2018 Security Industry Forecast: Pros Face Crossroads of Cloud, IoT, AI & Cybersecurity
The top security market experts and execs dish on what to expect in 2018, as DIY smart home products, AI and cybersecurity continue to disrupt the industry.
2018: Security Industry
Morgan Hertel V.P. of Technology and Innovation, Rapid Response Monitoring Services
We expect to see continued consolidation across the dealer, integrator and central station space. This will make it challenging for the various trade associations to maintain revenue because there will be fewer member companies to provide funding, putting significant pressure on them to consolidate or risk becoming irrelevant.
Dealers, integrators and central stations that figure out how to be successful during all of this consolidation will find themselves in a stronger position. Those that are part of a consolidation or that recognize how consolidation is impacting the market will compensate accordingly and be the most successful.
Pierre Racz President and CEO Genetec
The so-called “race to the bottom” took out a lot of players in the IP security industry that were fragile. In recent years, there has been a certain culling of the industry either through M&A activity or some companies were just unable to continue operations.
I expect to see this slowing down with less pressure placed on the actual price of devices. Furthermore, new legislative standards will press people to become more conscious, not only about the importance of quality in the work performed, but also for cybersecurity.
In particular, the approaching General Data Protection Regulation in Europe is forcing companies to do a better job in respecting the security of the data they gather and the management of private information, or face dire economic consequences. This is going to have a spillover effect in all liberal democracies.
Brian Grainger Chief Sales Officer Spectra Logic
There are few industries more ripe for consolidation than security, and I expect to see a surge in M&A activity over the next few years. In IT, four or five major disk manufacturers carved out 98% of the market. In security, Milestone is the No. 1 enterprise VMS software in the world but has only 8% of the market.
It will be interesting to see if IBM or HP decides to buy a security company or two. More likely is the merging of companies and technologies to bring simplicity to customers.
Some companies are “futureproofing” themselves in the wake of M&A activity by opening their platforms to integrate with other companies. I expect such companies to thrive, while proprietary technologies dwindle.
Chuck Wilson E.D., National Systems Contractors Association (NSCA)
Watch for new state and federal legislation that could change integrators’ existing business. For example, cybersecurity and IoT legislation could blindside integrators. I’ve read about 200 proposed new pieces of legislation on IoT/cyber provisions that will impact physical security providers.
Industry associations are well-equipped to report and respond, but we need everyone to pay attention. Associations like NSCA need integrators to take action and provide support when requested, and to participate in influencing lawmakers.
We expect to see several things in the next few years: code revisions, standards, regulations, new licensure, and all sorts of potential “good” and “bad” requirements for systems integrators that we need to be aware of, and take action on.
2018 Overall Expectations
Jorge Hevia, S.V.P., Sales & Marketing Napco Security Technologies
The good and bad news is security has never been a more important, omnipresent factor in society than of late and in the foreseeable future. Schools are in lockdown and all public places, i.e., malls, places of worship, tourist and entertainment venues, and hospitals are all termed soft targets for acts of terror.
As a result, physical security and access control technology is ramped up, active shooter drills are commonplace and video surveillance is inescapable. The prevalence of related media coverage makes home and business owners keener on bolstering security to protect family, employees, customers, etc., for peace of mind and liability protection.
So they turn to the security industry for help, tapping into our expertise and technological knowhow. Because there is so much focus on security, and improving it, there will be naturally more players entering the converging marketplace, which will create new technological innovation and new channels for attaining it.
Top consumer companies like Apple and Google that entered the security market have increased awareness and market penetration, in part spawning more DIY and/or self-installed solutions.
Bob Harris, President, Attrition Busters
Security dealers have every reason to be optimistic about recurring revenue growth if they’re willing to work hard and smart. Their existing customer base is a considerable opportunity as they are four times more likely to buy from their existing provider!
Systems integrators also have abundant opportunity if they learn about the recurring revenue model and consider ways it might fit into their business plan to drive growth. Neither parts and smarts nor design and build create recurring revenue. Managed services, service agreements, monitoring and interactive services do.
Wholesale monitoring continues to show profound growth that creates opportunity for dealers of any size. The ability to offer more of the services your customers demand increases your value and helps differentiate you from competitors that can’t. Customers are willing to pay a little more to get something better and those that can provide it really well are going to be the winners.
The New Year will continue to pose challenges for manufacturers to keep up and deliver new, exciting and better solutions. The additional challenge is getting new products into dealers’ hands to try. It’s often like pulling teeth to get dealers to try something new. Manufacturers would do well to take the blinders off to examine and invest in creative avenues to engage dealers’ eagerness in learning about new products and services.
Fredrik Nilsson V.P., Americas Axis Communications
Dealers and integrators should plan for continued growth in most vertical markets. Outside of that, they should stay educated on new technologies and welcome opportunities by leveraging the new technologies that are released.
On the monitored services side, video monitoring and storage in the Cloud is still in an early phase of adoption but the technology is continuing to advance and is scalable, so I’d expect to see growth in this area moving into the New Year. I anticipate we’ll also see new self-monitoring video solutions from consumer-type companies like Google and Amazon.
For manufacturers and distributors, the security industry will see continued consolidation, by acquisitions or by simply out-competing some companies. As an end customer, it will be important to align with partners having long-term staying power.
Don Erickson CEO, Security Industry Association (SIA)
The current discussion about reforming the federal tax code presents potential consequences for business growth upon all industry providers. The highly unpredictable current political climate could lead to prolonged deliberation by the House, Senate and Trump Administration to resolve differences over competing versions of recently passed federal tax reform legislation.
This in turn could influence planned R&D investments by manufacturers reliant upon the federal R&D tax credit but that are unsure if this incentive will receive a long-term extension. Conversely, a proposed expansion of “business expensing” would make costs associated with fire protection and alarm systems, and security systems eligible for Section 179 expensing and eliminate a significant disincentive to modernizing security and life-safety technology.
Jeff Whitney V.P. of Marketing Arecont Vision
Manufacturers and distributors always face challenges when disruptive technologies are introduced. The industry has already largely gone through a major shift over the past decade by the move from legacy, analog, proprietary security systems to IP-based, open, standards-based, mainstream systems.
As disruptive as that process was, and resulting in some companies to fail or disappear through M&A, many participants have changed and grown as a result. And a whole new series of vendors have appeared to dominate aspects of the market and complement other offerings. Manufacturers must continue to develop new products that deliver on what the customer desires or believes they need through these new technologies.
Doing so will lead to new products, and changes to supply chains and distribution channels at the same time in many cases. The opportunity for all manufacturers and distributors — with the adoption of new technologies like Cloud, AI, multisensor cameras, smart homes/buildings, etc. — is so strong that while some companies may falter, others will rise with better-than-ever offerings in 2018 and beyond.
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