Integrated Security Systems: State of the Market
Integrating access control or video surveillance together or with other systems is standard practice for some systems integrators, while others do it only occasionally. But virtually all systems integrators agree that the percentage of systems they integrate is on the rise and that growth in integrated systems will outpace their already strong sales of access control and video surveillance for 2006.
â€œCustomers want their systems to work together,â€ notes Scott Howell, manager of worldwide marketing for security equipment manufacturer Hirsch Electronics of Santa Ana, Calif. â€œInteroperability saves time and money, and it also automates routines and solves problems that couldnâ€™t be solved otherwise. What is driving the acceleration right now is newer tools that make interoperability easier to implement.â€
Tom Heiser, director of product management for another equipment manufacturer, Tyco Fire & Security of Boca Raton, Fla., also is witnessing strong customer acceptance of integrated systems. â€œBy integrating customer systems, what weâ€™re able to do is to use technology to enable the work force to respond better to an event,â€ Heiser says. By integrating video with intrusion protection, for example, Heiser notes that alarms can now be linked with video and automatically presented to a security guard. â€œWe hand it to him rather than requiring him to figure out which camera it was and call it up, so he can respond faster and more efficiently.â€
Usage of Integrated Systems to SkyrocketIn parts 1 and 2 of this four-part article series on the state of the security market, we looked at the video surveillance and access control markets and found numerous security dealers who were experiencing growth rates in the range of 10 to 20 percent a year in each of these areas. Increasingly, these systems are being integrated together or with other systems.
More than half of access control systems installed today are integrated with other systems, according to estimates from Tyco and competitor equipment supplier Bosch of Fairport, N.Y. For video, the percentage is somewhat lower, sources say â€“ in the range of 15 to 20 percent, according to Bosch product marketing manager David Heinen, who estimates that each year the percentage of access control and video systems that are integrated is going up by about 10 percent.
The percentage of security systems that are sold as integrated systems varies substantially from one security dealer to another, however. Some of the largest systems integrators â€“ including Firstline Security Systems of Anaheim, Calif.; Safeguard Security and Communications Inc. of Scottsdale, Ariz.; MAC Systems Inc. of Canton, Mass.; and Electronic Security Services Inc. (ESSI) of Upper Marlboro, N.J. â€“ note that 65 percent to 75 percent of their access control systems sold today are integrated with other systems, usually video. Jim Hunter, director of national accounts for Siemens Building Technologies Inc. of Buffalo Grove, Ill., says that â€œvirtually allâ€ new access control systems for his customers are integrated.
The size of a security dealer and of the installations that each dealer handles also play a role in determining how likely a dealer is to sell integrated systems. For smaller security dealers or those that handle smaller installations, integrated systems are still the exception rather than the rule. Many of these dealers purchase their equipment from security distributors such as Clark Security Products of San Diego, Systems Distributors Inc. (SDI) of Atlanta, and Tri-Ed Distribution of Woodbury, N.Y. All three of these distributors estimate that only 5 percent to 20 percent of the access control or video systems they sell are integrated with other systems. That will change soon, though, the distributors say.
â€œIntegrated systems will gain another 5 percent of the total access systems sold by third quarter,â€ predicts Tri-Ed systems manager John Hyatt. Dane Terry, electronic solutions manager for Clark, is even more optimistic. Within 12 months, just under half of all access and video systems Clark sells will be integrated, and within three years, those percentages will climb to 60 to 70 percent, he says.
Profits Are StableWhile the number of integrated systems sold is on the rise, the average integrated system price is remaining about the same, most sources say.
Most systems integrators SDM interviewed say that their profit margins on integrated systems installations have not changed much over the last year or two and are unlikely to do so for 2006. A few, however, have seen the average profit margin per job decrease somewhat due to increased competition.
A number of business and technology trends could help support strong integrated system sales for 2006. Several sources note, for example, that more and more corporate customers want to establish central control of security systems in remote locations by networking the systems together. This, in turn, is driving system integration, notes Jerry Quinn, director of operations for MAC Systems.
New technology developments also are driving new applications for integrated systems that are helping to expand the market. John Hayes, executive vice president for ESSI, notes several such trends. For example, he notes that, as the quality of images recorded by todayâ€™s video systems has improved, law enforcement officials increasingly are willing to accept those images as evidence in a trial, increasing the value to customers of integrated systems incorporating video. Hayes also has seen a lot of interest in new systems that integrate video surveillance with cable television. Installed in apartment buildings, such systems are â€œa very powerful tool,â€ Hayes says, because they enable residents to see visitors at the front door by turning their television set to a specific channel.
Terry notes another hot video-related development. â€œThereâ€™s a lot of buzz about video-based notification systems,â€ he says. Customers like the idea of having video sent to their computer in response to pre-programmed alarm events, Terry notes.
The trend towards corporate database consolidation could be a positive one for the integrated security systems market, notes Robert Bayer, director of sales and marketing for equipment manufacturer PCSC of Torrance, Calif.
Sources interviewed for this article noted a common security industry concern â€“ an increase in poorly qualified companies with low overhead installing advanced security systems and undercutting prices. â€œEveryone says, â€˜Weâ€™re an integrator,â€™â€ notes John Jennings, CEO of Safeguard, â€œbut being an integrator means establishing the core discipline and engineering resources in the company.â€
Systems integrators should recognize the value of such resources, Weldon cautions. â€œIntegrators need to be careful,â€ he says. â€œThe equipment is becoming less expensive and the technology is becoming more sophisticated. We need to be careful we donâ€™t de-value our product. Companies that have the knowledge and experience to integrate systems and be professional should charge for their services accordingly and not sell themselves short.â€
Side bar: How Integrated Systems Are Changing â€“ and How Those Changes Could Impact ProfitsOne factor that could influence security dealer revenues from integrated system sales would be a change in the equipment that comprises a typical system. Several industry sources note some new trends that could help boost integrated system sales and profitability.
â€œWeâ€™re seeing an increase in the average integrated system price because the systems are becoming larger,â€ notes Robert Bayer, director of sales and marketing for equipment manufacturer PCSC of Torrance, Calif. â€œPeople are seeing the value of physical access control and adding more readers.â€
Jim Hunter, director of national accounts for Buffalo Grove, Ill.-based systems integrator Siemens Building Technologies Inc., sees a similar trend on the video side of integrated systems. â€œPeople want more cameras because cameras allow them to extend their reach or view of a facility without having to add additional personnel," he says.
Technology for the Masses?
Some technology advances, however, could help drive a decrease in the average price for a typical integrated system. One such advance is pushing more and more intelligence away from a central controller and into peripheral devices, notes Stephen Thompson, director of marketing for fire and safety for Johnson Controls Inc., a Milwaukee-based systems integrator that also manufactures security equipment. Eventually the central controller could be eliminated, reducing both equipment and installation costs for the average integrated system, he predicts.
As security systems increasingly are integrated with other types of systems, some integrators also may find their average revenue per job increasing because they are handling new types of systems. The increased use of smart cards is helping to drive this trend, notes Jeff Goldat, president of Farmingdale, N.Y.-based systems integrator CHS Inc. â€œWith the advent of smart cards, you can step beyond the bounds of traditional security,â€ he says. He cites the example of colleges that increasingly are using smart cards for library and debit systems in addition to access control.
93 Percent of Dealers/Integrators Expect Integrated Systems Spending to RiseDealers and integrators were asked: â€œHow do you expect your level of spending in 2006 will compare with 2005?â€
*percentage of respondents to SDMâ€™s 2006 Industry Forecast, conducted November 2005