Now is the Time for New Leaders to Emerge within the Industry
In technology, the industry leaders of today are rarely the leaders of tomorrow. Technology innovations are being introduced to the market at an increasingly accelerated pace and the established multi-national companies that have long enjoyed strong market shares and growth rates are being challenged by hundreds of startups. This trend is ubiquitous in nearly every industry and vertical market, and continues to accelerate year after year. In the physical security industry, this technological disruption drastically transformed the largest sector of the industry in under 10 years and became the largest revenue in less than 15 years.
The video surveillance market was unabashedly transformed with the introduction of the first mass market camera in 1999 by Axis Communications which started a groundswell of change that moved giants. Multi-national, wellfunded and established industry giants such as GE, Bosch, Panasonic, Sony, Pelco and Honeywell were upended by Axis, Samsung, Geovision, Milestone, Genetec, Exacq, and myriad others.
The technological advancements of IP technologies were too rapid for most of the established companies to react to and they were confronted with ‘The Innovators Dilemma,’ a book and idea introduced by Clayton Christensen, a Harvard professor and businessman. These legacy corporations became classic examples of Christensen’s ideas about leadership. These established industry giants did everything ‘right’ and yet they lost their position at the top, and in some cases left the industry entirely.
As this rate of disruption continues and accelerates, we can be assured today’s industry leaders will be usurped by new innovative businesses with unseen ideas in years to come. If we look across the physical security industry it does not take a Ph.D. to see that the next business sector that will be transformed is the access control industry.
From a 10,000 foot view, the access control industry seems to have all of the right ingredients, making it extremely ripe for a monumental shift. The access control industry is dominated by large multi-national, multi-billion dollar manufacturers with recognizable brands such as Siemens, Honeywell, Johnson Controls, ASSA ABLOY, Dormakaba, Bosch, Allegion, and G4S. The products from these manufacturers are most often proprietary in creation and installation, and their markets are often artificially protected with geographical or vertical market protectionism for installers.
The installation of the products are very costly and the technology is both antiquated and cumbersome. The functionality of the software and hardware products are generations behind other technology that is generally available to commercial consumers. There are technologies present in other industries that have the ability to transform the access control industry. Combine all of these factors, an industry with a CAGR of nearly nine percent, and a market opportunity that is projected to be over $10 billion in 2022, and one does not need to be Nostradamus to see that the industry will dramatically change.
Blending advancements together
The ingredients are all there for several technological advancements to transform the industry, and for new and different players to emerge as the leaders of tomorrow. Perhaps some of these companies and technologies are already present. If you have had the opportunity to stroll down one of the major trade shows in Las Vegas, London, or Dubai you have seen hundreds of companies offering their ideas to the market and most being awarded validation with some marquee customer story or award. There are newer hardware innovations creating reductions in labor costs, easy to use software solutions, and opportunities for increased margins for installers and manufacturers. There are also some prominent technological trends that have become main stream – access control as a service (ACaaS), wireless locksets, and mobile credentials – which are being promulgated by dozens of competing companies. Each of these trends offer a piece of the solution that advances the industry and provides the technology that commercial consumers are demanding.
The wireless locksets reduce installation costs by over a thousand dollars a door, while the cloud-based access control eliminates the need for costly physical server installations and enable easy upgrades while solving many cybersecurity concerns. The mobile credentials enable easier administration and security of personnel in a facility while reducing costs. Interestingly, there is not a single company offering all of these technologies under one comprehensive package that could seismically shift the industry and present the comprehensive solution for the end user.
Will there be an existing global player that will present this singular solution that will cause this move over the next 10 years, or will it take a giant from another industry such as Google, Amazon, Alibaba, Apple or Intel? Each of these corporations have been inching towards the security industry with their own offerings, and in some cases have video solutions that they see are strong for their brand and revenues.
In addition, they could gain further insight and greatly monetize the data of a combined video, access control and perimeter protection solution. Existing global players such as ASSA ABLOY with its acquisition of Mercury Security and Allegion with its recent acquisition of ISONAS seem to be constructing the solution that could be disruptive; however, time will tell how much influence the combination of open architecture hardware, wireless locks, and in Allegion’s situation, cloud-based software will be rapidly adopted.
Looking at the cost
To further understand the opportunity, I would encourage you to try and describe a standard access control installation to a friend in technology outside of the security industry. I would recommend starting with the physical infrastructure required by most systems. Describe how they will need to dedicate physical space inside of the building to install a large circuit board inside a large metal box to a battery and a power supply that will need to be connected to a dedicated power circuit installed by an electrician.
From that panel, they will need to buy expensive low voltage wiring that will connect to a reader and all of their door hardware connections. What is the price tag for this portion of the installation? Please allot the industry average of $2,300 per door.
For the management of this door, they will need to purchase a physical server ($3,000) and a separate software from the hardware manufacturer that will not scale outside of their individual building without the purchase of additional software licenses. This software will manage their users, credentials, rules and schedules brilliantly, and will often require the certified installation company to have an annual maintenance fee and have the integrator present anytime that they would like to speak to the manufacturer.
Finally, they should decide which computers will have the approved client software installed on them as this is the only way to access the administration of the software. Can they use their mobile phones or tablets? Probably not, but if so, that is an additional license. The cost for this software – it certainly varies widely, but it typically costs nearly $3,000 to $4,000 for the first 16 doors. After all of this, if they wish to use their mobile phone as a credential to enter the facility, they will need to add another $100 per reader and purchase an electronic credential license for $1,000 and a bank of 100 credentials at a cost of $1,000.
After you have picked your friend’s jaw up off the floor, they will soon ask more detailed technological questions such as how secure is it? How secure are their cards? What if an employee loses a card? Can the software be managed in the Cloud? What is the cybersecurity of the software? Why is a large circuit board needed when my mobile phone manages dozens of complex applications locally and in the cloud? Does the access control system do something super special other than managing rules and opening and closing doors at the right time?
The next several years will undoubtedly bring both seen and unforeseen changes to the physical security industry. End users and general consumers enjoy technological power through their smart phones that is orders of magnitude more formidable and user friendly in comparison to the legacy technology in many of today’s physical security systems. While the video surveillance industry has undergone a radical change in the last several years to answer the demands of the consumer in many aspects of business, there remains a tremendous opportunity for entrepreneurs and large businesses to transform the access control industry.
There will be a sea of change coming and history tells us that the leaders that are surviving in the market today will not be the leaders of tomorrow. Which companies will answer the call of the market and provide the solution to consumers to securely, easily, and less expensively open and close doors? The door is certainly open for the new leaders to step through.
By Robert Lydic – Global Vice President of Sales – ISONAS at Allegion, PLC