Scope of Access Control Market Is Largely Misconstrued, Analyst Says

During his Security Investor Conference keynote, Lee Odess described the access control market as “grossly underestimated” and shedding its cottage industry status.

Lee Odess, founder and CEO of consulting firm Group337, wasted little time setting the table — and context — for his keynote during Imperial Capital’s annual Security Investor Conference, held virtually Dec. 2-3. In a nutshell: How the global access control market is reported and tracked is so far out of whack, we’re left with a “grossly underestimated” assessment of the market’s true size and scope, he said.

Odess cited research projections by Omdia that estimated the global market for electronic physical access control equipment was worth $5.88 billion in 2019 and is forecast to grow at a CAGR of 4.7% to $7.4 billion in 2024. And while this latest data represents “the best report that I’ve seen so far,” he said, the marketplace — present and future — is way more complicated than to be accurately assessed within those statistical confines.

“I believe those numbers reflect old truths of our industry. And those old truths are crumbling and exploding. It is primarily for the positive, but it really depends on what side you take,” he said. “Do you take the short-term side or the long-term view?”

access control

Lee Odess during his virtual keynote address.

Odess, a former executive who spent brief tenures with Brivo, UniKey Technologies and Allegion, described “two truths” to illustrate his viewpoint that there is a much larger story tell.

For starters, the access control sector is reported and tracked only as a high-security market — a cottage industry — and not reflective of the broadening adoption into mainstream vertical niches. Consider that the size of the combined small and medium-sized business (SMB) and enterprise market in United States is well over 90%. That alone dwarfs any of the numbers being reported by the usual vendors interviewed for market research studies, Odess said.

Typical market research also fails to account for the true demand for protecting doors. That omission will become even more glaring as the industry figures out a value proposition to penetrate the vast, mostly untapped opportunity presented by interior doors. Health and safety concerns due to the coronavirus pandemic can be expected to hasten development of that opportunity. It’s already happening as budgets are opening up to replace edge devices, such as readers, and layer software services on top of legacy systems.

“Plus if you look at the age of a lot of our industry’s  systems that are installed, they are well over 30-years-old. That means they’re due for updating, especially to support the new use cases brought on by COVID-19,” Odess said.

His second truth is this: The entire breadth of the access control market cannot be sussed out accurately if only measured in terms of equipment. Software must also be analyzed as part of the equation. Specifically, software not as a feature of hardware but as a business, he said. After all, hardware is becoming a feature of software.

For an industry comprised mostly of hardware manufacturers that haven’t exactly relished change, these are challenging times. Even the industry’s historical software companies are more or less hardware companies, Odess said. But now market pressures and alternative revenue opportunities via software are accelerating change. Conventional wisdom and deep-rooted norms are being disrupted. Where previously the industry functioned with the main goal to keep bad people out, now its players must solve new customer expectations and compete within an ever competitive built environment.

“Now is a pivotal moment. We have internal pressures being created because of historical aging workforces, old and inadequate technology platforms, and lack of innovation,” Odess said.

He added the access control industry is becoming a feature of a much larger value proposition. And while this could spell the demise of some traditionalist companies, the evolution should be looked to with much excitement.

“It is rare that you get to participate in an old industry reimagining itself. That said, what got us here today is not going to get us there tomorrow. This is an industry that likes to think and act tactically,” he said. “It needs to think strategically and act tactically.”

Access Control ‘Index’

Odess used his keynote address as a platform to debut the findings of Group337’s new analyst report titled “The Index.” Using proprietary research and criteria applied to 45 physical access control companies, the firm set out to determine which vendors are best situated to not only satisfy market needs for today, but also capture the mainstream market moving forward.

“As the market shifts and we move from mainstream beyond the high-security use cases that have defined us for years, there is a need to understand who is ready for tomorrow as well as today,” he said.

The Index is based on a collection of public information, surveys from the companies, interviews with the vendors’ end customers, as well as feedback from industry experts. Odess said his company’s research identified six attributes an access control vendor poised to lead will need to encompass. While the list is not intended to be comprehensive, he said these half dozen traits will separate the winners and losers:

  • Market reach
  • Technology
  • Innovation
  • Marketing
  • Talent
  • The “It” Factor (defined as an organization’s story, swag and cool factor)

A 70-point assessment was used to score each company. Based on the scores — which determine how well a company is positioned to succeed “today” and “tomorrow” — vendors were then ranked in four categories:

  • Commanders (positioned for today and tomorrow)
  • Settlers (positioned for just today)
  • Futurists (positioned for tomorrow)
  • Traditionalists (not well positioned for today or tomorrow)

Below is a graphical representation of the results, with 52% of the companies represented in the Commanders category; Traditionalists, 32%; and 8% were either Futurists or Settlers.

On average, the companies that ranked best to worst both for Today and Tomorrow, performed best in technology, followed by market reach, marketing, talent, and the worst case was innovation, Odess said.

access control

Companies with broad market appeal for international opportunities scored really well for market reach. For technology, companies with a combination of hardware and software also scored well. The technology that is expected for today, such as biometrics, analytics and mobile, is offered by most manufacturers in the industry, Odess said. Even if it is in small amounts nearly all vendors offer at least one of these product categories.

“This means the need for innovation is greater. Not many companies are innovating or if they are they’re not making a really big deal about it,” Odess said. “This doesn’t just mean in new technologies. It means innovation in business models, marketing and in opinions. This also means that it’s time to put aside the iteration and move to innovation.”

A 5-Year Forecast

The results from Group337’s market research are not intended to establish some pecking order among access control companies. Rather, the data illustrate an evolving marketplace that is placing demands on companies “to move to strategy and tactics,” Odess explained. While signs indicate some vendors are already doing so, the vast majority are not, he added.

“I highly recommend you take a look at the ones that are. You’ll start to see there are new seats at the table. And for the foreseeable future the old school companies will see moderate growth. But in aggregate, in like a riptide, it’s going to erode over time and it is complete chaos underneath,” he said.

Odess concluded his presentation by offering a five-year forecast of the access control market, based on his company’s new research. Here are some abridged highlights:

  • Software will become more prevalent and expected
  • 50% of the companies listed in the Index are going to become irrelevant over time
  • Expect an increase in vertical integration; software companies entering the lock business, lock businesses getting into software, as examples
  • The industry’s install base will become less important than it has historically
  • Technology acceleration in AI and Big Data will become increasingly important, with clear signs differentiating which companies possess these capabilities and those that don’t
  • Consolidation/M&A will be limited given the dearth of sophisticated, growth-oriented companies

Also in his crystal ball, Odess sees a rising importance placed on integrators. However, he makes a specific distinction. “I do think security integrators will start to be more like systems integrators. And systems integrators that are typically from the logical access control world will start to do security.”

The channel can expect upheaval in the way it goes to market, as well. Odess explained the way people buy and learn is changing entirely. Purchase intent in the commercial market and the way end users discover is now being done remotely, and this trend will only accelerate, even in the high-security space.

“It’s always been a one-on-one, in-person business, but not anymore. “This is going to put a ton of stress on organizations that are set up for that one-on-one,” he continued. There is going to be a little bit of a churn, and this will take some time, but it’s going to happen. But in the end, this is exciting. It’s a critical time and it’s a time for action.”

About the Author

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Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for latimes.com. Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.

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