2022 Security Industry Forecast: Challenges, Opportunities and Predictions
It’s a classic case of good news, bad: The security industry came through the pandemic with flying colors only to now be strapped for products and people. Twenty market experts weigh in on what to expect during 2022.
Phew, the security industry emerged from the potentially crippling business impacts of a pandemic better than almost anyone could have hoped. Time for dealers and integrators to get their companies back to growing and full strength at selling, designing, installing, servicing and monitoring systems, right?
Um, maybe not so much … at least for a bit. As it turns out, even as key signs are go for an economic surge, most industries — security as much as any — presently face the substantial speedbump of supplies and worker shortfalls. Remember, patience is a virtue, good things come to those who wait, yada, yada.
The fact of the matter is consumers, businesses and other organizations need and want the solutions offered by today’s security technologies industry. Prosperity will reign as the flow of products picks back up and talent is drawn to this occupation’s vibrant career opportunities.
Get the full story for 2022 with keen insights from nearly 40 experts queried for SSI’s Annual Industry Forecast.
2022: Security Technology
Sanjay Challa, Chief Product Offcer, Salient Systems
An important opportunity to note is many businesses are finding they can use their video surveillance beyond safety, loss prevention and liability. The challenge comes from actually making that happen — there’s a lot more work that needs to be accomplished before we’ll see an easy, mainstream adoption of technology solutions and vendors as one total solution. Even with access control, a lot of this comes down to deeper integrations. The biggest challenge to overcome is that customers want an integrated system, but don’t want to pay additional fees or worry if the pieces will work together cohesively.
Judy Jones, V.P. of Marketing, Napco Security Technologies
We see security moving more to a service model vs. the old hardware-centric one. And dealers with a portfolio of services, from simply offering add-on remote smartphone control or notifications to trendy and omnipresent video as a service to newer, extremely exciting access control as a service. Whether this means dealers/integrators offer consumers monthly services based on their traditional hardware or host a sort of virtual system for an account — so there is little hardware investment — it all creates new revenue opportunities. The stream of recurring revenue they produce can smooth over interruptions, COVID or economic issues for the provider’s business. Plus, with Cloud-based technology comes a wealth of new integration options, such as intelligent video — all value-adds for the customer and dealers’/integrators’ bottom line.
Paul Boucherle, Principal, Matterhorn Consulting
Demystifying implementation of the Cloud and simplifying the technical aspects and value proposition is a change, challenge and opportunity. Video, as well as business operations data storage needs, is stronger than ever before, especially concerning cybersecurity hacks and ransomware threats that compromise operational capabilities. This vector has greater focus and weight in the commercial/industrial/government markets but will also impact residential apps at the higher end of the market. SaaS will be supported by simpler access to the Cloud, and automation is about more effective AI development that trades programming for deeper learning and actionable responses.
Fredrik Nilsson, V.P. of the Americas, Axis Communications
The biggest technological changes that will present opportunities and challenges are enhanced processing power at the edge with deep learning capabilities, and increased development around open platforms. These changes will create obvious business opportunities. Customers will increasingly demand more open, agile and intelligent solutions. However, the industry will be challenged to respond quickly to these market demands. Manufacturers and application developers must keep pace and systems integrators will face a learning curve when it comes to delivering new solutions.
Morgan Hertel, V.P. of Technology and Innovation, Rapid Response Monitoring
This is the beginning of a new era in the concept of security as a lifestyle, with AI and other offerings starting to catalyze. In 2022, we are going to see more new entrants and concepts than ever before. We will all take some arrows in the back in the beginning, but we will get it right and that’s going to change everything.
2022: Security Markets
Clint Choate, Senior Director Security Market, Snap One
A smart home is now built over time. No longer does a homeowner call up a pro to order everything up next Tuesday for a full in-stall. A pro is involved to be a curator of technology and the technology that is selected will need to be a platform based on open standards of interoperability. It starts with security and connectivity. In the commercial arena, we continue to see a blurring of the lines or a convergence of IT/datacom, security and A/V integrators from a vertical perspective. Standards are generally networked based, and our integrators are able to comprehensively address commercial properties including automation, lighting, conference rooms, sound, networking and life safety.
Andrew Elvish, V.P. of Marketing & Product Management, Genetec
Monitoring occupancy and space utilization will remain a top priority across many markets in 2022. Within months of the pandemic, businesses were deploying different solutions to track occupancy in their buildings and control social distancing. Almost two years later, this trend is still growing. Many organizations in various sectors from transit and retail to healthcare and banking are using occupancy management solutions, people-counting analytics, access control data, and LiDAR sensors to keep up with health and safety mandates.
What’s shifting is the understanding that these solutions go beyond safety objectives. More organizations recognize how much occupancy management, and more broadly, spatial analytics data, can benefit their operations and business. For instance, monitoring queues in places such as airports, stores or stadiums can reduce wait times, optimize staff scheduling and improve the customer experience. Corporate offices are also catching on to this trend, considering how to best optimize their workplaces as they give employees the flexibility to split worktime between home and office.
Tom LeBlanc, Executive Director, NSCA
There continues to be a tremendous opportunity for security integrators that service the K-12 market to take a more consultative role when it comes to school safety. The nonprofit PASS program allows integrators to educate school systems about tiered safety standards that make sense for their unique situations and budgets. School safety continues to be an enormous priority for everybody involved with K-12 schools, from superintendents to parents, and integrators can elevate their credibility and provide better solutions to meet this demand.
Brian Wiser, President, Bosch Security and Safety Systems, North America
With the added capabilities of security technology, integrators will begin to need more specialized knowledge of and customized solutions for vertical markets. For example, new AI detectors in intelligent cameras can provide accurate people counting in crowded spaces such as retail and mass transit applications. This same type of AI technology can also be used to detect vehicles, which can help city centers or parking lot or garage managers detect the occupancy of every parking space to help drivers find open parking faster and reduce emissions. The customized use of security technology also enables relevant solutions that address the needs of other verticals, such as government, critical infrastructure, datacenters and intelligent transportation systems.
2022: Business & Operations
Julie Lichty, Sr. V.P. of Product Management, Bold Group
It is extremely difficult and expensive to recruit, hire and keep talent, especially for IT professionals. If you’re an alarm company, it’s harder to compete with software and technology companies, let alone manage the impact of the Great Resignation. This will have a major impact on a company’s ability to deliver service-level agreements at cost points previously contracted. It will also have an impact on the workload carried by current employees. In addition, companies need to look at their culture and ensure they are staying current, relevant and innovative. Lastly, companies will need to evaluate prices and inflation as the cost of hard goods and labor increase.
Mitch Reitman, Principal, Reitman Consulting Group
The tight workforce will continue to make it important to retain and promote employees. Wages will rise across the board causing companies to see a need to increase prices. Tighter lending and equity requirements may bring down multiples paid for alarm accounts. Since interest and inflation rates are a key component of cash-flow models and steady state analyses, rising inflation rates will negatively affect valuations.
Kirk MacDowell, CEO, MacGuard Security Advisors
Attrition continues to be a key indicator, and thus for many metrics focus, of the health of a company. That focus is working, but sometimes to the detriment of sales. There needs to be a solid emphasis on increasing subscribers while holding attrition steady. Aside from that, finding and training talent will haunt the industry into the future. Integrators must first zero in on retention of existing staff as that is the highest priority. Recruiting talent should be an everyday, fun endeavor. Think outside the box. For example, if you’re looking at recruiting veterans, set up a booth in a shopping center where military personnel frequent.
2022: Security Industry
George De Marco, Managing Partner, DECO Ventures
The competitive landscape continues to transform and evolve. One of the biggest competitors is the Internet as it is used by consumers for buying decisions, and they are greatly influenced by user experiences and ratings. Industry manufacturers and service providers must step up their game with innovation to drive consumer demand, rather than wait for demand. Disruptors have led the charge in recent years, setting us on our heels to catch up. M&A will likely continue to consolidate portions of the industry by active acquirers. The capital market’s appetite for the residential space is still soft as are the multiples for pure residential plays.
From an acquirer or lenders’ perspective, the commercial market remains more compelling and highly attractive. A strategy that focuses on acquiring a highly talented employee base may just be as valuable as acquiring a customer base. Whether the go-to-market strategy is based on a traditional, self-installed or hybrid model: Is there another player on the horizon the industry is unaware of or underestimating as a formidable competitor or disruptor?
Charles Durant, Managing Director, Sandra Jones and Co.
Strategic acquirers of all sizes are seeking growth and facing increasing competition from financial acquirers, or private equity firms. M&A by PE firms continues to grow at all-time highs with billions of dollars competing for deals. PE firms have become a major economic force, with 4,000 globally — roughly half in the U.S. with managed assets of $4.7 trillion. They are raising $625 billion annually in new funds to invest in M&A.
PE-funded rollups have become a driving M&A force for security integrators, with firms like Allied Universal, Convergint and ADT providing significant competition for strategic buyers like JCI, Securitas, Prosegur, Stanley, Siemens and many regional enterprises. Valuations for security integrators, along with the rest of the private market generally, are at or near all-time highs.
Aaron Saks, Sr. Product and Technical Manager, Hanwha Techwin
The industry’s ability during the pandemic to quickly respond to massive shifts in business practices during lockdowns and successfully support the challenges of a remote workforce was admirable. We can expect fallout and disruption to continue the longer pandemic and supply chain issues persist. When you add things like the NDAA and recent FCC ban on state-sponsored Chinese companies, it’s clear that cybersecurity as well as privacy are becoming increasingly scrutinized in many countries. The lack of legislation in the U.S. will not last as standards will become more important.
The race to the bottom with regards to buying the cheapest solution has taken its toll for all those companies that find themselves in a ‘rip-and-replace’ scenario. It’s critical manufacturers and integrators build a trusted supply chain that minimizes risk.
Mark Hillenburg, V.P. of Marketing, DMP
Consolidation will continue but make way to new and innovative companies that solve the labor issues and start new businesses or models of revenue. Thus, the market will continue to evolve, bestowing blessings on the fast and agile … and continuing to burden the slow to react and the refusers to adjust.
2022: Overall Expectations
John Mack, E.V.P., Imperial Capital
Alarm dealers’ growth will be driven by increased demand for integrated home automation solutions. The DIY market will be an opportunity to sell to lower price-point customers while still providing professionally monitored services, which will drive RMR growth. Systems integrators will focus on increasing RMR streams through the managed services model as they look to increase margins and valuations. Security systems will be transformed into business intelligence solutions, integrating with other IT infrastructure. Monitored services providers will leverage new technologies and automation adoption to drive higher ARPU.
In residential, increased security awareness, 3G and video verification adoption are drivers of better RMR. In commercial, extended managed services like video surveillance and managed access control will provide opportunities for higher RMR. Supplier chain challenges will remain a focus in the near term and companies will need to spend more upfront on working capital to ensure inventory levels. Additionally, cost of materials will be a concern with potential inflationary pressure.
George Brody, President, Telguard
With cord-cutting and POTS service declining, cellular alarm communication is the technology of choice for new installs and upgrades, while providing additional RMR for alarm dealers. Penetration rates are still relatively low and independent dealers are achieving consistently impressive business metrics, including attrition. For systems integrators, with new technology, access control and video surveillance leading the way, I expect a solid 2022 in this segment. The monitored services business continues to be strong with insurance companies’ support, new offerings that add RMR and ASAP to PSAP gaining momentum for improved response times to first responders.
Peter Giacalone, Principal, Giacalone Associates
Given continued concerns regarding health preservation and rising crime, integrators should enjoy the benefits of filling the gaps and being a key part of building up the infrastructure required. Despite disruptive technologies and increase in consumers that self-monitor, professional monitoring will increase at a great rate. Although the economics are changing in certain segments, engagement will continue to increase. This includes enhanced services like remote video, access control and remote patient monitoring. On the end-user piece, with security directors/managers, they really need to step up their education and awareness. It’s essential anyone consuming or recommending systems thoroughly understands differences among the good, bad and ugly. They need to grasp the more advanced requirements, what is truly available via leveraging advanced technologies rather than taking the legacy path.
Richard Brent, CEO, Louroe Electronics
I foresee continued growth and new business opportunities for security and alarm dealers as customers express greater interest in remote security systems. Systems integrators will have the unique challenge of keeping up with new updates and technologies in product solutions. As more systems begin to integrate, integrators must have a year of learning and adaption. Monitored services providers will see increased demand and should expect multiple sources of alarm indicators to have positive effects improving the overall reliability of security systems.
Due to the supply chain issues, I expect a higher likelihood of distributors carrying more inventory, which will be a key value proposition for them. For security end users, it is essential they do their basic research. This takes form in asking for proof-of-concept ASAP as well as considering long lead schedules in project planning. They must now allow their suppliers and contractors plenty of time to deliver in order to avert supply chain obstacles.
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