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The Austrian economist Joseph Schumpeter used the phrase “creative destruction,” to describe a process in which the old ways of doing things are endogenously destroyed and replaced by new ways. In his view, this was part of a cycle of economies going through growth and recession.

We’re not technically in a recession until there have been two consecutive quarters of negative growth of real GDP or economic growth. But 70% of the US economy is consumer spending and consumer spending is growing extremely slowly. Discretionary spending seems to be what’s really taking the toll right now as noted by this article in Business Week. Yet some of the less exciting staples of the economy are actually humming along such as food and fuel.

What about security? IMS reports a slowdown in growth of network video to 30% for 2008, down from 42% last year. 30% growth doesn’t sound all that bad to me. Now that’s just for network video growth, which they note is less than 20% of the overall video surveillance market. Hybrid video systems (that is, video systems that support IP network video and analog video) would seem to be positioned well either way the market moves over the next year or so.

There are a few takes on how the reduced growth in the economy will affect the broader video and security market from some video/security bloggers. John Honovich claims that there are too many IP Video Surveillance Software suppliers that are either not supplying value or are not differentiated. There sure are a lot of them and it does seem like that there will be consolidation or a reduction in the number of IP Video Software suppliers.

Steve Hunt blogged an insightful article recently on the same topic but with a different twist. His main point is that if you supply value, you’ll survive. To supply value however, you have to stay close to your customers.

I’d say the software (and service) suppliers that provide real value to their customers will survive if they can control their costs and connect with their customers. Perhaps some creative destruction will occur along the way video as innovative entrepreneurs create new ways to deliver increased value to customers. Those who aren’t producing value to the end customer however might want to read, “Change or Die”, available now at Amazon.com!