Hot Seat: Stress Scalability and ROI
Scott Harkins, president and general manager of Honeywell Systems, explains why integrators can expect to be increasingly called upon to design and install scalable access control solutions. He also comments on the IP-analog tug of war and how the Internet is changing traditional business models.
Why should an integrator want to offer a scalable access control solution?
System scalability is critical because one of the basic tenets of access control is that 50 percent of sales are for expansions to existing systems. We’re seeing systems that will approximately double in size in two to three years. Also, designing systems strictly to meet an existing requirement does not leave much room for an organization to grow, so it’s imperative that security systems offer scalability to account for future needs and expansion.
Another key point is an access control system can be a significant investment for some organizations so it’s critical for the system to have sustainability and to not quickly become obsolete. For example, installing a single door solution that’s not capable of future expansion puts the investment at risk. Organizations must always plan ahead, even if future growth is uncertain.
How has the Internet altered the traditional sales channel?
The Internet has clearly allowed end users and integrators to become more educated using information that’s readily available at their fingertips. Industry sectors have been impacted differently as well. A price-buyer, for example, is more likely to pressure an integrator to provide the lowest possible price and shrink margins. Conversely, a value-buyer is more likely to focus on technology solutions that result in the greatest ROI [return on investment]. As a result of this enhanced awareness, buyers are also more likely to be engaged with the integrator to design the system in order to meet buyers’ exact requirements.
While the availability of Internet pricing is squeezing margins, the bigger challenge is that technology — particularly in video surveillance — is changing so rapidly that the data collected today may not be reliable or considered leading-edge tomorrow. Purely buying or selling technology for the sake of buying or selling technology isn’t a sustainable business model. Instead technology must drive real and measureable value for the end user, and integrators and manufacturers should focus their attention on demonstrating that value in order to show ROI.
What are your expectations for IP to eventually make analog obsolete?
The analog market is still as healthy as ever and while it’s not growing at nearly the same rate as the IP market, it’s growing. The transition to IP hasn’t happened at the rate the industry predicted several years ago and the reason is fairly apparent: IP video has not been able to consistently drive enough end-user value to overcome the clear price advantages of an analog solution.
That said it appears we have passed the tipping point with the advent of HD [high definition] cameras. While these cameras control both bandwidth and storage, they’re becoming more competitive with high-quality analog cameras. We strongly believe that 720p and 1,080p technologies will drive the costs down, improve camera performance and ultimately become the primary solution in most markets.
On the other hand, analog will continue to be a strong performer in segments where price is the primary concern. IP has clearly taken the lion’s share in larger markets where companies invest in their network infrastructure and view security as a fundamental business priority.
In my opinion, there’s more to the story around the industry’s slower-than-expected adoption of IP technology. IP technology is simply more difficult to install than analog. Analog has traditionally been a plug-and-play solution, and any camera can work with any DVR.
However, IP requires compatibility among cameras, networks and NVRs. The speed of technology change and the complexity of IP technology make it difficult for end users and integrators to keep up. To eradicate this issue, Honeywell continues to invest in IP technology, software and hardware that removes the complexity of IP installations and creates a simpler, analog-like installation experience for integrators.
Until integrators are 100-percent confident that they can sell, design and implement IP systems that impact the bottom line, analog will continue to have strong, healthy sales.
What impact do you see managed services having on the marketplace currently?
Managed services — a.k.a. software-as-a-service [SaaS] and/or hosted services — is still considered relatively new in the security space and often takes on many different definitions. With that said, managed services is altering many of the business models we see today, and we fully expect it to experience growth among dealers and end users in the near future.
While managed services is still in its infancy, the industry is beginning to understand the value that it can bring to end users and the advantages it can bring to security dealers and integrators. Early adopters have developed a managed services business model for winning new business and generating additional recurring monthly revenue [RMR]. Managed services for video and access control are now at the tipping point for explosive growth.
Honeywell expects this space to be attractive to both large and small security dealers. In fact, new managed services offerings open up an entirely new way of driving value, whether via third-party central station services, the cloud or internally managed services.
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