existing X-ray machines and are programmed to automatically spot weapons or their components. (Optosecurity will not say how many items it can recognize.)

"There is not a lot of money that has trickled down to startups," Bergeron conceded. "But the problem is that now (government customers) are running out of innovation. If you look at the checkpoint now, it is the same as the checkpoint 10 years ago, and the checkpoint 20 years ago."

Some measure of technology’s limited impact since Sept. 11 can be gleaned from the Department of Homeland Security’s budget request for 2007.

DHS cited 25 "key accomplishments" in the three years since it corralled 22 federal agencies, but most of the victories surrounded organizational changes or improved use of resources.

Only three items linked technology to better Sept. 11-style safety. One celebrated the rise of a data-sharing network that routes secret information among 56 federal sites.

The other two related to a single program, US-VISIT, which incorporates biometrics and machine-readable passports to tighten border control. DHS touted this about the program: Of the 44 million foreign visitors it had processed, US-VISIT had detected 950 people with criminal histories or immigration violations.

Requests for future technology initiatives, meanwhile, were more numerous. For example, DHS sought $692 million for explosive detection devices, $157 million for radiation monitors and $5 million to upgrade the satellite capabilities of the emergency alert system.

"The themes around much of the successes involving technology have been relatively basic at this point," said Greg Baroni, who heads the federal business for Unisys. "I see this as an emerging market. The large, advanced, state-of-the-art technologies are still being explored."

Even this basic phase has been pivotal for Unisys. Before Sept. 11, Unisys’ federal business was so weak that the company was trying to sell it. Now the unit has doubled to nearly $1 billion a year, about $400 million of which comes from homeland security contracts. The group had 1,200 employees in 2001, but now has nearly 4,000.

Helena Wisniewski has worked in homeland security from multiple angles: At the CIA, the Pentagon’s Defense Advanced Research Projects Agency, defense contractors and a biometrics company she founded. Now an administrator at the Stevens Institute of Technology, Wisniewski says innovations in the post-Sept. 11 tech market have been limited because of the pressures to get basic technologies in place quickly.

That environment also shoehorned some ideas into places they didn’t work. Witness the rush to use facial-recognition biometrics to scan crowds for evildoers, even though the access-control technology was built for settings where people present themselves one at a time under good lighting.

"It’s very difficult in a lot of circumstances to reduce a technology to practice in six months," she said. "We haven’t really organized to sit back and look at an effective strategy for the longer term. I think we need an overall strategy, not just tactical solutions."

Gartner’s Vining says the most successful security technologies so far have been improved communications systems and networks for information sharing. Police and intelligence agents have also benefited from new data-mining programs, he believes.

Several analysts expect the next wave to make more use of chemical, biological and radiological sensors, which figure to play a role in a $2 billion border security contract to be awarded shortly. Boeing Co., Lockheed Martin Corp., Northrop Grumman Corp., LM Ericsson and Raytheon Co. are seeking prime-contractor status on the deal.

Brian Ruttenbur, homeland security analyst for Morgan Keegan & Co., is also watching companies that help analyze intercepted communications and those that manage video surveillance.

Of course, even as technologies improve, none is likely to end the post-Sept. 11 era of hyper vigilance.

"We can’t catch everything," Ruttenbur said. "I don’t know of any single technology that can be right 100 percent of the time."