The January edition of SECURITY SALES & INTEGRATION includes our annual industry forecast as a cornerstone of our special 2014 Industry Forecast Issue. For the piece, I interviewed 25 of the industry’s most knowledgeable market analysts, business experts, security dealers, systems integrators, supplier representatives and trade association directors. Some of their perspectives can be found in the magazine article, with the balance of their assessments appearing in separate Under Surveillance blog posts.
Featured in this installment: Jim Coleman, President, Operational Security Systems and Security-Net
What leading technology developments do you see for 2014?
Jim Coleman: Technology is rarely invented for the security industry. Rather, we shape innovations developed for larger markets to the needs of the security marketplace. Mobile communications is one example and its exponential growth is influencing our industry. We see this with smartphones that we can now use to review video, or use to help manage our intrusion and access control systems remotely. It remains to be seen if smartphones will be disruptive to the central station monitoring business. Cloud computing models will continue to infiltrate the security marketplace. Cloud-based access control offerings are well accepted and are gaining traction. Cloud-based video services are still a niche offering searching for market segments that offer a compelling value proposition. Encryption technology will become more important in the larger IT marketplace and our industry will be pressured to raise the bar on protecting sensitive information.
What the leading business and operations challenges?
Coleman: During the downturn of the economy, margins went down. While most everyone agrees we are seeing a rebound, the margins are not going to come back to where they were before the great recession. So, for systems integrators the question becomes how do you become more efficient and reduce overhead? Health-care costs are rising for many integrators by double digits this year. There is an expectation from employees that you provide that benefit and as the expense increases and profit margins are clamped, that can become a problem.
What type of year are you anticipating?
Coleman: Most integrators are seeing some revenue growth. Because margins have gone down for integrators, the ability to grow organically is harder and they’re not growing as fast as they once were. Larger integrators have more efficient operations, so the larger security project opportunities tend to go to these larger integrators. The smaller security projects that are left are exposed to harsher competition. Still, most integrators grew in 2013. What we have observed is that the opportunities are heterogeneous – meaning they are in different pockets and not the same across the country. Some things in our economy are growing robustly and some are still stagnant. The high growth segments, like high tech and energy, are clustered geographically. Those integrators with offices in the right locations, serving the right customers will be thriving while those in lower growth regions with continue to fight over each opportunity.
What is something that might surprise people in 2014?
Coleman: There is a truism that technology change does not happen as fast as you think it is going to happen and when it does happen it is usually larger than you thought it was going to be. We hear about cloud computing, mobile communications, Near-Field Communications [NFC], encryption or things like migration from analog to digital and convergence. When change does not happen right away we tend to get back on our heels and say it is not going to happen and we do not have to invest in preparations for the predicted changes. What is going to surprise people is when technology changes do take traction it may be too late to gain the market share advantages of an early adopter. Just because it took longer does not mean it is not going to happen and often the changes will be larger than people thought initially.