State of the Market: Access Control
By Karyn Hodgson
SDM Magazine, March 2015
Sometime around the middle of last year many access control industry insiders noticed a welcome phenomenon: People were smiling more. At trade shows, around industry round tables and across boardrooms, a collective weight seemed to have lifted. As the economy finally shrugged off the doldrums and businesses started loosening the purse strings, those manufacturing, selling and installing access control saw momentum — whether for the first time since the recession or as a continuation of a recovery begun a year or two earlier — that led to a positive 2014 for most and a rosy outlook for 2015.
This is reflected in SDM’s 2015 Industry Forecast Study. SDM readers were contacted in the fall of 2014 about their opinions of the state of the market in 2014 and their expectations for 2015. Nearly 70 percent rated their current access control market as good or very good/excellent in 2014. When asked to predict how the market would fare in 2015, there was a substantial gain (9 points) in the percentage of respondents who expected the access control market to be very good/excellent. (See charts on page 51).
“We fared better than we budgeted for or expected in 2014,” says security integrator Skip Sampson, CPP, president, KST Security, Indianapolis. Sampson, who is featured on this month’s cover, attributes this growth in large part to the general economic recovery.
“It all hinges on budgets. We would engineer a lot of projects in previous years, but they might sit for a year or two before the funding would come through. This year a lot of those projects were finally funded, and other projects we consulted on and engineered got funded right away. In the summertime, everyone said to themselves, ‘This is going to continue to be good.’ We saw projects in the summer that took us right through fall and winter and proved to us that corporate America was releasing funds.”
Christopher Sincock, vice president, security business, DAQ Electronics LLC, Piscataway, N.J., says the positive atmosphere was palpable. “There were more smiles the second half of 2014.
Traveling around North America, I saw signs of construction that I hadn’t seen for a few years and that was very encouraging. There is nothing like seeing a bunch of cranes when you are driving through a city. I love to see those.”
Research firm IHS Technology, in its most recent study, predicted the global market for access control would grow at about 5.5 percent. However, Blake Kozak, senior analyst for the Englewood, Colo.-based firm, says if you figure in wireless and electronic locks, that number is closer to 7.5 percent. “2013 was sluggish; but [during] the back end of 2014 the market started to come back,” he says. “Based on our analysis of the last eight months or so, the market will continue to improve.”
While many in the industry reported similar growth numbers, a few outstripped that by quite a margin.
“I would say that our company performed extremely well — almost publicly too well,” says security integrator Craig Jarrett, president, Netronix Integration Inc., San Jose, Calif. “We grew right at 65 percent last year. As a whole I would say the industry grew, maybe not as much as we personally did, but everyone I talked to was pretty positive and the sentiment seems to be that 2015 will be even better.”
There are concrete reasons for this optimism. Along with a freeing up of funds for both old and new projects and a rise in construction (see chart on page 55), access control systems are quite simply “aging out.” This fact, timed as it is with rising optimism in the economy and businesses’ willingness to spend money, is good news for the access control industry.
The Big Trends
“I think what has happened is the economy finally started to show signs of stability and there are many large companies and systems that really needed significant upgrades or replacement,” says Frank Gasztonyi, chief technology officer, Mercury Security, Long Beach, Calif. “Many of those systems were installed 15 to 20 years ago. What we saw after 2009 was many companies who were reluctant to grow or upgrade those systems or they did the minimal. In 2014 they started to release the budgets to upgrade.”
Scott Schramme, vice president of sales, Continental Access Control, a Napco Security Group Company, Amityville, N.Y, agrees. “Right now in the access industry one of the big things going on is a lot of opportunities with what I will call ‘retro.’ There are a lot of systems out there that have just gotten old. Because of the influx of money, a lot of businesses are spending it to upgrade access control systems. It is a big opportunity.”
Sampson has seen this trend in action. “We see a large opportunity out there for upgrades to systems that have been in place for years. They are now getting the funding to upgrade both the hardware and software side of things for those systems.”
Speaking of software, Mitchell Kane, president, Vanderbilt Industries, Parsippany, N.J., points to the life cycle of technology as another driver timed just right for the access control industry now. “There is a technology cycle every six to seven years where everyone seems to do upgrades. One of the biggest drivers over 2014 and going forward is that a lot of the companies we support are finally moving to the latest Microsoft version, which in turn forces upgrades. Some of them are still running on special license agreements. When they start to move away from those it opens up all kinds of opportunities.”
Beyond software, another sea change has occurred within that seven-year technology cycle: the rise of the “Internet of Things.” While not a direct driver for security yet, this is an entire mindset taking over the consumer side of life, and many expect that to bleed over to the industry sooner than later.
“The Internet of Things (IOT) is literally a giant map of smart devices that are floating out there,” explains Rob Martens, futurist and director of connectivity platforms, Allegion, Carmel, Ind. “I do see an interesting growth potential with the pull through into the commercial market with the IOT. Now a lock isn’t just a lock. It is a potential smart device that can add something to their lives.”
Everyone is a consumer, says Andrew Elvish, vice president of marketing and product management, Genetec Inc., Montreal. “It’s my mantra. We all have smartphones; some have Apple TVs or home automation. Even though we are a B2B business, people’s expectations are set in many ways by their experience as consumers.
“There is a refresh period going on in terms of technology. In the past six to seven years, the tech gap between what they have and what they can get is so compelling it is time to make that move. And concerns around security both physical and logical are very present in those doing risk assessments,” Elvish reasons.
As more and more IT departments get in on the security upgrades, this could be a significant factor.
Marcus Logan, senior manager, product marketing, Honeywell Security, Louisville, Ky., sees a definite correlation between consumer experiences and business expectations. “I can unlock my door or manipulate my house through my phone or iPad. How come I can’t interact with my office door the same way?”
Finally, there is the fact that U.S. corporations are sitting on more cash today than ever before, after hoarding it for years against a sluggish economy. Moody’s, a credit ratings company, reported that U.S. company cash levels reached a record level $1.65 trillion in mid-2014, according to an October 2014 Reuters article.
“I read there is more cash sitting on the ledger books today than at any time in history,” says Scott Baker, president, EMS & OEM Group, ASSA ABLOY Americas, Phoenix. “In 2008 a lot of corporations focused on cash flow. Once they have all that cash, there are only a few things they can do when the economy gets better: look for acquisitions, buy back stock or invest in some other way. Business investments include security.”
CEO and founder of Camarillo, Calif.-based Security Door Controls (SDC) Arthur V. Geringer, DAHC, agrees with the options present in such a circumstance. “This year should be even better because there is so much money sitting on the sidelines and pressure to get more than just a larger return.”
What does more money to play with, a willingness to spend it, the need to upgrade end-of-life access systems and new types of buyers with a keen interest in technology add up to? A whole lot of opportunity.
Baker put it best: “I am more optimistic at the start of 2015 than I have been at the start of any year since 2008. It is the first time I can remember that the end users and manufacturers and integrators are all lined up with a strong economy.”
Industry Challenges & Opportunities
In addition to the big things that are adding up to a very optimistic outlook for access control, there are also some ongoing inside industry trends with the potential to impact sales both positively and negatively.
As a whole, access control is not a fast-moving industry. Often, what is “new” to the average end user has actually been around for several years; but only after it is proven and they see others implementing it will they jump in.
“There are a number of key challenges to this market,” says Dr. Selva Selvaratnam, senior vice president and chief technology officer for HID Global, Austin, Texas. “The biggest challenge is perhaps related to the prevailing attitudes about access control. In 2014 HID Global conducted a survey that raised questions about how well organizations are ‘keeping up with the bad guys.’ We found reliance on legacy infrastructure, technology and mindsets will make it hard for organizations to keep up with today’s technology advances that address a world of increasingly sophisticated threats.”
For example, the survey found that while 75 percent of respondents felt cards with cryptography were important, the majority also believe that mag stripe and proximity technologies provide adequate security, despite their vulnerability to cloning.
“The access control industry today still has a lot of proprietary nature to it,” adds Jason Ouellette, product line director, Access Control, Tyco Security Products, Westford, Mass. He points to situations such as the end-of-life announcements around GE products. “At the end of the day it is a forklift exercise and most of the strategy is how to protect and preserve the reader. What is already in place will drive a lot of who they will go with when it comes to access control decisions.”
This is a trend across the board, Genetec’s Elvish says. While his company experienced strong growth in 2014 in line with others’ performances, it wasn’t as strong as they had expected, due in part to platforms being discontinued and companies (both manufacturers and integrators) being acquired.
As the industry was busy consuming itself, those watching — particularly the new breed of buyers — went into “wait and see” mode before committing.
“We were expecting a lot more of our large customers were going to add access into unified projects,” Elvish says. “It did happen and is happening but there really was a wait-and-see attitude among CSOs and CIOs due to so much flex in our industry. Interestingly, in 2014 we also saw a real change in the people around the table, the buying teams and decisions makers. Now we see people like the chief resiliency officer (CRO).”
These new people are influencing buying decisions and that is a trend that will continue. Like it or not, access control and the security industry in general have to embrace IT and IP (Internet Protocol) and the new breed of decision makers who live in these worlds.
“There is slow progression, even within organizations,” says David Bunzel, executive director, Physical Security Interoperability Alliance (PSIA), Santa Clara, Calif. “We have board members working for larger security companies that, when they come from a different industry, scratch their heads and say this industry thinks ‘old.’ But there are some companies and individuals in companies who see the value and understand what IP devices do and the Internet of Things.”
So what you have going on in the industry is a push-pull of those who feel that the traditional panel/card reader (often proximity) systems have worked for them and continue to work and those that understand the power of IP and the potential it can bring. The age of the traditional panel is waning and the IP/network/edge infrastructure is waxing. The trick is negotiating the transition.
A new breed of integrator is beginning to emerge to help navigate these waters — the IT integrator. This integrator is not always the competition, says Gavin Bortles, president, The Kepler Group Inc., Altadena, Calif. “We are bridging the gap between physical and logical security. There are a lot of old school security integrators who have a significant momentum in the market, but have yet to really invest in the IT side of their skill set. That is where we come in to help.”
KST’s Sampson adds: “We rarely see an opportunity that isn’t involving both IT and security now. When we have our yearly client reviews it is with both — security to understand what is coming up with deployments and IT because they know what that software road map is.”
IP may be daunting to some, but Bortles sees access control systems, even traditional ones, as a natural fit into the IP world. “Because of its network footprint, access control has a lot more flexibility on where it resides and on what infrastructure. A camera load is significant on the network, but access control just acts like a regular computer. Because of that it is much easier to IP-enable an access control system and deploy it in any environment. The barrier to entry is a lot lower. I don’t think the convergence industry will mature this year, but there will be a big push.”
What that means is even though video is often considered “king” in the security world, access control actually has the advantage when it comes to being the kind of solution that is considered normal practice in an IT department, he explains.
And guess where the budgets reside? “We can potentially get to the point where security folks have access to the kind of budgets IT has had for the last 20 years,” Bortles adds. “Security has been kind of the red-headed stepchild within the organization, not a profit center. But as security becomes more of an integral part of that we will have a lot more IT departments doing security system upgrades. Look at Sony. If someone is inside your firewall, imagine if they can view your cameras and physically see your sensitive areas. That is the frightening discussion in the enterprise now. When folks have that kind of fear struck into them, money becomes available.”
Beyond Access Control
It is impossible to talk about access control today without also talking about “what else?” Access systems are rarely standalone these days and more and more customers at all levels expect it to be integrated, at a minimum, with video and intrusion detection.
In fact, 60 percent of SDM’s Industry Forecast responders expected sales of integrated systems to increase in 2015, ahead of access control at 55 percent (see chart on page 51). This is a number that has been steadily climbing over the past few years.
“We have deployed a percentage of systems with video integration and that continues to trend up,” says integrator Jason Cloudt, vice president of sales and marketing, Security Equipment Inc., Omaha, Neb. “We were integrating video on smaller systems this past year: we did some systems that were 50 cameras or a single building that wanted video integration. Another thing I see us having more success with is integration with intrusion and tying it all in with one graphical user interface (GUI) to manage it.”
DAQ’s Sincock calls this the “holy trinity of access control.”
“At the end of the day, everyone has that, even the smaller operations by virtue of number of doors often have more cameras than doors under access control,” he says.
What has changed and is changing, however, are end user expectations for what that integration can do for them. They no longer have to be persuaded that integration is a good idea. They know that. Now the conversation is about the how and the what.
“They are buying a lot more of the integration capabilities,” says Gary Staley, national sales director, RS2 Technologies, Munster, Ind. “Number one is integration to outside databases so we can exchange data from HR packages for adding and removing people automatically from systems.”
Integrator J. Matthew Ladd, president and COO, The Protection Bureau, Exton, Pa., agrees with that assessment of buyer preferences. “We are seeing much more drive to have Active Directory, or integration to other systems. I think that is where you will see the growth, whether in 2015 or 2016: building and HR systems connected with access control.”
Steve Piechota, vice president and CFO for integrator Netronix sees this trend as a motivational force. “I think the ability to integrate with other systems has motivated some folks to begin to upgrade existing systems. Last year we did several that were virtually forklift change-outs of systems. They had end-of-life systems that were going to have to be replaced. They looked at ways of integrating with their HR systems and various IT systems and we sat in planning sessions with end users that were all about being able to do integrations and improve efficiencies. That is something I am selling on virtually a daily basis — the integration to other systems and taking disparate systems and linking them together.”
Sincock says even the term “access control” is outdated. “We have to stop calling it the access control market because it is so much more. There are so few access-control-only systems sold. These days so many folks also want integrated video and other things. It is becoming far more common to sell an integrated system than just straight access control.”
KST’s Sampson thinks “unified platforms” are the way forward. “They are really needing and buying a unified head end for all of their security systems. I think the vote is still out on who will win that unified head end: access or video manufacturers? But most of our opportunities have been centered around access control applications being the unified GUI of the video system and intrusion system and those types of technologies.”
This is what is driving the whole discussion around standards in the access control world. (See related article, “I’ll Take 3 Standards; Hold the ‘Secret Sauce’” on page 66.) “End users are seeing that the other ecosystems they work with, whether that is office systems or productivity tools, are all fairly integrated and work nicely together,” Genetec’sElvish says. “On the security side of the house there are a lot of silos still and a lot of users are very hungry for unified or open systems.”
Per Bjorkdahl, chairman, steering committee for ONVIF, San Ramon, Calif., believes the access control market is following the video market in expecting open platforms and choice. “End users want to select an access control management platform and be able to pair it with a wide variety of different IP-based door controllers and card readers. It is no longer considered a luxury in the market. End users expect to be able to integrate video and access control together for a more complete and accurate picture of their security operations.”
End users are frustrated with closed, proprietary systems and are embracing the open architecture approach more and more, says Bruce Stewart, business development manager for access control, Axis Communications, Chelmsford, Mass. “With an open system users can build best of breed solutions instead of being locked into a legacy system with one vendor. IP-based solutions not only meet their needs today, but also have the flexibility and scalability to grow with them into the future.”
End users are also extremely interested in mobility — a trend that is a direct crossover from the consumer side. “There has been an interesting transition in the access control market over the last 12 months,” IHS’s Kozak says. “What wasn’t even talked about six or seven years ago is now at the forefront. People want to manage things on the go and not have installed software. The industry is beginning to focus on flexibility and mobility.”
Honeywell’s Logan agrees. “One thing we have seen more requests for that has been somewhat surprising is apps. Users want ways to interact with the system on the go, anywhere at any time. This trends spans from small entry-level systems to the enterprise. Three to four years ago they weren’t interested in apps. Now it is almost a minimum to compete.”
Paul Ahern, president, Cypress Integration Solutions, Lapeer, Mich., would add customization to that list of newer demands. “The requests for custom integration solutions to adapt non-typical data collection devices into access control systems have been robust.”
At the end of the day it all comes down to listening to the end users, adds Paul Bodell, president/CEO, ECKey Smartphone Access Systems, Lancaster, Pa. “They want a secure, convenient access control system that is affordable. Take a look at what you are providing. Is it secure? Most are. Is it convenient? Affordable? End users will ultimately buy the things that meet these three qualifications.”
And increasingly that convenience piece gets back to the consumer experience and expectation, Stewart adds. “With information at our fingertips in our daily lives, the thought of not being able to access your security information in the same way is becoming more of an expectation gap each day. Younger generations of security professionals are coming up through the ranks and are looking toward easy, accessible, flexible and open systems — not technology from the last millennium.”
Sidebar: 2 Technologies to Watch Closely
While access control may be a “slow moving” industry, that doesn’t mean there aren’t new technologies being developed all the time. Two of the hot-button discussion points of the past year have involved the buzz around NFC/Bluetooth, and wireless online locks. SDM asked experts to weigh in on these technologies relative to their influence on the market in 2015 and beyond.
SMARTPHONE AS CREDENTIAL
This is probably the top thing people are talking about in the industry. Interestingly, integrators mostly agree that they hear much more about this from manufacturers than they do from their end users. Still, the whole consumer expectation discussion would not be complete without contemplating the No. 1 technology of the decade: the smartphone. Putting aside whether near field communications (NFC) or Bluetooth low energy (BLE) will ultimately be the technology of choice — or whether there will be room for both — many insiders feel the phone as credential has the potential to be a “disruptive force” on the industry.
“I believe Bluetooth may have some of the most immediate opportunities,” says SDC Product Development Manager Mauricio Lainez. “NFC-enabled products are becoming more readily available, but the technology is still relatively unknown to end users.”
Rob Martens of Allegion still sees it as a generational thing, with the younger generation almost universally carrying a smartphone. “They think, ‘Why do I need to carry a card?’ As more of them enter the workforce that demand will only go up.”
NFC is brand new, says Jeffrey Nunberg, president and CEO, Integrated Security Systems, Miami, Fla. “We are looking at 2016/2017 for that to become more widely adopted. I am personally looking at NFC readers for our new headquarters building. But really it is new but not revolutionary. It is just another app. I don’t think it is something that will cause people to go out and replace what they have. They might upgrade their readers.”
ASSA ABLOY Americas’ Scott Baker agrees. “It is not going to be 2015. That will be our first opportunity to sell it in any numbers and early adopters will be the hospitality industry. If there is one lesson I have learned in this business it is that people in this industry are slower to change than in their personal lives or even other industries. Whatever technology will eventually dominate the world, it will take longer in the security industry than it did for smartphones to take over in cell phones.”
Manufacturers such as ECKey are on the forward side of this trend. “We are an early-stage company, says ECKey’s Paul Bodell. “I would say right now that 50 to 60 percent of our leads are end users asking if we have dealers that support these products because they want to do it.” Bodell believes in small and medium businesses things will start happening in 2015. “Smartphone-based solutions are literally a fraction of the cost of traditional panels and readers. Enterprise systems will take longer because they specified systems a year or two ago and aren’t going to change now. It will be at least another year and a half before it starts to disrupt that market.”
Others aren’t so sure smartphones will be a big factor any time soon.
“In 2015 we will, I think, see some advances in NFC/Bluetooth type access credentials,” says integrator Skip Sampson of KST Security. “But it is not ready for mass deployment yet. We haven’t forecasted a decrease in card sales because of it.”
RS2’s Gary Staley points to a personal experience that illustrates that the technology is not ready for prime time. “When I was in Las Vegas recently I bought breakfast in McDonalds using my phone. The girl behind the counter looked surprised and told me it was the first time she had seen that — ever. That gives me a measure of what people are used to.”
Still, there is a Unisys statistic that it says takes 26 hours for the average person to report a lost wallet, but only 68 minutes to report a lost or stolen phone.
“That is driving some of the awareness around mobile credentials, but what are still being deployed are traditional cards and readers,” says Marcus Logan of Honeywell Security. “I think it will transition, but don’t know how quickly.”
WIRELESS ONLINE READERS
The emergence of a new class of readers from the likes of ASSA ABLOY and Allegion are set to position wireless technology as one to watch for 2015.
“Wireless is a very lucrative proposition,” says Frank Gasztonyi of Mercury Security. “Through the use of wireless we see that the number of secured doors can be significantly increased and end users are quite willing to do that because they don’t have to go through a major disruptive installation effort.”
Sampson views the new online locks as a business opportunity. “Finally we have something that is somewhat new in our bag of tricks that we are seeing a lot of success with now. We are not losing that business to a pushbutton lock.”
Not all integrators are comfortable with wireless yet, but if they can get there, it can literally open up new doors — and new business.
“Dealers and integrators are still not leveraging the benefits of wireless like they could,” says Scott Lindley, president, Farpointe Data, a DORMA Group company, Sunnyvale, Calif. “These solutions let integrators and end users reap the benefits of a wired system, without the cost of a hardwired system. They are an attractive alternative to off-line, standalone locking systems because they offer a real-time solution that’s compatible with nearly all brands of access control.”
Mitchell Kane of Vanderbilt Industries thinks wireless will bring the entire industry up. “These companies are making a large effort to move technology onto every door. When they do that, you are going to need access control systems to support them. It helps drive the whole industry in a positive way.”
Allegion’s Martens sees 2015 as the year for wireless. “We think it will be a great year for wireless locks. People really want that functionality but there were a bunch of us that didn’t really have that [online] solution. Now we have it and the interest is pretty big. If you think about it, it is very intuitive. I have let myself in the front door with my badge (or phone). Why do I have to use a key when I get to my office? Historically there just weren’t the right solutions in the marketplace. I feel like we nailed that one.”
ASSA ABLOY’s Baker agrees. “Not everything that needs to be locked is a door. There are a variety of openings, including cabinets, gates and server locks. This is a relatively new trend that we haven’t been able to do before.”
Integrator J. Matthew Ladd of The Protection Bureau says wireless locks are a growing part of his business. “It has changed the cost structure. We used to have to put in a control panel and then run wires to specific locations. Now we just have to get it connected to the network and we are up and running.”
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