Security systems integrators lauded the state of the market in 2015, yet their revenue was down 1 percent overall and among those integrators with which a year-to-year comparison could be made, a significant number — 34 of 82 companies — reported decreased North American systems integration revenue. (See table “Top Systems Integrators: 8-Year Performance.”)

SDM’s Top Systems Integrators Report ranks companies by their North American systems integration revenue, which includes solutions such as design, project management, product, installation, programming, start-up, and training sold directly to an end-user customer or through a tier of contractors. Total North American systems integration revenue — which is not the same as total annual gross revenue — reached $5.63 billion in 2015 for the 100 companies ranked on this year’s report.

One of the reasons revenue growth did not match the commentary given by systems integrators could be that projects secured in the latter part of 2015 will not be on the books until 2016 — contributing to flat financial performance, but elated forecasts by the integrators.

“In my opinion the security market made a comeback last year and it is looking even better in 2016,” says No. 30, Sound Incorporated, which reported $20.2 million in 2015 systems integration revenue, up 2.6 percent over 2014.

While there were some who experienced a flat or downcast market, a larger number of systems integrators say the market expanded in 2015. They cited several factors as having influenced that growth, including a higher level of new construction and the need to upgrade timeworn systems — especially given the greater benefit that digital-based technologies offer.

“2015 saw a strong market for security system sales. In large part the market was driven by increased customer focus on upgrading legacy systems to newer digital technologies. Clients continue to gain a higher level of understanding that digital technologies can drive efficiencies within their security operations and provide more value to their corporate stakeholders,” reports Tutela Inc., ranked No. 35. The company saw strong growth in the logistics and transportation vertical market last year.

Security as a service, managed offerings, and cloud-based solutions are gaining traction in the marketplace, the integrators observed.

“In general, we participated in a strong market in 2015; good economic trends in many of the markets we serve helped to drive strong sales performance,” notes ADS Security, ranked No. 48, reporting 14.1 percent higher integration revenue. “While we saw growth across the board, we especially saw strong growth in our commercial segment and, in particular, with our cloud-based services such as SecureDoor (managed access control) and our family of RemoteView video (cloud based video storage).”

Integrated Security Technologies says, “We are still looking to see the cloud services end of the business take off. It has been discussed more frequently but we anticipate some activity taking hold in 2016.”

Other integrators also commented on factors that contributed to a strong marketplace:

Telenet VoIP Inc. (No. 92): “Overall the market seemed to be healthier, margins seemed to stay flat but more opportunities were available for bidding. After structured cabling, and network upgrades, CCTV and access control seem to continue to be the focal point of educational entities.

Advanced Electronic Solutions (No. 51): “2015 was a strong year for AES. We had many upgrades to IP systems as well as a number of new major projects. Profits increased as opposed to 2014.”

Sentry Security (No. 94): “Market was strong in 2015. Integrated systems dominated.”

Security Integrations (No. 40): “The market was strong, fueled by upgrades from analog CCTV to IP-based solutions.”

Tele-Tector of Maryland Inc. (No. 68): “The market was strong in the area of upgrading analog systems to IP base.”

Perhaps most telling about the direction that things are heading in comes from an observation by MidCo Inc., ranked No. 28: “There is a need for more network-savvy systems integrators like MidCo.”

Not only are offerings of cloud-based and managed security solutions growing, but the market is desiring — and demanding — solutions that deliver “big data.” There is also a greater emphasis on cybersecurity, say the integrators of their clients.

“ITO and big data will continue to be a focus of our go-forward strategy. The industry is way behind other industries in the use of data. Video analytic metadata is going to become very valuable,” claims D/A Central Inc., ranked No. 70.

Therefore, the need for security systems integrators to become more network-savvy is greater than ever. When asked what percentage of projects sold in 2015 incorporated IP-based technology, 45 percent of systems integrators noted that between three-fourths and 100 percent of their projects incorporated IP.

Which Markets Are Spending?

A handful of vertical segments stood out as front-runners in spending on integrated security products and services: education (especially higher-ed), healthcare, utilities/critical infrastructure, and transportation/logistics. Integrators also mentioned:

• Energy
• Retail (especially multi-location)
•  Banking
• Multi-unit residential
• Hospitality
• Government
• Banking

No. 2-ranked Convergint Technologies emphasizes the broad-reaching application of video technologies: “The market for security systems sales and integrated systems continued its strong growth in 2015. Video sales continue to dominate as customers begin to look beyond traditional security applications and start looking at using video for manufacturing, process improvement, regulatory compliance, etc.

“The best growth came from the utility segment as these customers continue to be concerned about the security of their infrastructures. With the downturn in the price of oil, petrochemical has been hit the hardest in terms of being weak in 2015,” Convergint says.

No. 7-ranked G4S Secure Integration LLC, calls out critical infrastructure as a leading sector. “Our strongest sector is definitely critical infrastructure. We see tons of potential in that market to adhere by NERC/CIP regulations and see ourselves as one of the best providers,” the company says.

No. 59, Stone Security, says the positive marketplace had a constructive effect on its operations. “We felt the market was stronger in 2015 than 2014 especially in education and industrial markets. We were forced to add a number of people to the organization to keep up with increased demand in 2015.”

No. 81-ranked Peak Alarm Co. Inc., affirms that spending on integrated security solutions continues to hold up. “The market in 2015 continued to be strong in security systems sales driven by corporate spending arising from office and warehouse expansion. No specific market exhibited low or no growth.”

In addition to specific drivers in individual market segments, the overall concern about active-shooter situations and terrorist episodes in general is casting its shadow across North America and spreading into the systems integration industry.

“Terrorism in the news, especially domestic terrorism, has led to an increased focus on security. The education segment, in particular, has dedicated a large amount of budget to improving security,” writes No. 43-ranked Redrock Security & Cabling Inc.

“The concern of continued terrorist activity will continue to drive the need for improved security solutions, which will drive increased funding,” asserts No. 3-ranked Johnson Controls Inc.

According to No. 13-ranked Securityhunter Inc., terrorism is a top issue in the security marketplace. “The federal government is investing heavily in securing its people and facilities. A great market opportunity exists in helping to secure the border, and key infrastructure locations like airports.”

Among the top trending issues that Top Systems Integrators think will have the greatest impact on their business in 2016, active-shooters/acts of terrorism, cybersecurity, and the growth of Security as a Service through cloud-based services and managed offerings stand out. The first has the potential to produce devastating consequences, yet provides opportunities for integrators to become a key part of securing America against such atrocious deeds.

View Footnotes

KEY:

e = SDM estimate.  na = not available.  Abbreviations to markets: airport = airports; corp = corporate office space; correctional = correctional; edu = education/campus; entertainment = entertainment/sports venues; financial = financial/banking; gaming = casinos/gaming; govt = government; health = healthcare; hotels = hotels/hospitality; industrial = industrial; law = law enforcement; retail = retail/restaurants; transport = transportation/distribution; utilities = utilities/critical infrastructure.

SIDEBAR: Largest Project in 2015: $26 Million

These 78 systems integrators reported having the highest-value security projects started in 2015. Note: Four of the top 10 companies did not report their largest project size, as requested by SDM. Projects below $100,000 are not ranked here.

Source: SDM Top Systems Integrators Report, July 2016

Largest Project Winner:
Johnson Controls

Customer:
New York Power Authority

Johnson Controls will, for up to a two-year term, engineer, procure and construct systems associated with physical and cyber security upgrades in order to maintain compliance with the North American Electric Reliability Corporation’s Critical Infrastructure Protection (NERC CIP), Version 5 Standards. The upgrades consist of physical and cyber security enhancements, including cameras, access controls and methods of preventing and detecting intrusion in Authority substations. The contract includes work at five of the Authority’s generation and transmission facilities and eight remote substations.

                                             Alphabetical Index to Companies

More from the Report

To gain additional information beyond that published in this issue and online, the complete SDMTop Systems Integrators Report and Database is available in Excel format. Included are contact names, mailing addresses, telephone numbers, website URLs, targeted vertical markets, branch office locations, and much more. SDM’s Top Systems Integrators Report and Database contains the information needed to target products and services to the systems integration market.

The cost of the report is $595. It may be ordered by contacting Heidi Fusaro at 630-518-5470 or by emailing fusaroh@bnpmedia.com.